The Department of Mineral Resources (DMR) gave a briefing on the Mining Charter which is currently under review. The finalisation of the Mining Charter has been extended to December 2016 due to the substantive changes that have been introduced since the publication of the reviewed draft Mining Charter.
The Mining Charter is provided for by Section 100(2)(a) of the Mineral and Petroleum Resources Development Act (MPRDA) to facilitate transformation of the mining industry. The Minister is empowered to develop the Charter with targets and timelines to ensure compliance. Assessments had shown that the desired transformation targets have not been achieved though there is a noticeable change.
The draft reviewed Mining Charter was gazetted in April 2016 for 60 days and 60 written substantive submissions were received and taken into consideration which led to a further four-week consultation in July where relevant stakeholders were consulted with. Currently, communities and traditional authorities are being consulted on the Mining Charter prior to finalisation
The Mining Charter is aligned with Broad-Based Black Economic Empowerment Act which is the national custodian of transformation and which provides for sector-specific Charters to be developed, with the proviso that they are fully aligned to enable harmonisation of transformation across all economic sectors. Key to the review is to address the material misalignment on definitions, terms and concepts between the Mining Charter and the DTI Codes of Good Practice developed in terms of the BBBEE Act as amended in 2015.
DMR outlined the changes proposed in the reviewed Mining Charter for ownership, procurement, community development, human resource development, employment equity, and sustainable development.
The reviewed Mining Charter also proposes the establishment of the Mining Transformation and Development Agency to manage the skills development levies and the 1% annual turnover to be contributed by foreign suppliers. The establishment of the MTDA shall be concluded within 12 months of the publication of the reviewed Mining Charter.
On ownership, the DMR said that it and the Chamber of Mines are progressing in finalising negotiations to settle “out of court” on the impeding declaratory order on the interpretation of the so-called “once empowered, always empowered”. Capital goods and consumables are combined into one category ‘mining goods’ with a target of 70% of total procurement budget on locally manufactured goods from BEE compliant companies. The reviewed Charter puts more emphasis on socio-economic development of communities.
Concerns were varied as some MPs said 44% procurement going to companies that are less than 50% BBBEE compliant was a concern, that SA is too lenient to investors and that DMR was being too nice about the required level of beneficiation. DMR must push the boundary as not enough is being done to transform the industry. Others were concerned that regulations will impose a cost which will result in less mining. The State should act in a way that does not kill the ‘golden goose’ and DMR will kill the junior mining sector if it imposes the reviewed Mining Charter.
MPs were pleased that DMR is going to publish the Social and Labour Plans and asked when and how these will be published; how much money will the MTDA taken in each year. There was a concern that the Charter is silent on the percentage for youth employment and youth procurement. Clarity was requested on the percentage requirement for senior management. Members asked how many bursaries are DMR and the mining houses providing per year and noted these funds are not accessed by the students but by people who are earning; through which structures the traditional leaders were engaged and what are their concerns; what penalties are in place should mining houses fail to comply to contribute the percentages; how is DMR going to measure this. South Africa needs to put more emphasis on broad-based because the way it is been happening right now is immoral. SA needs to give more emphasis on ownership to communities and workers.
Mr Mosa Mabuza, Deputy Director-General: Mineral Policy and Investment Promotion, DMR, said the Mining Charter is provided for by S100(2)(a) of the Mineral and Petroleum Resources Development Act (MPRDA) to facilitate transformation of the mining industry. The Minister is empowered to develop the Charter with targets and timelines to ensure compliance. The Mining Charter was introduced in 2004 and was assessed in 2009 and 2015. Both these assessments revealed that though there was some noticeable transformation in the mining industry there was still a long way to go for the mining industry to be fully transformed. Key stakeholders have been invited to participate so as to create a better position to ensure that transformation is achieved.
The objectives of the Mining Charter are:
• to recognise the internationally accepted right of the state to exercise sovereignty over all the mineral and petroleum resources within the Republic
• to de-racialise the ownership of the mining industry to redress the imbalances of the past injustices, to utilise and expand the existing skills base for the empowerment of Black persons
• advance employment and diversify the workforce to achieve competitiveness and productivity
• enhance the social and economic welfare of mine communities and major labour sending areas
• promote sustainable development and growth of the mining industry
• catalyse growth and development of local mining inputs sector by leveraging the procurement spend
• and promote beneficiation of South Africa’s mineral commodities.
