DMR Minister Mosebenzi Zwane shocked the Mining Sector last week with the publication of a radical new Mining Charter, implementation thereof with immediate effect.

As a result hereof, Mining companies’ stocks fell sharply within mere hours after Zwane’s announcement.

Radical changes were promulgated, changes which were not discussed or made known to the Chamber of Mines – who represent 90% of the industry - and as can be expected, the Chamber is upset with these radical and unilateral changes implemented.  

The Chamber of Mines are planning to take the DMR to court, to, among others, interdict the actual coming into effect of the Charter (to suspend its operation), and to take the Charter on review on procedural and substantive grounds.  

The changes will have an impact on investment and profitability of the mines, and job losses is a natural consequence thereof.  

NUM fails to see the direct link between the cost of these radical amendments and pending job losses, and are threatening to picket should the Chamber take the DMR to court.

All things taken into account, the mining sector needs to transform, but at what cost and at what speed?

New BEE transformation targets

The Act (Reviewed Mining Charter, 2017) is poorly worded, but let’s look at the most significant changes:

  • 26% black ownership must increase to 30 % within the next 12 months;
  • This 30% black ownership, must be divided into 14% for black entrepreneurs, 8% for employees, and 8% for mining communities to be held in trust;
  • Enterprises who already have 30% black ownership, does not need to apportion;
  • All boards must be 50% black;
  • Enterprises applying for prospective mining rights, must have 50% black ownership, plus one person;
  • Additional thereto – all enterprises must pay their BEE shareholders 1% of TURNOVER, BEFORE they pay any distributions to shareholders;
  • This 1% of TURNOVER is OVER AND ABOVE dividends owed to BEE shareholders;
  • A foreign supplier must contribute a minimum of 1% of its annual turnover generated from local mining company/ies towards the Mining Transformation and Development Agency;
  • Procurement of goods must be 70% from black companies; and
  • Procurement of services must be 80% from black companies;

At this stage it seems that every BEE ownership deal will need to be restructured.  

I would not rush to have this effected though, as we need to wait and see what will happen with the Chamber of Mines’ Court applications.  

It will be in the form of an application and in all likelihood will not be a lengthy process.