Peter Leon: Here’s how SA should craft its new mining charter

JOHANNESBURG — President Cyril Ramaphosa has entrenched his reputation as a successful negotiator by pressing the right buttons to get his predecessor out of office. But his negotiation skills will come under further pressure as the government grapples with a disastrous mining charter, created by Zuptoid Mosebenzi Zwane (who, unfortunately at the time of writing, is still the country’s Mineral Resources Minister). But in a last-minute effort to bring all parties to the table again to try and thrash out a new charter, Ramaphosa looks set to smoke the peace pipe with the industry. In this piece, Peter Leon suggests how government and industry can meet each other halfway. – Gareth van Zyl

Mining Minister Zwane’s controversial Mining Charter. More magic available at www.zapiro.com.

By Peter Leon*

Yesterday’s agreement between President Ramaphosa and the Chamber of Mines to postpone today’s court hearing to review and set aside Mining Charter III signals a welcome change in relations between Government and the South African mining industry.

“The decision to suspend today’s hearing presents an opportunity for all affected parties to negotiate a revised version of the Charter which reflects terms acceptable to all mining industry stakeholders. If successful, it will also provide much-needed policy certainty to attract investment and create jobs,” says Peter Leon, Co-Chair and Partner, Herbert Smith Freehills’ Africa practice.

Peter Leon

It is to President Ramaphosa’s credit that he has intervened so decisively within days of assuming office to resolve this long running impasse between government and industry.

“In our view, the provisions of any amended or renegotiated Mining Charter should:

  • be agreed by all parties in the mining sector. The Charter once again needs to reflect an overarching social compact between government, labour, business and communities rather than a top down form of executive lawmaking;
  • be clear, concise and unambiguous;
  • contain realistic and achievable timeframes for the implementation of any new requirement;
  • in relation to existing mining rights, fully recognise historic empowerment transactions for the duration of such rights. Security of tenure is of paramount importance to mining companies and investors given the capital intensive nature of mining and the long lead times between exploration and production;
  • in relation to the procurement of goods and services, be achievable within realistic timeframes with due regard to South Africa’s international trade law obligations;
  • in relation to employment equity, be achievable within realistic timeframes having regard to South Africa’s regional demographics as well as the provisions of the Constitution
  • not address issues of tax or company distributions to shareholders which are regulated under company or fiscal law;
  • avoid being overly prescriptive in relation to the corporate structuring of mining companies and their assets;
  • include a methodology for the calculation of the beneficiation offset under the ownership requirements. Although this offset has been recognised under all three Charters, the lack of methodology for the calculation of the offset has resulted in the DMR failing to recognise it since the first Mining Charter was published in October 2002.”

*Peter Leon is a partner and Co-Chair of Africa at international law firm Herbert Smith Freehills, which has opened an office in Johannesburg.