On 15 April 2016 the draft reviewed Mining Charter was gazetted for public comments for 60 days. Only 60 substantive written submissions were received and these were considered and a further four-week consultation process was conducted in July 2016. Relevant stakeholders consulted included organised business, mining companies, organised labour, legal fraternity, trade associations to name but a few. DMR has taken all inputs into consideration and has reviewed the Mining Charter accordingly where possible. Currently, the Mining Charter is being consulted with communities and traditional authorities prior to finalisation. The final reviewed Mining Charter will be published by December 2016.
The Mining Charter is aligned with BBBEE Act which is the national custodian of transformation and its amendment came into effect in 2015. The Act provides for sector-specific charters to be developed, with the proviso that they are fully aligned to enable harmonisation of transformation across all economic sectors. The Ministers of Trade and Industry and Mineral Resources agreed that it was undesirable to have a conflicting transformation regulatory regime. The misalignment mainly relates to definitions of terms and concepts. Key to the review is to address the material misalignment on definitions, terms and concepts between the Mining Charter and the DTI codes of good practice developed in terms of the BBEE Act as amended.
The following changes have been proposed in the reviewed Mining Charter:
• On ownership, the DMR and the Chamber of Mines are progressing to finalise negotiations to settle “out of court” on the impeding declaratory order on the interpretation of the so-called “once empowered, always empowered”. This is consistent with the directive of President Zuma.
• On procurement, Capital goods and consumables are combined into one category ‘mining goods’ with a target of 70% of total procurement budget (excluding discretionary expenditure) on locally manufactured goods from BEE compliant companies.
- All locally manufactured goods must be independently validated by an entity such as SABS.
- A minimum of 80% of services must be sourced from BEE compliant companies at a minimum of 50%+1 black ownership and control.
- A further breakdown of the procurement threshold requirements: a minimum of 30% of the element threshold, that is 21 percentage points must be sourced from a minimum of 50%+1 black owned and controlled SMMEs and this is linked to the supplier development principle. A minimum of 5 percentage points of the target must be procured from companies with a minimum of 50+1% women owned and controlled and/or 50+1% youth owned and controlled. The Department requires all the support to create opportunities to empower women the youth. A minimum of the remainder, amounting to 65 percentage points of the target must be procured from companies that are at least at 50+1% black ownership and control.
• On community development in both mining areas and labour sending areas, the reviewed Mining Charter proposes to streamline the community development element to maximise the socio-economic development impact. The reviewed Charter puts more emphasis on socio-economic development of communities in line with the MPRDA. The percentage set aside for mine community development has been prescribed in this Charter to ensure efficient and effective implementation. The Charter introduces 1% of revenue generated over intervals of two and a half years be contributed towards implementation of a five year (renewable) social labour plan. The approved SLPs projects will include infrastructure projects, poverty eradication projects, enterprise development and income generating projects to name but a few. The SLP will be published in English and another dominant language commonly used within the community.
• On human resource development, the Mining Charter retains the 5% (excluding the statutory 1% skills development levy) leviable amount and this is in line with Schedule 4 of the Income Tax Act for skills development. The 5% shall include support for South African based academic institutions, research and development initiatives intended to develop solutions in exploration, mining, processing, technology efficiency (energy and water use in mining), beneficiation as well as environmental conservation and rehabilitation, health and safety. It further introduces a two percentage points of the HRD element to be contributed towards the Mining Transformation and Development Agency (MTDA).
• On employment equity, the use of “economically active population” is replaced with national and or provincial demographics, in line with the recent Constitutional court judgement in the Solidarity v Correctional services case. At Board level there must be a minimum of 50% Black people with exercisable voting rights proportionally represented, of which 20% must be black females. Currently, representation at Board level is at 3%. At senior management there should be a minimum of 60% Black employees as a proportional representative of all senior management of which 20% should be Black females. 2% of employees with disabilities as a percentage of all employees, reflective of national and or provincial demographics. A minimum of 40% Black people are represented in the mining company’s core and technical skills. Core and technical skills have been defined to include technical representation across all organisation levels.
• On sustainable development, a number of stakeholders who made submissions raised concern with the omission of this element, stating that since the coming into effect of the Mining Charter 2010, remarkable traction has been gained on implementation of environment provisions as well as the mine health and safety resolutions. Consequently, the element has been reconsidered and is being refined for inclusion. The Mining Charter further introduces 0.15% of annual turnover to be contributed towards R&D in the country.
