November 24, 2017

KPMG comments to the draft Mining Charter

Yoliswa Msweli, Associate Director, Strategic Social Investment Services Lead, KPMG in Southern Africa

KPMG in South Africa was invited to provide written inputs and comments to the notice Gazetted by the Department of Minerals Resources (DMR). The Mining Charter, a government instrument designed to redress the country’s historical inequalities and facilitate sustainable growth and transformation in the mining industry, serves as a critical tool to guide integrated socio-economic development efforts for business. As such, its clarity and achievability is of paramount importance to ensure regulatory certainty and that its adoption truly achieves the intended outcomes for transformation for black South Africans.

Key to the attainment of the vision and objectives of the draft Mining Charter is the following:

  • Clarity on the role of the draft Mining Charter as a document – as a Regulatory document, the current draft appears to be a hybrid between a policy and guideline. There is a need to therefore ensure that its role is clear and detailed guidelines are provided to support its successful implementation.
  • Economic consequence – the current South African economic climate is volatile, and the mining industry in particular is under increased financial pressure caused by demand-supply issues affecting commodity prices. As such, it is important that the economic impacts of the proposals put forward is known prior to the conclusion of the revised Mining Charter for the sustainability of the industry.
  • Measurability – the draft Mining Charter sets forth targets for the industry concerning either the financial inputs (e.g. % of revenue to be spent) or quantitative outputs (e.g. management level quotas). There is however no mention of the intended outcomes and impacts as well as associated indicators. This approach is similar to the previous Mining Charter versions and tends to promote a compliance driven approach which does not challenge whether the intended and desired development has in fact been achieved.
  • Achievability – the draft Mining Charter sets ambitious targets for the various elements. The basis for determining these targets is unclear as well as rationale as to why the targets are considered attainable. Evidence in the form of baseline data on the average attainment rates for the previous Mining Charter targets (2014) and basis of escalation would help provide better clarity on the targets proposed as well as achievability thereof. Further, the draft Mining Charter sets forth a three year transition period from when the Charter is adopted for companies to be fully compliant. The significance of the various new elements introduced necessitates stakeholder inputs on the realistic timelines that are required to ensure full compliance.
  • Inclusiveness – the draft Mining Charter as a critical document to drive development in the industry requires significant number of stakeholders to be engaged. It is therefore of paramount importance that sufficient engagements with all material interested and affected parties takes place and that inputs from these engagements are evidently incorporated into the final draft of the Charter.

KPMG, as a Corporate Citizen and a business advisor to the industry, is providing comments based on our knowledge and experience of what is necessary to maximise transformation and development outcomes; as well as our experience as users of the previous Mining Charters.

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