Although Mining Charter III has resulted in greater collaboration between stakeholders across the mining industry, while taking into account the realities facing the industry, areas of uncertainty remain and these are likely to raise compliance costs.
This was discussed during a Webber Wentzel and Deloitte Mining Charter panel discussion, held in Johannesburg, on Tuesday.
Compared with prior iterations, Deloitte’s analysis indicates that the 2018 iteration of the charter included mainly expected changes.
While the charter is better aligned with compliance measures and criteria used in the Department of Trade and Industry’s Broad-Based Black Economic Empowerment Codes of Good Practice, questions arise over whether it is fully aligned and integrated with this and other government policies.
A lack of integration could lead to a case of double reporting, said Webber Wentzel Corporate Practice partner Jonathan Veeran.
Mainly, the compliance targets in the charter are lower and less challenging for rights holders to comply with than those in previous drafts.
However, the changes are expected to have a considerable impact on all mining rights holders – old, pending and new.
The charter has introduced a number of new concepts, the majority of which are aimed at driving transformation while providing policy certainty, but, areas of ambiguity do still remain.
One new concept is the declaration of ownership and mine community development as ring-fenced elements that require full compliance.
Rights holders that fail to comply fully with the ring-fenced elements of the charter are automatically deemed noncompliant, regardless of their scoring in the weighted elements. These elements are employment equity, at 30%; human resources development, at 30%; and inclusive procurement, supplier and enterprise development, at 40%.
Although the charter does not weight or ring-fence the housing and living conditions element, this remains part of the scorecard.
ROOM FOR IMPROVEMENT
Despite the charter’s aim to provide regulatory certainty in accordance with stakeholder requests, there are some key areas of concern.
One key concern highlighted during the panel discussion was the charter being vague and ambiguous in some of its terms, which could create regulatory uncertainty and give administrators broad interpretive discretion.
Veeran said this could create issues when mining houses are dealing with administrators.
Another factor to consider is that the Mineral Resources Minister does not have the power to reconsider the decision to grant a mineral right.
Also mentioned was the regularity overreach of the charter. Entities, which are subject to industry-specific ownership targets, but also work in the mining industry would be subjected to two sets of compliance requirements.
Veeran also touched on the aspect of international trade and investment law.
The charter may violate South Africa’s obligations under applicable bilateral treaties, for example, by being biased against international mining entities in favour of local entities.
Lastly, Veeran said that, as a result of onerous requirements, the charter could have a negative impact on investment.