What the new Mining Charter holds for mining companies and suppliers

“I work in the mining sector. It seems that finally agreement has been reached and a new Mining BEE Charter issued. Am I right when I say that the new charter determines that in the mining industry you now need to be at least 51% black owned?”

The long-awaited Mining Charter 2018 or Mining Charter III (“MCIII”) has been signed by the Minister of Mineral Resources on 26 September 2018. MCIII is immediately effective and applicable to all mining companies in South Africa. 

MCIII contains a few vital concepts that must be understood and it is important to take note of them:

Historically Disadvantaged Persons (“HDP’s”) – These are persons as defined in the Mineral and Petroleum Resources Development Act which includes people or communities that were disadvantaged by unfair discrimination before the Constitution took effect. This concept includes persons with disabilities and women.

Historically Disadvantaged Persons Owned and Controlled Company (“HDPOC”) – This refers to an entity which is 51% owned by HDP’s.

BEE Entrepreneur – This refers to an HDP or a company that is at least 51% owned by HDP’s. 

BEE Compliant Company – This is a company with a minimum BEE level 4 status and is at least 25% + 1 owned by HDP’s.

The MCIII lists six main elements that a mining company needs to comply with:

1. Ownership

Provision is made for three different scenarios or mining rights relevant to the commencement of MCIII. 

New Mining Rights – These refer to mining rights applied for after commencement of MCIII. A new mining right applicant must have a minimum of 30% BEE shareholding which must be distributed as follows:

  • 20% to a BEE Entrepreneur
  • 5% to employees of the applicant
  • 5% to the community

Existing Mining Rights – An existing mining right holder (rights held on date of commencement of MCIII) with 26% BEE shareholding shall be recognised as compliant for the duration of the mining right held. When an existing mining right is renewed, the ownership requirements of MCIII will apply and these companies will have to amend its shareholding to comply with MCIII.

Pending Applications – Pending applications which were lodged and accepted before the commencement of MCIII shall be processed in terms of the 2010 Mining Charter which only required 26% BEE shares. These mining right holders must within 5 years from the effective date of such mining right increase its shareholding to 30% as prescribed by MCIII.

2. Inclusive Procurement, Supplier Development and Enterprise Development

Mining right holders are required to stimulate the local economy by strict local procurement requirements. 

Goods: Mining right holders must spend 70% of total goods expenditure on South African manufactured goods of which 44% must be on BEE Compliant Companies and 21% must be spent on HDP’s or HDPOC’s.

Services: Mining right holders must procure 80% of total spend on services from South African based companies of which 10% must be spent on BEE Compliant Companies and 50% on HDP’s or HDPOC’s.

Supplier and Enterprise Development is further promoted by mining right holders who are allowed to offset certain percentages expenditure for supplier and enterprise development purposes from their procurement targets.

3. Employment Equity

This element aims to achieve equality in the workplace and incorporates demographic targets according to provincial and national demographics. The following targets are set for the different management levels:

  • Board and executive management:  50% HDP’s
  • Senior management:  60% HDP’s
  • Middle management:  60% HDP’s
  • Junior management:  70% HDP’s

4. Human Resource Development

Mining right holders must spend 5% of their leviable amount (leviable amount is roughly equivalent to payroll) on human resource development which includes employees and non-employees (the community). Investment in science, technology and engineering is encouraged as well as training in the form of learnerships and apprentices. Spending must also be done according to provincial and national demographic targets.

5. Mine Community Development

A mining right holder is required to achieve a balance between mining operations and a mining community’s social economic needs. Mining right holders are required to:

  • Develop a social and labour plan in consultation with municipalities, communities and affected stakeholders.
  • The plan must be published and approved.
  • 100% of the plan must be implement within any given financial year.

6. Housing and Living Conditions

Mining right holders are required to improve the standard of housing and living conditions of the employees as stipulated in the Housing and Living Conditions Standard for the Mining and Minerals Industry. The mining right holders shall be required to submit a Housing and Living Conditions Plan for approval by the Department. Clear targets and timelines shall be agreed on for implementation of the Housing and Living Conditions Plan. 

It is clear that MCIII contains many new concepts and mining companies and prospective mining companies would be well advised to address their BEE planning early. You are correct that the MCIII definitely has a stronger focus on companies becoming at least 51% black owned but it is not an absolute requirement at this stage.

November 9, 2018

Sign up to our newsletter

Pin It on Pinterest