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Pretoria – A provision in the disputed 2017 Mining Charter which requires holders of mining rights to top up the black ownership of its mines to 30% if it falls short, could steer away investment, a court has heard.
Representing the Chamber of Mines at the North Gauteng High Court on Thursday, Advocate Chris Loxton presented the ground of review of the Charter related to ownership before a full bench of judges which include Judge Peter Mabuza, Judge Tina Siwendu and Judge Frans Barrie.
The arguments of the Chamber consider the objectives of the Mineral and Petroleum Resources Development Act (MPRDA) which involves transformation in the industry and the maintenance of an “internationally competitive mining industry” which can attract investment and provide jobs and opportunities to historically disadvantaged South Africans (HDSAs) to participate in the industry, Loxton said.
Loxton pointed out that if investment opportunities are undermined, then transformation objectives are also undermined. “The failure to meet transformation objectives undermines the aims and objectives of the Constitution and the MPRDA.”
He added that Mineral Resources Minister Mosebenzi Zwane, through the Charter, wishes to achieve certain goals or address stumbling blocks in a manner in which “he thinks” will advance transformation goals.
“We believe he has not always done so lawfully,” Loxton said.
The "once empowered always empowered" issue was raised by Loxton. The Chamber particularly is seeking clarity on whether a party is obliged to top up the ownership target of 30% within a period of 12 months, if for some reason ownership falls below it.
“Regarding existing prospecting rights and mining right holders, the top up provision is unconstitutional as it is vague an uncertain,” the Chamber’s founding affidavit read. “These provisions are unclear and the lack of clarity gives rise to considerable uncertainty.”
The Chamber wants this to be reviewed by the courts and set aside.
In the affidavit the Chamber argued that minister is not empowered by the MPRDA to decree by way of the Charter that a holder of a mining right has a “continuing obligation” to maintain the minimum HDSA ownership level. This was previously 26% and was bumped up to 30% in the 2017 Charter.
The Chamber sought clarity on whether failure to comply with this level is in contravention of the Charter in terms of the mining rights granted.
There was also no clarity on whether empowerment transactions of the past were still taken into account. The affidavit shows that this would often happen after a holder entered into a transaction which achieved a minimum of 26% black shareholding, a BEE partner may exit the partnership if the contract had lapsed, or if the shares were sold to someone who was not a HDSA.
The MPRDA does not oblige the holder to restore the percentage of HDSA ownership to the 26% targets previously, and the new 30% target, according to the affidavit.
This allowed HDSAs to take the opportunity to participate in the industry, and gain an economic advantage if they sold shares for a profit, Loxton explained.
The MPRDA does not involve a constant quota, as the BEE rule does. The MPRDA is about empowerment, he added. “The minister hast treated these objectives as if they require quotas.”
Based on the top up, it means that HDSAs, and economic participants in mining companies will be subject to “lock-ins” that would “reduce the value of their investment, impair the investment opportunities” available to non-HDSAs and discourage investments by HDSAs, according to the affidavit.
Mining companies would also be required to replace HDSA participants. The resulting cost, uncertainty and administrative burden would be a “material disincentive” to investment in the mining industry, the affidavit read.
Loxton explained that as the minister grants mining rights, if one does not meet certain requirements you do not get the mining right. But there is a lack of certainty in the current situation in that once someone is granted a right, the minister could continue to change requirements for rights which effectively means someone could lose their right.
“The minister has the right to cancel a mining right if it is in breach of the Act (MPRDA) or the breach of the terms of a mining right,” said Loxton. The minister cannot do the same if there is a breach of the Charter as it is not legislation.
“What is important in the present case is that there is no power in the part of the minister under the Act to say that the holder of the right must top up from time to time any addition to the HDSA shareholding … There is no such provision in the Act, so there would be no such power,” said Loxton.
Court proceedings will continue on Friday.
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