Johannesburg - The government is hosting a summit ahead of a review of the Mining Charter to get a sense if rules governing black economic empowerment (BEE) and enforced equity targets were the best vehicle to change the sector, said mines minister Buyelwa Sonjica.
The government might have to revisit how it measures empowerment compliance by the deadline target of May 2009 for at least 15% black ownership of equity, particularly now that the global economic crisis has left a number of empowerment transactions in trouble.
The mining sector and lawyers have raised concerns that the charter - which was formally adopted as part of the Mineral and Petroleum Resourced Development Act (MPRDA) in 2004 - will undergo large changes, bringing uncertainty to the sector at a time of great economic upheaval.
Plea for flexibility
The mining industry, represented by the Chamber of Mines and its president Sipho Nkosi, flagged the problem that many empowerment deals are now under water because of the sharp decline in share prices and metal prices, and asked Sonjica for "flexibility" when it came to assessing these deals.
Nkosi told delegates at the Chamber of Mines annual general meeting that flexibility from the government was critical.
The first deadline under the charter is 2009. By this date mining companies should have at least 15% black ownership of their equity as part of obligations to be granted new-order mining and prospecting rights.
"It's a matter the government has to reflect on," Sonjica said.
Some empowerment groups have failed, others are faced with large liabilities and others are reducing their shareholdings in the mining companies they are partnering, she said.
Asked if there might be an extension of the deadlines for companies who couldn't meet the targets because of the global meltdown, she said: "I wouldn't say that at this point, but surely we would have to review the position that we have now.
"We have a reality out there that is not of anybody's making. It is the consequence of a global economic crisis. Things are not normal and we can't behave as if things are normal."
There are potentially big changes coming for the sector, which saw a massive flight of capital when elements of the proposed charter were leaked, showing the government wanted empowerment levels of up to 50%.
The levels were subsequently negotiated down to 26% ownership by 2014.
BEE under the magnifying glass
Within the charter was an agreement that the efficacy of the document would be reviewed after five years. That time is upon the industry.
"It's more about evaluating the performance of the charter and whether we have achieved all we had intended to achieve, how far we've gone with transformation because the charter was the tool of transformation of the sector," Sonjica said.
"The review will include BEE performance, which has been negatively impacted on by the financial meltdown. We will review whether the sector was opened for the participation of black people and the extent to which that was done," she said.
"It will look at whether BEE was not the best tool to use and what do we do if it was not the best tool for increasing participation of the previously excluded groups," she said.
Asked if the 26% target would be changed, Sonjica said she would not pre-empt the outcome of the review process and that it would be initially discussed during a pre-review summit of empowerment companies early next year.
While the mining industry realises changes have to be made, it urges restraint.
"Transformation must deal with the injustices of the past and the residual anger that remains, but it must deal with the fear and loss of experience and skills offshore," AngloGold Ashanti CEO Mark Cutifani said at a recent presentation, adding the real test was to grow a globally competitive mining industry.
Jacinto Rocha, the deputy director-general of the Department of Minerals and Energy, told Miningmx some weeks ago that the review process would determine the extent of changes that might or might not be need to made to the charter.
"There will be a debate about the 26% and what it has achieved. If it has achieved what we set out of achieve with the charter, we'll leave it alone. The 26% could be increased or decreased," he said.
The government has noted that companies are generally struggling to find partners who can afford to acquire 26% of their equity. "Others might say that the 26% undermines them and they are not really participating because they are only a minority shareholder," Rocha said.
"At some point people will ask questions about a situation where the majority (of the population) gets a minority stake and it's said to be empowerment."
- Miningmx.com
For more mining sector coverage, visit miningmx.com.