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NEWS-LEADING DEVELOPMENTS 4 E&MJ; • JULY 2017 www.e-mj.com South Africa's Mining Industry Opposes New Mining Charter South Africa's mining industry has been caught off guard by the launch of a new black ownership law package and said it would go to court to force the government to renegotiate its terms. In June, the Department of Mineral Resources (DMR) promulgated a new ver- sion of the Mining Charter that differed substantially from its previous version. The charter, since it was introduced in 2002, has provided rules for black par- ticipation within the mining sector. How- ever, previous versions have always been drawn up by consensus between govern- ment officials and the industry. This time almost no consultation took place, the Chamber of Mines said, which represents around 90% of the industry. The chamber will seek an immediate interdict against the charter. The version of the charter published brings out a variety of brightly flashing red lights, said Mxolisi Mgojo, president of the chamber. "We believe we have no choice but to apply for an interdict on the charter," he added. The issue of the charter has been simmering for some time. The DMR has been at odds over the revisions that the government has been pursuing. However, the latest document was published with- out consultation, to the outrage of mining companies who were caught by surprise. "Today we see additional issues that have not seen the light of day before," Mgo- jo said. At a hastily organized press brief- ing, chamber officials said they had only seen the final charter "40 minutes ago." Among the key provisions are: • Raising black ownership threshold to 30% from 26%; • 50% plus one share black ownership of prospecting rights, also up from 26% to 70% of procurement of mining goods to be purchased from black economic empowerment companies; • The demand for companies to pay 1% of their annual turnover to the 30% black economic empowerment (BEE) structure before any distribution to all shareholders; and • Scraps the provision that previous black empowerment arrangements be credit- ed even if the black shareholder has since exited the company. The chamber said it was too soon to discuss the specifics of the provisions, but its primary objection was that mining companies had almost no say in the new law. Roger Baxter, CEO of the chamber, noted that the last meeting held between the chamber and DMR was two months ago. However, Baxter said the provision of 1% turnover to black shareholders amounted to a tax on other shareholders. He also objected to the 70% local con- tractor requirement. "This is going to be impossible to achieve because a lot of the big manu- facturers are not going to set up shop in South Africa," Baxter added. He noted that previous versions of the charter had been negotiated between the mining sector and DMR. "It was entirely a DMR charter and it does not have the industry buy-in," Baxter said. "Lots of those issues we have only seen today." Baxter said the new charter would only add to the uncertainty plaguing the local industry. In talks with government over the is- sue, the DMR focused almost entirely on putting an end to retrenchments and showed little interest in other issues that could foster growth. For instance, it has become almost impossible to secure ex- ploration permits, Baxter said. Department of Mineral Resources Republic of South Africa Mining Charter 2017 highlights. Element SALIENT POINTS OWNERSHIP • Minimum 30% BEE for all mining rights: o 8% employees o 8% mine communities o 14% black entrepreneurs • Right-holders already at 30% not required to apportion. • Minimum 50% plus 1 black person share- holding for all new prospecting rights. Must include voting rights. • Right-holder to pay 1% of annual turnover to the 30% BEE prior to any distributions to its shareholders. Provisions of Companies Act 71, 2008 will apply. • A holder who claims a Historical BEE Trans- action (transaction that achieved 26% prior to 2017 Charter) must top up to 30% within 12 months. • A holder who has maintained 26% black per- son shareholding is required to top up its black person shareholding to 30% within 12 months. Element SALIENT POINTS EMPLOYMENT • Board level: 50% black; 25% to be women EQUITY • Executive/Top management: 50% black; 25% to be women • Senior management: 60% black; 30% to be women • Middle management: 75% black; 38% to be women • Junior management: 88% black; 44% to be women PROCUREMENT • 70% of all mining goods to be from BEE entities • 80% of all services to be from BEE entities • 100% of mineral samples to be analyzed by SA-based firms • Foreign suppliers to pay 1% of their annual turnover to the Mining Transformation and Development Agency.