The new amended Mining Charter – the agreement that governs black ownership in the mines – has been a festering sore for more than four years. The employers and unions have disputed it, lawyers have argued over it and yet no one seems to be able to agree on one of the most important documents in Africa’s most lucrative industry.
Love it or loathe it, the mining industry in South Africa employed more than 450,000 people, with a trickle down that supports an estimated 4.5 million people, contributing  7.1% to GDP, in 2016. In the same year, it racked up sales of more than $30 billion. It may be a far cry from the industry’s heyday in the 1980s, when it employed a million people, but it is still too big to ignore.
Cars run on South African-mined platinum, in their catalytic convertors, from New York to Paris; around half of all the gold on the fingers and locked in the bank vaults across the world was unearthed and refined in and around Johannesburg in more than a century of mining.
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This treasure trove of wealth is the main reason why the fight over the Mining Charter has been so intense and emotive. It is an agreement, not legislation, agreed by employers and government to foster black empowerment.
It came into force in in 2004 amid a blaze of publicity claiming the industry was going to be swiftly transformed, towards more black ownership, in a decade. Instead, when 2014 came around there was uncertainty, a lack of direction, and questions in the corridors of power whether the Mining Charter had achieved anything at all.
The mining employers fear the Mining Charter has scared off foreign investors and is part of a severe decline in this industry. In 2016, according to Statistics South Africa, the South African mining industry’s real GDP was 2.6% smaller than in 1994. The thriving financial services sector grew by 168% over the same period.
The Chamber of Mines – that represents 90% of South African mining companies – called the amendments the last nail in the coffin when they came out last year. The former mining minister Mosebenzi Zwane called the amended Mining Charter the key to changes in the industry that will benefit the black majority – for so many decades seen as mere cheap labor in the mines.
The zealots in the government – who were pushing the amendments – want radical change in mining. They see it as a pillar of the establishment in apartheid days where black sweated labor was used to create the wealth to keep the status quo.
When the amendments were released they were dramatic and controversial. An increase in black ownership from 26% to 30% with a rider that this be maintained at all times. The mining employers bridled at this clause because they argue for a “once empowered, always empowered” rule that stipulates that once they have borne the cost of transferring ownership to new black owners they are deemed to have done their job. One of the bugbears of the black empowerment game is dilution.
That is, after the lock-in period, black shareholders often cash in their stakes, which dilutes the overall black owned percentage, leaving the employers with the arduous task of starting again. If the “once empowered, always empowered” principle was upheld by the courts it would mean most of the major mining companies could claim they had done their job.
On top of this were a raft of amendments that the Chamber of Mines objected to and one or two the lawyers called illegal. Among them, a stipulation that 1% of the revenue be paid to black shareholders before any others are considered. Mining lawyers consider this to be an illegal flaw – in contravention of the Companies Act – in a Mining Charter that was rushed and poorly written.
“It is open to discretion, with very unclear rules that make it very difficult to invest with that level of uncertainty and that is the long and short of it,” says Peter Leon, mining law expert with Herbert Smith Freehills in Johannesburg. He also considers another clause about the writing off of dividends, to be repaid by black shareholders in fees for shares, to be tantamount to expropriation.
The Chamber of Mines claims the Mining Charter is unconstitutional and written without proper consultation. Its lawyers were ready to argue this in a three-day judicial review of the Mining Charter by a powerful bench of three judges, at the High Court in Pretoria, on February 9, 10 and 11.
At the eleventh hour, South Africa’s new president Cyril Ramaphosa – a mining man to his boots – made good on a promise in January at the World Economic Forum in Davos to intervene. His officials persuaded the Chamber of Mines to hold off with its legal challenge to give negotiation another chance.
It means the regulation of the industry will fall back on the previous charter, with its 26% black ownership target, that most companies had priced in and come to terms with.
Outside the court on the day was a throng of singing and dancing protestors who could prove a fly in the ointment. These were the people who live with the mines and their dust and disruption.
They had traveled for hundreds of kilometers, with their lawyers in tow, from tiny villages across South Africa to make their point in Pretoria. They wanted a seat at the negotiating table and the court ruled that they should get one.
The mining communities making their debut in the Mining Charter talks, alongside government, unions and mining employers, could add more time and dimensions to what is already likely to be a complex debate.
The Chamber of Mines has flagged this as a difficulty in negotiations. Mining companies often struggle to deal with power shifts and conflicting leadership claims in communities around mining – especially when the money starts flowing.
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This puts the prediction of wrapping it all up by June, made by the new mining minister Gwede Mantashe, in severe doubt.
“We will finish it within three months, I am putting that timeframe for myself,” says Mantashe.
&#8220;A new Mining Charter that is well designed and reached through an inclusive negotiation process needs to be finalized as soon as possible,&#8221; says the Chamber of Mines in response.
In many ways, a crumb of comfort for the employers is that the new man Mantashe is also a mining man down to his boots and a world away from his disliked predecessor Zwane. Mantashe, the former leader of the biggest union in Africa, the National Union of Mineworkers (NUM), is known in the industry as an honest broker and skilled negotiator.
“You could say Gwede has mining in his blood,” says Elize Strydom, a former legal head and chief negotiator at the Chamber of Mines, who sat across the table from Mantashe in wage talks for nearly a decade.
“The good thing always was when Gwede said you had a deal, you had a deal, and you could go home and sleep soundly.”
Mantashe, who is also the chairman of the ruling African National Congress, will have his work cut out for him over the next three months to make good on his promise and sort out what is probably the most tricky and crucial set of regulations in one of Africa’s biggest economies. It is not going to be easy reconciling the wishes of a multi-million-dollar investor and a poor villager living in the shadow and dust of a mine.
Any foreign investor or any African business connected to mining will hope Mantashe does so.

