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Mining Charter splits judges

Apr 08 2018 06:02
Dewald Van Rensburg

Two diametrically opposed judgments have emanated from the Pretoria High Court on the Mining Charter’s controversial “once empowered, always empowered” issue.

The one that carries legal weight has however dramatically improved the industry’s bargaining position relative to the government, with the court suggesting that most compliance with a new charter would be voluntary and not enforceable.

The application for a declaratory order was heard by a full bench of three high court judges late last year, and they handed down judgment this week.

The main judgment, endorsed by judges Peter Mabuza and FG Barrie, declares that mines do not have to maintain their minimum 26% black ownership if it gets sold or diluted later.

This is what the Chamber of Mines wanted and will give the industry a far stronger hand in the continuing negotiations for a new mining charter.

There can only be a top-up obligation if a mining right expressly contains that as a provision, the judgment said.

This is practically speaking never the case.

The judgment, however, goes even further and questions the validity of the entire second Mining Charter adopted in 2010 and suggests that there would be few legal consequences if a mine disregarded it.

A blistering minority judgment by judge Thina Siwendu, however, reached the completely opposite conclusion.

She said that the 26% black ownership target must be read as being perpetual and that the Mining Charter must be regarded as having solid legal standing.

The main judgment effectively undermines the democratic era’s mining law reforms, Siwendu argued.

Now what?

This week’s main judgment calls into question the legality of the government producing a second, and by extension any further, mining charter after the original one in 2004.

The two judgments at least agree that the 2010 charter, and by extension the next charter, will only apply to mining rights issues afterwards.

The crux of it is that no charter can retrospectively impose conditions on mining rights, which usually last for 30 years.

That means the 2010 charter only applies to rights issued after 2010 and the next charter will only apply to rights issued afterwards – dramatically reducing its application in South Africa’s very mature mining industry.

“Some might interpret it that way,” conceded the chamber’s CEO Roger Baxter. “We are not looking at that angle.”

The chamber’s members are not going to challenge the 2010 charter and will continue to negotiate a new one with new mineral resources minister Gwede Mantashe, he told City Press.

“We are not trying to invalidate either of the two charters. We were part of those.”

The chamber has been battling the controversial third Mining Charter published in June last year by then minister Mosebenzi Zwane.

It expressly called for perpetual top-ups of black ownership and made other demands the mines claim to be impossible, illegal or irrational.

The court case to set this aside has been indefinitely postponed after Cyril Ramaphosa became president of the country and fired Zwane along with a number of other Zuma-era ministers.

A new charter is now under negotiation and will almost certainly embrace the “once-empowered” principle that the mines want due to this week’s judgment.

The department of mineral resources told City Press that it has “noted” the judgment.

“The department will study it before making any pronouncements,” said spokesperson Ayanda Shezi.

The National Empowerment Fund acted as a friend of the court in opposition to the “once-empowered” rule and likewise told City Press that it would comment once its lawyers had studied the judgment.

City Press has previously reported that the chamber had made an offer to accept a new higher ownership target in the mining industry of 29% – if the once-empowered rule was observed. This was revealed in the voluminous court documents in the case against Zwane last year.

Peter Leon, a mining lawyer at law firm Herbert Smith Freehills, said the ruling was a “huge victory” for the mines.

According to him, its says that the government never had the power to issue a second mining charter, “let alone a third”.

In practice, the industry will probably agree to a new 30% target as long as all historical empowerment deals continue to count, said Leon.

Dissent

The dissenting judgment took issue with the other two judges relying too narrowly on prescriptions of legal interpretation in the 60-year-old Interpretation Act.

“The court is faced for the first time with the task of determining the transformation obligations of an important sector of the economy,” wrote Siwendu.

The first charter was created in 2004 in terms of the 2002 Mineral and Petroleum Resources Development Act (MPRDA).

The act and the charter were intended to be the democratic government’s enactment of the Freedom Charter’s call that the mineral wealth of the country belong to everyone – via state custodianship.

Before then, minerals could be privately owned in South Africa. This is no longer the case and all mines are, legally speaking, leasing the mineral resource under conditions imposed by the charter.

The real issue is that the charter determines how state custodianship of the country’s mineral wealth works, wrote Siwendu.

“The custodianship of the state is a fundamental foundational principle of the MPRDA ...” wrote the judge. This means that the state’s “custodial role” requires that the charter be more than a one-off set of rules for granting mining rights, she argued.

“I find that the Mining Charter is a distinct, expressly and separately authorised statutory instrument.

“I find that the stipulated ownership must be held throughout the life of the mining right,” she said.

“I am mindful that there are unintended consequences,” she said, but added that the “cost of redress” is a policy issue and not a legal one.

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bee  |  empowerment  |  mining charter  |  mprda
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