Reviewing the new draft Mining BEE Charter

“I own a small mining company. One of my colleagues in the industry told me that a new draft Mining BEE charter has been published. Is this true? It so, what are the main elements of this new draft charter and how will it affect my business?”

You are correct. A new draft Mining BEE Charter (“Draft Charter”) was published on 15 April 2016 which aims to amend the 2010 Mining Charter. This Draft Charter makes provision for seven elements which are similar to the 2010 version, with the exception of the Sustainable Development and Growth element, which is not included within the Draft. 

Three of these elements have been identified as being so called “Ring Fenced” elements, namely Ownership, Housing and Living Conditions and also Human Resource Development. A full (100%) compliance target has been set for all three of these elements requiring mining rights holders to maintain this level of compliance at all times, with non-compliance putting mining companies in breach of the Mineral and Petroleum Resources Development Act (“MPRDA”). Non-compliant mining rights holders will then be subject to sanctions in terms of the MPRDA. 

A minimum scorecard score of 50% or 50 points is required under the Draft Charter in order to be deemed compliant. This will have to be achieved through a combination of different initiatives under all seven elements.

Procurement and Supplier Development, Employment Equity, Beneficiation and Mine Community Development make up the rest of the available elements. These elements all have specific percentage targets for which points will be awarded. Beneficiation remains an exception that can be used to offset a maximum of 11% of the Ownership element requirements. The Procurement element requires mining companies to procure most of its consumables, capital goods and services from local suppliers that are BEE compliant with specific focus on the advancement of SMME procurement. 

The big discussion surrounding the Draft Charter is the Ownership targets. According to the Draft Charter, the main objective is still the creation and preservation of “Meaningful Economic Participation” by 1) Historically Disadvantaged South African (HDSA) communities surrounding the mines, 2) the workers involved, and 3) the development of “black” entrepreneurs. The Draft Charter aims to enforce this objective by requiring that one “BEE Transaction” be put in place for each individual mining right granted. The Draft Charter further requires that a minimum of 5% Ownership be allocated to each of the abovementioned groups, namely the HDSA community, workers and black entrepreneurs. The interest held by the community and workers will have to be allocated to a registered trust which will in turn be represented and controlled by traditional authorities as well as the unions. 

A minimum of 26% HDSA Ownership will therefore be required at all times for each mining right that exists. All BEE Transactions that were concluded prior to the publication of the 2010 Charter must be aligned and all non-compliant mining rights holders will be required to align themselves with the above mentioned within three years after the date of publication of the new Mining BEE Charter. 

The Draft Charter therefore requires significant investigation by any mining rights holder and it is our recommendation that the assistance of a BEE consultant be obtained to assist in properly understanding the compliance requirements for your business under the Draft Charter.

June 2, 2016

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