Aerial view of a quarry, Johannesburg, South Africa

Mining Charter Back To Square 26

If radical socio-economic transformation – the term favored by South African politicians these days – had a face, it would probably look like one of the many new mining operations being established by new players in the industry.
A recurring theme over the years at the Mining Indaba has been the uncertainty in the South African mining industry. This is driven by contested regulatory and legislative issues which have looked to aggressively introduce transformative initiatives across the industry.
That narrative has not changed but this year’s gathering in Cape Town had a tinge of optimism, with miners waiting for the contentious legislation to be changed.
In 2017, the then-Minister of Mineral Resources, Mosebenzi Zwane, announced a new Mining Charter that “shifted the requirements for black ownership and employment equity at mining companies, as well as the companies from which they procure any goods and services.”
Following this, industry stakeholders say they have lost confidence in the ministry. According to the Chamber of Mines, the Mining Charter made investors wary of committing any capital to the country. A report by the Chamber of Mines claims that investment into the sector, which contributes 8% to GDP, has been stagnant since 2008.
This year, there were calls for the minister to stay away from the event. The stakeholders wanted Cyril Ramaphosa, who at the time was Deputy President, to deliver the keynote address. Zwane ignored this and defiantly asked, “In terms of the population of South Africa, what percentage of the people do these critics represent?”
“Anyone who thinks they can better the charter, our door is open for discussion,” Zwane told FORBES AFRICA on the sidelines of the event.
But, if you look past the legislative woes and the political rhetoric, you’ll see an encouraging story of a young black man who struggled to break into the sector which has previously been dominated by a privileged few.
A recent report by Statistics South Africa noted that mining production had increased by 6.5% year-on-year, up from the annual growth of 5.2% reported in October 2017. This bodes well for Black Royalty Minerals, a subsidiary of the Makole Group, which launched its first colliery in Bronkhorstspruit, a small town 50kms east of Pretoria, at the end of January.
“For us, mining is a pillar and a cornerstone of the South African economy. It’s a foundation that you cannot ignore when you talk about economic development. So, in 2014, [Bronkhorstspruit] is where Chilwavhusiku started, we did our prospecting and applied for all our authorization and after this was done we realized that we could take this project into the mining phase and that’s exactly what we did. And now, as we stand here, we are very proud of this development,” says Ndavhe Mareda, the Chairman of Black Royalty Minerals, which is 100% black-owned.
“One of our mandates is growth. We are looking at both the domestic market as well as export markets. We are working with a lot of traders in the hopes that we’ll be able to expand our horizon. And, we want to do this the right way, in a way that will not exploit the land or its dwellers and of course that works well with the society.”
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Mareda was born in Venda, a former homeland of the apartheid regime in northern South Africa. He obtained his matric and moved to Johannesburg, the City of Gold, to further his studies. He obtained his Bachelor of Commerce at the University of South Africa and practiced as an accountant before venturing into entrepreneurship.
The company, which became operational in 2014, employs 350 people – 90% of whom are Bronkhorstspruit locals. It is hoped the colliery will create opportunities for the some 20,000 people that live around the mine.
“There is a huge level of unemployment in Bronkhorstspruit and our mine eases a lot of the pressure applied by the poverty. We give tender preference to the locals. These tenders may be for transportation or any other services that the mine needs to commission,” says Mareda.
This is what the disputed Mining Charter is looking to foster – assisting black-owned businesses like Black Royalty Minerals.
Disputed government policies are not isolated to South Africa.
The Democratic Republic of Congo (DRC) is no stranger to legislation battles between government and mining conglomerates. The government recently completed a new draft of what it calls the Mining Code. It awaits the signature of the president. In the meantime, mining companies are anxious about the future of their operations in the region.
Randgold Resources started developing Kibali, in north east DRC, eight years ago. After investing $2.5 billion in the operation, the giant gold mine may have to stop productivity.
Randgold chief executive Mark Bristow says the mine is on track to produce its target of more than 700,000 ounces of gold in 2018, making it one of the largest gold mines in the world. But, with the Mining Code, this prosperity may be short-lived.
“It is our express wish that the government grasps the serious consequences this ill-considered code will have on its ability as a country to attract international investment and re-investment to the DRC, and to refer the code back to the ministry of mines for further consultation with the industry,” says Bristow.
Officials, however, are confident the code will demonopolize the industry and allow the country to enjoy a percentage of the profits made from the exploration of its resources. Albert Yuma Mulimbi, Chairman of the state-owned mining company Gecamines, says it will be renegotiating its contracts with international mining partners operating in the DRC.
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Regulation is not the only issue facing mining in Africa. The former president of Nigeria, Olusegun Obasanjo, in his official address, highlighted that creating a sustainable environment for emerging miners is no simple task. He said the industry is marred by a lack of transparency as well as a legacy of mistrust of major miners. The mining industry has been accused of pursuing profits at the expense of its workforce.
Solutions to these issues need to be found.
Apart from the emergence of junior miners, the mining industry in South Africa is looking at technological advancement to resuscitate the sector.
&#8220;Technologies like robotic process automation and artificial intelligence will enable core mining activities to be performed from locations that can support a more diverse and inclusive workforce,&#8221; reads Deloitte’s Tracking The Trends report. &#8220;These new technologies will turn the mining value chain upside down, disrupting both existing business models and the traditional roles and relationships among mining companies and their customers, suppliers, and even competitors.&#8221;
This is the kind of disruption that excites another junior miner, Olebogeng Sentsho, who’s a disruptor herself as a young woman emerging in the mining industry. She is the founder of Yeabo Mining, a company that specializes in erecting and operating waste management plants at mines.
“In order to make headway in this industry we need greater support and space from various stakeholders. The increasing cost of mining, especially when discovering alternative minerals in decommissioned mines, is immense,” she says.
Sentsho says Yeabo Mining will need R50 million ($4.1 million) for infrastructure needed to mine in the current climate.
“It’s not an easy ride but it’s one worth hanging onto and I am confident about the future and the markets we’ll be serving as Africans,” says Mareda with a smile and genuine hope.

