Although the South African mining industry has not experienced a setback following the implementation of the socioeconomic empowerment charter for the South African mining and minerals industry, which incorporates broad-based black economic-empowerment (BBBEE) ownership, there are some areas of confusion.

“Mining houses use the Mining Charter and its scorecard to monitor whether they meet the objectives of empowering histori- cally disadvantaged South Africans (HDSAs). The Mining Charter came into force on May 1, 2004, and requires that mining companies must be 26%-owned by HDSAs in ten years. However, the scorecard, which is attached to the Charter, stipulates that 15% of the mining companies must belong to HDSAs in five years,” says corporate and commercial law firm Deneys Reitz director Otsile Matlou.

There is, therefore, potential confusion regarding the em- powerment targets stipulated between the Mining Charter and its scorecard with regard to the first five years. Government released a clarification document to explain the requirements in the first five years, the terms of which stipulate that the 15% requirement only applies to the conversion of old-order mining rights to new-order mining rights. The 26% compliance is with regard to new applications.

However, it is accepted that 15% empowerment is required in five years in the case of conversions, and 26% in the case of new applications.

Meanwhile, there has been some confusion created by the publication of the Codes of Good Practice in terms of the Black Economic Empowerment (BEE) Act, 2003, also known as the DTI Codes. “Some people are arguing that they should apply to the mining industry, while others say that the DTI Codes cannot apply to the mining industry,” Matlou explains.

“The view should be that the DTI Codes do not apply to the mining industry. Section 100 of the Mineral and Petroleum Resources Development Act (MPRDA) enjoins the Minister of Mineral Resources to develop a code of good practice for the mining industry, stating that Parliament requested an industry-specific code for the mining industry,” Matlou notes.

Meanwhile, Matlou adds that the industry is also confused by the BBBEE codes of good practice, which were published on April 29, 2009.

“The code is supposed to be a document that states govern-ment’s present policy for the mining industry with regard to how government requires mining legislation to be implemented. The Mining Code appears to, in certain respects, contradict the Mining Charter, which is not in accordance with Section 100 or what is generally expected of a code of good practice,” Matlou notes.

He explains that paragraph 4.1.5 of the Mining Code is problematic as it provides that failure to comply with provisions of the Mining Code, such as guidelines to ownership, management, employment equity, skills development, preferential procurement, enterprise development and socioeconomic development will make the mining rights of the holder concerned vulnerable to suspension or cancellation by the Minister in terms of Section 47 of the MPRDA.

“A code should not articulate that, if a company breaches the terms of the code, there will be certain legal consequences. The Mining Code should only be seen as a guideline and not as a law, as there are already laws that govern the mining industry,” he says.

Commercial and corporate law firm director at Werksmans Attorneys Morné van der Merwe states that a lot of mining companies feel that the code of good practice may be unconstitutional as it endeavours to move certain State obligations onto the private sector.

He also adds that the expect- ations for the new Mining Charter, which is due to be released shortly, will be for it to be more closely aligned with the concepts embodied in the codes of good practice.

“The purpose of the Code is to support and better explain the Charter and the Act. However, the Code rather purports to create new criteria and definitions which require compliance. The Code further purports to carry the weight of an Act of Parlia-ment as opposed to being a supporting document. Seeing that the Mining Charter is outdated, in many respects, in comparison with more recent BEE laws and regulations, the revised Charter is expected to follow in the footsteps of the Code. However, investors are reluctant to spend in jurisdic-tions where there is uncertainty in relation to the security of rights – the situation that prevails at the moment as a result of a conflict of rules and regulations,” Van der Merwe explains.

However, the MPRDA board has mandated a subcommittee to resolve these contradictions.