The reviewed Mining Charter proposes the establishment of the Mining Transformation and Development Agency to manage the 2% leviable amount for skills development and the 1% annual turnover to be contributed by foreign suppliers. The establishment of the MTDA shall be concluded within 12 months of the publication of the reviewed Mining Charter.
Mr L Mokoena (EFF) said his main concern with was the youth, given they are the bulls eye of the population but the department seems to be putting less emphasis on them, whether procurement or employment equity. The Charter is silent on a percentage for youth employment or procurement as with black women and black companies. There needs to be more employment of the youth in general and one needs to raise the bar a little more. He also raised concern about the 44% procurement going to companies that are less than 50% BBBEE compliant, as that is going to people not willing to transform. He knows it might be an unfair statement for those companies who are trying but are failing for various reasons, but DMR need to push the boundaries. DMR has the mammoth task to transform the industry and workplace in general.
Mr Mokoena said the use of ‘housing’ is problematic for him as it speaks primarily of houses. It should be 'settlement' because that includes roads, houses and schools which are important in improving the living conditions of our people. He had slight misgivings about the beneficiation levels DMR is pushing and said DMR is being too nice. As a country it is our responsibility to push for beneficiation. We have to push for more so we employ more people. He thinks it will be good for the country as well. The enforcement of BEE codes is always a problem and there needs to be more discussions with DTI because we are struggling and we are not transforming the industries. DMR needs to find mechanisms to implement BBBEE codes in an efficient way. Twenty-two years down the line, the numbers are not good.
Mr Mabuza responded that the DMR has had a detailed engagement on the topic. He said the threshold is 35 years for youth. The problem with the legislative leg, unlike race or gender, youth is not a permanent arrangement. In goods, DMR has explicitly provided for the youth. On skills development, DMR makes sure the existing workforce can be empowered. The youth needs to be empowered so they can learn to ‘fish’. The 44% is for companies that are already in the country providing capital goods that SA does not have capacity to produce, those foreign companies must be allowed to invest in SA, but they must be at level 4 BBBEE. The 44% is not a target stating that if the company is not non-compliant, it must come to SA and SA will give it business. In terms of beneficiation SA has moved from capital goods at 40% to 70% and is creating a captive market for beneficiation. He said we will hear from Mr Mokoena if 70% lacks ambition given the fact that SA operates in an open market.
Mr H Schmidt (DA) asked why mining grows by 1% when other countries are growing at a faster rate? He noted his concern with slide 17. He asked what was the reasoning of excluding non-discretionary expenditure on slide 11? At some point there was a percentage amount for R&D and in the past it was done voluntarily, but now it is forced? Whatever DMR does has cost consequences. There needs to be a mining industry that is sustaining itself for longer periods. The biggest beneficiary is not the employees or shareholders but it is the State in terms of taxes being paid directly and indirectly, the VAT, the PAYE. The State should act in a way that does not kill the ‘golden goose’.
Mr Mabuza responded that it is correct that SA is at the bottom of the boom and SA must make sure it does not miss again. Comparisons must always be done in context. The issue of R&D is very interesting and Mr Schmidt must remember that pre 1994 SA was insulated and SA lost on R&D because of our past. He would like to see SA doing more R&D. We cannot transform an industry that is declining and in SA the industry cannot grow unless it transforms. In SA you cannot achieve the productivity and the efficiency unless SA transforms.
Mr J Lorimer (DA) asked that DMR to clarify why ownership is missing. All these regulations will impose a cost which will result in less mining. He asked if the Committee can see the list of the 60 companies who made the submissions. He asked DMR if when they consult with traditional leaders if DMR does it through the House of Traditional Leaders or another process? And how does DMR determine who they are speaking to? He asked what the definition of youth is? He asked what happens if a company reaches the age of 35? He asked if the junior sector will have to comply with this or someone with a mining permit? He commented that DMR will find that it is killing the junior sector if it imposes the Mining Charter. He is pleased that DMR is going to publish SLPs and asked when these will be published and how it will be accessed? He asked how much money will be taken in per year by the MTDA? He referred to slide 17 and asked for clarity on the senior management percentage.
