South Africa’s mining sector is a key contributor to the country’s revenue and economic progress. While this sector has had to deal with various impediments towards progress, the good news is that great strides are being made to harmonise this critical sector. One step pointing towards progress is the 2018 draft version of the new Broad Based Socio Economic Charter for the Mining and Minerals Industry which is currently being subjected to public comments. Here are some key components of this Mining Charter.
1.The Draft Charter increases the black ownership requirement from 26% as set out in the current Charter to 30% . Holders of new prospecting and mining rights are required to comply with the 30% ownership requirement from the outset but existing prospecting and mining rights holders are afforded a period of five years in which to comply with the 30% Ownership Requirement.
2.The Revised Mining Charter provides that a foreign supplier must contribute a minimum of 0,5% of its annual turnover generated from local mining companies towards the development of suppliers to be directed to the Mandela Mining Precinct for research purposes.
3. A new addition in this charter is the stipulation that boards must comprise 50% black South Africans, 20% of which must be black women. The 50% black representation is carried down through the organisation to executive and senior management. For junior-level management, the target is set at 70%.
4.The new Charter outlines a 4.1% ‘trickle’ dividend that must be paid after six years to employees and host communities (who together are entitled to 16% of the shares, 10% of which are free). This 1% must come from earnings before interest, tax, depreciation and amortisation (Ebitda).
5. Within five years, 80% of services supplied to mines must be from SA companies (of which 60% must be BEE entrepreneurs, 10% must be women or youth-controlled and 10% must be BEE-compliant companies).
6. BEE mine ownership targets have been set at 30% within five years and “ring-fenced” – meaning everyone must comply with this or be deemed non-compliant. You can no longer make up for weak BEE ownership with stronger procurement and employment equity point scoring. The good news here is that companies that achieved the current 26% BEE shareholding requirement, and whose BEE partners have since exited the transaction, are still deemed to be compliant. They will just have to top up their shareholding from 26% to 30% within five years.
7. The new Charter stipulates that within five years, 70% of all mining goods must be manufactured in SA. Out of this, 21% must come from BEE entrepreneurs, 44% from BEE-compliant companies and 5% from BEE women entrepreneurs or youth-controlled companies. That means just 30% of mining goods can be supplied by companies that fall outside the broad BEE definition. In the case of a competitive situation between a BEE and non-BEE supplier, the quality of goods should be similar.
8. A new mining right must have a 30% BEE shareholding, split up as follows: 14% to BEE entrepreneurs; and 8% each to employees and host communities (of which 5% each is “free carry” – meaning the beneficiaries do not have to pay).
9. The current Mining Charter requires 5% of payroll to be invested in human resource and essential skills development.
The period to receive public comment on the Draft Charter closes at the end of August 2018. The current Charter remains in force until such time as the Draft Charter is signed into law.