With the continuing declines in commodity prices and weak demand for mineral resources, particularly from China, mining companies have started to implement cost-cutting measures, including the downscaling of their workforces. However, international law firm Hogan Lovells partner, mining head and Africa regional head Warren Beech emphasises that mining houses must ensure that they notify the Department of Mineral Resources (DMR) of their plans.

He notes that, in terms of Section 52 of the Mineral and Petroleum Resources Development Act (MPRDA), the holder of a mining right is required to give notice to the Minister of Mineral Resources “in the prescribed manner” in terms of downscaling of operations in two events.

The first is when a company’s profit-to-revenue ratio is lower than 6% over an average period of 12 months, or, secondly, when the downscaling of operations is going to result in the dismissal for operational reasons of more than 10% of the workforce or more than 500 people, whichever is the lesser.

Beech points out that the DMR has become very “agitated” about the matter of notification under Section 52 of the MPRDA. However, he highlights that the word ‘pres-cribed’ is defined as ‘prescribed by regulation’, but explains that there are no regulations in force providing an indication of how to report to the Minister in terms of Section 52.

“What this effectively means is that there is no obligation to report to the Minister from a legal perspective. “The DMR, however, is of the view that. as soon as a company contemplates downscaling [in accordance] with the provisions of Section 189 of the Labour Relation Act – companies have an obligation to notify the Minister so that the processes under Section 52 can be implemented,” he states.

The process includes the DMR’s Mineral and Mining Development Board making recommendations and negotiations being undertaken between the company and labour to try to save as many jobs as possible.

Beech says that the view of the majority of legal advisers is that there is no legal obligation to notify the DMR of downscaling; however, he warns that, by not notifying the Minister, a company could seriously damage its relationship with the DMR and trade unions.

Therefore, he advises that companies inform the DMR of their downscaling plans despite there not being a legal obligation for them to do so.

Beech was a speaker at black-owned training and conferencing company Intelligence Transfer Centre’s Mineral Resources Compliance and Reporting conference, which was recently held in Johannesburg.