Imagine you are playing a football match and you have scored three goals in the first half thinking that victory is a foregone conclusion, only for the referee to change his mind after the half time break and decide that the three goals you have scored are equal to one goal. How would you feel?
That’s how mining companies that believed they had met the Black Economic Empowerment (BEE) threshold of 26% black owners must be feeling after the Department of Mineral Resources (DMR) has announced that under the new version of the Mining Charter the “once empowered, always empowered principle” won’t just suffice.
Negating the “gains”
Under the proposed Charter change, the DMR has stressed that all mining companies would be expected to have a minimum of 26% black ownership, regardless whether black investors sold their stakes. This, amongst mining companies is viewed as a deliberate attempt to set them to failure (complicate). Worse still, the proposed change in the industry is that the Department might have come up with the proposal unilaterally, without consulting the mining companies.
Another glaring grey area is lack of clarity on the grace period between the sales of black shares and the time it will take to find a suitable replacement.
A fighting chance
Mining companies are not going to leave without the issue without a dogged fight, legal or otherwise.
On its part, the Chamber of Mines, which represents the interests of 90% of the industry, does not believe the new Mining Charter is concluded, and there is still ample time for constructive interaction with the government and other stakeholders. In a statement the organisation’s President, Mike Teke, says: “We look forward to constructive interaction with the government and other stakeholders. It is in our best interest that a mutually acceptable version of the Charter is finalised at the earliest opportunity.”
Currently, the organisation is contesting the black shareholders issue in court.
Adding insult to injury?
If the revised Charter is ratified, it will only worsen the negative perception of South African mining sector as an investment destination. South Africa risks repelling capital inflows into the mining sector.
Update: The Chamber of Mines is contesting the black shareholders issue in court