The Chamber of Mines SA has approached the High Court for a declaratory order to provide guidance on the principles applicable to the assessment of the Mining Charter’s ownership element, particularly regarding previous BEE deals.

Subsequent to the announcement made on 31 March 2015 that the industry and the Department of Mineral Resources (DMR) would jointly seek court resolution on the matter, it has become clear that the legal mechanism available to the parties necessitates a clear applicant and respondent, with an identifiable and clear point of dispute.

A joint application, by definition, suggests some form of agreement between the parties, resulting in a request for a legal opinion, which is not the function of a court.

The DMR has been fully apprised of the Chamber’s approach, and engagement with the DMR continues on this and broader Mining Charter issues.

Chamber of Mines CEO, Roger Baxter notes: “The Chamber and its members fully support the transformation objectives of the Mineral and Petroleum Resources Development Act and have taken meaningful steps to give effect to them. The Chamber remains committed to joint resolution on the matter with the DMR, but we believe that it is in the interests of the industry and the country that this is done swiftly.”

“The industry and its stakeholders need regulatory certainty in respect of continuing consequences on which basis mineral rights have been granted, and which have been disclosed to shareholders, so as to ensure the sustainability of the industry.”

The DMR will be responding to the application we have made, where after a court date will be determined. The process is expected to take a number of months. After the court hearing, the judge may take some time to make a ruling, against which either party may appeal.

“This necessary legal process will not stop us from continuing to engage with the DMR to bring resolution and clarity in a way that meets the needs of all stakeholders. It is our view that this litigation does not imply a breakdown in the relationship between the Chamber and the DMR. On the contrary we believe this will strengthen the relationship among the stakeholders.”

“The joint agreement between the DMR and the Chamber regarding the need to seek clarity from the courts on the ownership element of the Charter shows the maturity of the relationship.”

Background

The Chamber’s concerns relate to the DMR’s intention to exclude empowerment ownership transactions post-2004 where historically disadvantaged South Africans (HDSAs) have sold their participation.  This exclusion is clearly prejudicial to mining companies and undermines the sustainability of the sector.

To ensure meaningful economic participation by HDSAs, companies entered into varied transactions that afforded HDSAs the opportunity, amongst others, to acquire mining assets and/or shares on beneficial terms and to also realise the value of their investments by disposing of them.

The Chamber and its members understand that to be in accordance with the spirit and objects, specifically as set out in section 2(d) and (f), of the MPRDA.  The objective was to create a critical mass of HDSA economic empowerment that would become self-perpetuating.

In many cases where mining companies facilitated substantial HDSA participation, HDSA shareholders elected to exercise their rights to realise the value of their shares, with the inevitable result that HDSA-shareholding in the mining company, which facilitated their substantial participation, has subsequently been eroded.

That they have been able to do so, demonstrates that those HDSA shareholders obtained meaningful ownership. It also demonstrates the meeting of the objective to create a critical mass of broad-based black economic empowerment, even if this is then transferred into other areas of the economy.

To penalise mining companies retrospectively for acting in good faith to promote meaningful HDSA economic participation is, in the Chamber’s view, unfair.

Further, it is in the Chamber’s view that to lock HDSAs into an indefinite participation in a mining company would be contrary to the objects of the MPRDA. For as long as HDSA shareholders are able freely to dispose of their shares, as many of them desire to do, the fluctuation of HDSA ownership in mining companies will be inevitable.

It is a sign that the objects of the MPRDA are being given effect to, rather than evidence of non-compliance on the part of the mining industry.

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