New Kids On The Mining Block

A powerful team of private lawyers will fight the mining companies in court. With an attorney backed by four advocates, it is clear that the Department of Mineral Resources (DMR) plans to fight tooth and nail to keep its Mining Charter III intact. It promises a quick fix for the black majority calling, in tough economic times, for a larger slice of one of the richest cakes in Africa. The mining industry of South Africa contributed 7.1% of the country’s GDP in 2015, employing more than 450,000 people and paying more than $1 billion in royalties and taxes.
For a start, Mining Charter III calls for an increase in the black ownership of mines from 26% to 30% at all times. In court, the Chamber of Mines, which represents 90% of the country’s mining companies, will argue for “once empowered, always empowered” policy in that once a mining house has borne the cost of transferring ownership, into black hands, it is deemed to have done its job. This would make most companies compliant overnight.
What has become clear, since it was gazetted on June 15, is that even though it was more than four years in the making, many agree this was a hastily and poorly written document, full of holes, compiled without consultation with the industry. A source in mining says even the savvy, powerful, legally trained, regional managers of the DMR weren’t even consulted. All of this is likely to weaken the DMR’s case in court. Martin Madlala, the spokesman for the DMR, was unavailable for comment.
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“I think just the whole approach is terrible and the content is flawed. If you look at what it says about prospecting rights of 50% black ownership, plus one share; when you are prospecting you must take drill samples of the ore body. One hole will cost you R200,000; for an emerging black miner, where does he get the millions to do that with?” says Frans Baleni, the former head of the National Union of Mineworkers and current central committee member of the South African Communist Party.
The head of the New York Stock Exchange-listed DRDGold, which produces more than 140,000 ounces of gold from mine dumps around Johannesburg, feels that the 70% black ownership requirement for procurement could infringe the General Agreement on Tariffs and Trade (GATT) rules.
“Very little in this document is right, it is a shambles… I don&#8217;t think it can be executed,&#8221; says Niel Pretorius, the CEO of DRDGold.
<blockquote>&#8220;We will not be applying for mining licences in this country anymore because of the new mining rules. We do have mining licences to last us for 10 to 15 years, but there won&#8217;t be any more applications for now,&#8221; says Pretorius.</blockquote>
Defeat in court would mean a rewrite, watering down the new mining codes. It’ll be a setback for the government. Either way, after years of attempting to be a team player, capital in mining is likely to become a lot more defensive, allocated in the interests of shareholders and little else.

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Mining Charter Back To Square 26

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