Insight
Charter deserves support
Government’s
proposed
mining charter
provides the
right framework
for policy
certainty and
genuine black
empowerment
and it deserves
widespread
support, writes
Ndavhe Mareda,
chairman of the
Makole Group.
G
iven mining’s pivotal role in the South
African economy, it is imperative that
the mining charter is accepted and
implemented as quickly as possible.
The most contentious issue in the charter
proposed by the Department of Mineral
Resources (DMR) is the question of black
ownership. All parties agree that enabling a
substantial black stake in mining is vital; the
sticking point comes once an empowerment
partner exits the deal by selling to a
non-empowered party. The DMR unequivocally
believes that the requirement of the Act
to ensure black ownership is a continuing
obligation, while the Chamber of Mines
argues that once the empowerment threshold
is reached, the obligation does not continue.
“Once empowered, always empowered.”
As we all know, the courts have decided in
favour of the Chamber but the DMR is taking
the case to the Appeal Court. We support the
DMR’s appeal because without the continuing
participation of blacks as owners and managers
of mines, and not just workers, we simply lack
the social licence to operate. From that lack
springs all sorts of challenges for the industry,
not the least of which is a permanent state of
mistrust between management and workers,
perennially dysfunctional labour relations, and
conflict with local communities.
Having said that, of course one must
recognise that the obligation to ensure
continuous black ownership at the 30%
level suggested by the charter is a challenge.
If nothing else, the continued dilution of
shareholder funds will discourage foreign (and
domestic) investors which is imperative, and
from a macro-economic perspective must be
encouraged and developed.
The charter does, in fact, recognise this
dilemma and proposes that B-BBEE
shares should only be sold to entities or
individuals who fall into the same category.
They should be supported by financial
institutions who recognise the issues and
bigger transformation picture and who must
step up to the plate to enable meaningful
transformation and empowerment
This provision, in fact, disadvantages
the B-BBEE stakeholders because it
automatically restricts the marketability —
and thus the value — of their investment.
If we stand back and look at the big
picture, it is only too apparent that in most
cases, the exiting of black investors from
empowerment schemes in mining is typically
[64] MINING MIRROR SEPTEMBER 2018
driven by the realities of the financial
disadvantage from which they suffer. For
historical reasons, black individuals and
entities are likely to be saddled with high
levels of debt, which need to be serviced. By
contrast, mining is very much a long-term
investment, and does not necessarily deliver
steady returns in the short and medium
term. Black investors are thus very likely to
be forced to exit in order to relieve financial
pressures, not to realise some unearned
golden bonanza as some would seem to think.
Given the importance of maintaining black
ownership to legitimise the industry and
putting the legalities aside, surely we can come
to some practical ways of making it easier for
B-BBEE investors to retain their investments
for the long term, thus maximising the
benefits both for them and the mining
companies? One obvious avenue would be for
institutions like the Industrial Development
Corporation and the Development Bank of
South Africa to accept share certificates as
collateral for short-term loans.
Making black shareholding of mines
more secure is necessary, and it can be
accomplished without unduly prejudicing all
the relevant parties. But it’s only the first step.
The industry should also give attention to
ensuring that blacks participate meaningfully
at all levels.
A first step would be to educate B-BBEE
shareholders about their rights and
responsibilities as part owners, and in the
practicalities of exercising them.
In line with that thinking, the requirement
that 50% (up from 40%) of all management
should be black should also be seen as a