Mr Mabuza responded that DMR is aligning the definitions. People with mining permits do not need to comply. DMR is struggling to obtain and direct the skills development programme but if you look at the industry as a whole it will be proper to say that it is supporting about 10 000 to 20 000 students. Part of establishing the MTDA is to make sure DMR can streamline its skills development initiative. The agency will be developed and constituted by government, business and other relevant stakeholders. The DMR must be responsive to the skills development the industry requires for the industry to grow.
Mr M Matlala (ANC) asked about the empowerment of women. He had gone to several mines in the country, and he asked if DMR is talking about skilled women or is it ‘window dressing’? He asked if DMR has a programme or plan to address the problem we are faced with? He made reference to slide 19, employees with disabilities and asked if the DMR is phasing out the 2% of whites with disabilities and bringing in Blacks with disabilities by 2% so it is going to be 4% - is DMR increasing it or are they going to share it? Mr Mabuza spoke of Black when now there is reference to historically disadvantaged. He asked if DMR is including the Chinese and Indians as part of the historically disadvantaged. He asked what the definition of Black is.
Mr Mabuza responded that the reason for some it because DMR has started and not finished. It is busy concluding the process. He agreed there had been instances of fronting but there have been instances of empowerment. empowerment should not only be about ownership but skills, procurement. on the disabled employees DMR is leaving the 2% and focussing on demographics and that must be reflective of the demographics. DMR will leave it to the companies to define it. Regarding the Black issue, he said DMR is aligning the Mining Charter to the legislation passed by this house and previously had used previously disadvantaged, but the Members of the House have accepted the word ‘Black’. Black is defined as Africans, Indians and Coloureds and the Chinese are not included in this definition, but under historically disadvantaged individuals. such measures are placing a particular emphasis on those who were marginalised and the normalisation of society and it is Constitutional imperative that SA cannot continue to have a highly divided society.
Mr Z Mandela (ANC) referred to slide 3 and said there is still a long way for the mining industry to be transformed. He asked if it is an industry captured or dominated by Whites, seeing we see the industry is not transformed. The companies listed on the JSE are still predominantly white. He referred to slide 4 and asked how DMR is ensuring it is expanding the skills base. He asked how many bursaries DMR is providing per fiscus. And within DMR entities and how many bursaries are made available? it does not sit well with him that the head of Mintech earns R2 million and his deputy earns R1.6 million yet they are beneficiaries of bursaries at Mintech. He referred to the #FeesMustFall movement and said funds are not accessing the students but to people who are earning. He asked what the mining houses are doing to ensure that we are able to ensure the expansion of existing skills. How many bursaries do they have? He asked about the mining houses investment in expanding the skills base.
He referred to slide 5 and asked what DMR has done to further beneficiation in the RSA. It seems we still sending our commodities out of the borders for beneficiation. He referred to slide 7 and asked through which structures the traditional leaders were engaged and what were their concerns. He mentioned the issue of racialising the sector. The terms used are bordering on racial discrimination. He asked for confirmation from DMR what DMR means by Black people and Black women? DMR needs to be very explicit about this. When you say Black you are bordering on racism. It reminds him of Animal Farm and hopes it is not a repetition of the past. On slide 22, he asked what penalties are in place should mining houses fail to comply to contribute in terms of the percentages.
Mr Mabuza said DMR has sanctions in terms of the Charter and not in terms of the Agency.
The Chairperson noted that the definition of Black is African, Coloureds and Indians and that is in law.
Mr Mandela said that it is one to say Black is inclusive and talks to Coloureds and Indians but it is different on implementation. On skills development, he thinks DMR needs to find mechanisms of ensuring what is envisioned is accounted for. He does not want to make it a governmental responsibility as the mining houses have a duty and role in this but how are you as DMR going to measure that?
Mr Mokoena said DMR must not be apologetic about empowering Black people in general and Africans in particular. The DMR must not be apologetic about enforcing compliance. He thinks Mr Mabuza is mitigating the issue of the youth. In terms of beneficiation, SA cannot even refine in some of these mines. SA is haemorrhaging and is losing as it is not beneficiating enough. SA is too lenient to investors as well. In terms of BBBEE, SA needs to put more emphasis on broad-based because the way it is been happening right now is immoral. SA needs to give more emphasis on ownership to communities and workers. He asked what is the stance on a living wage for workers?
The meeting was adjourned.
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