High Court Judgment on Mining Charter: DMRE briefing

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Mineral Resources and Energy

23 November 2021
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

Minerals Council of South Africa v Minister of Mineral Resources and Energy and Others (20341/19) [2021] ZAGPPHC 623 (21 September 2021)

The Department of Mineral Resources and Energy briefed the Committee on the September 2021 Gauteng High Court judgment which had set aside key sections of the Mining Charter. The Department explained why it had decided not to appeal the judgment. The focus of the briefing centred around the implications for the transformation of the mining industry after the judgment, which found that mining right holders are not legally obliged to achieve targets on inclusive procurement and supplier and enterprise development.               

In the discussion, many Members said the judgment would negatively affect mining communities and Historically Disadvantaged South Africans as well as jeopardising government’s transformation agenda. The majority of the Committee was critical of the Department for not appealing the judgment. The Department said the transformation agenda would be more swiftly achieved through a parliamentary process, namely amending the Mineral and Petroleum Resources Development Act.

Members asked how long the Department would take to develop a new legislative framework for transformation. Had the Department begun the process yet? What is the Department’s interim plan to ensure compliance with the transformative goals of existing legislation, [now that the Mining Charter has been weakened]?

Members asked the Department to justify the decision not to appeal the court judgment. They asked if the Committee could seek the opinion of the Parliamentary Legal Advisors on whether the Committee could compel the Department to launch an appeal.

Meeting report

The Portfolio Committee was convened to receive a briefing by the Department of Mineral Resources and Energy (DMRE) on the Gauteng High Court’s judgment on the Mining Charter. [Minerals Council of South Africa v Minister of Mineral Resources and Energy and Others (20341/19) [2021] ZAGPPHC 623 (21 September 2021)]

The Committee noted the Minister’s apology as he was with the Public Protector during the time of the meeting. Adv Thabo Mokoena, Director-General, DMRE, led the Department’s delegation.

The Director-General provided a brief outline of the court judgment.

The question in dispute concerns the ambit of the powers of the Minister under section 100(2) of the Mineral and Petroleum Resources Development Act (MPRDA) to make law in the form of subordinate legislation, as well as the legal nature and role of the Charter in the context of the MPRDA. At issue, therefore, is whether the Charter constitutes law or policy. As the judgment indicates, the Charter constitutes a policy not a law and is thus not binding. However, there are conditions for mining right renewal which the Department could use to ensure compliance with the Act’s objective of advancing transformation in the mining industry.

The principle of “once empowered, always empowered” was confirmed in the court’s judgment.

Although certain sections of the Mining Charter were set aside by the court’s judgment, the DMRE has had engagements with its social partners in the industry. There was broad commitment from them that the judgment should not be taken as a cue to veer away from the transformation goal. Everyone had a social responsibility and must thus act responsibly,

Briefing by DMRE

Mr Pieter Alberts, Chief Director: Legal Services, DMRE, said that the Mining Charter was published by the Minister on 27 September 2018. In March 2019, the Minerals Council of South Africa instituted a judicial review of several aspects of the Charter. On 21 September 2021, a full bench of the Gauteng High Court reviewed and set aside key elements of the Mining Charter. These included transformative mining charter elements such as ownership, inclusive procurement, and supplier and enterprise development.

The presentation summarised the court case, the implications of the judgment as well as the reasons for the Department’s decision not to appeal.

Mr Alberts said that with new mining right holders, the Department still can use the MPRDA to ensure compliance and invoke penalty provisions in the case of non-compliance. The court has also reassured the Minister’s power in the enforcement of the MPRDA. The Department was in favour of parliamentary processes to review the transformative legislative framework to advance the transformation objective.

Full details of the presentation can be found in the presentation slides.

Discussion

Mr J Lorimer (DA) expressed his disappointment at what he had just heard in the briefing. What he heard was a justification of the Department’s attempts to overthrow what the court has thrown out.

Mr Lorimer said that the starting point of the court case began with transformation. Growth should be inclusive but it was in fact exclusive, as evidenced by the record-low spend on mining exploration. He had not felt [inaudible] when the Minister announced that South Africa was aiming to attract five percent of the global exploration expenditure. It means that the current policy is not investor friendly. The policy has now been thrown out of court. But he was hearing that the DMRE is fixed on the procurement requirement in the Charter and planned to use the parliamentary route to achieve what it had failed to achieve in court.

Mr M Wolmarans (ANC) said that he had been following what the Mining Charter was saying. Since September in 2018, the charter was promulgated with a noble objective issue of transformation together with a number of other issues which underpinned those affected mining communities. Hence, he found it disturbing that the judgment reviewed the transformation agenda as outlined by the Charter. He said instead of reviewing the percentage which could be subjected to discussion, this judgment sought to rub off all the small gains that the country had made to transform the industry. The implications of the judgment were that mining communities are left out at the discretion of mining companies. The participation of the public would now become null and void. He said that, with this judgment, “the judiciary is taking the country back to its pre-1994 stage”. He did not understand why any Committee member would not want to get deeper into the matter or even celebrate the judgment. He did not know how he would communicate with people and their constituencies. He, as a member of the African National Congress, a member within the Committee, found that the judgment had thrown every little gain that they had made out.

Mr Wolmarans drew everyone’s attention to bullet number 2. This point has the implication that government could now be going out to beg at the doorstep of those mineral industries. Words such as “encouragement regarding transformation whilst legislating as such” cast aspersions on the Committee’s ability to enforce the transformation [aspects of the] law.

Mr Wolmarans commented on the way forward and suggested members to look deeper into understanding this judgment and observe and take note of how communities responded to such a judgment. He described it as a bitter judgment for Members who are committed to drive transformation. He questioned whether the policy for the majority in the mining industry who had accepted transformation also must be reviewed.

Ms P Madokwe (EFF) commented that given the Mining Charter’s progress and its objective of transformation for communities, she found it worrisome that the DMRE did not intend to appeal the judgment. She asked what the Department’s interim plan was to ensure compliance with the transformative goals. What was the time frame for legislation, since the Department was opting for that option. She suggested the Committee to take the Mining Charter to public hearings so that members of the public are involved in the process. She said she concurred with her colleagues and remarked that the judgment felt to her like it was taking the country like 27 years back.

Mr S Kula (ANC) wanted to check two issues with the Department. First of all, the DMRE claimed that it could not take the option of appealing. This was not satisfactory to the Committee. He asked if the Committee could source a legal advisor as he felt that it was an obligation of the Department to appeal a judgment like this. Mr Kula had read through the judgment and believed that there are grounds to appeal and it would be in the best interest of the transformation agenda to appeal.

Secondly, he highlighted the misconception by some members of the Committee that Members of Parliament owed their loyalty to investors. He said the Committee’s priority cannot be on investors, although everyone in South Africa wanted the country’s economy to grow and to attract more investment. The primary objective should be on South African people. Given the important role of the Mining Charter in promoting the representation of women, youth, Historically Disadvantaged South Africans and affected mining communities, he felt that all Members should support irrevocably the transformation agenda. Members had been on their constituency visits to Mpumalanga and Gauteng, and there were serious concerns revealed by those affected mining communities. The Gauteng High Court’s decision to set aside certain sections of the Mining Charter certainly undermined those people. He asked those Members how they could explain to their constituencies. Mr Kula urged the Department to urgently bring the mining legislation to Parliament to circumvent the judgment. There is no question that it is absolutely unacceptable to delay the process of transformation.

Ms V Malinga (ANC) said she was disturbed by the Gauteng High Court’s judgment. This outcome was taking the country way, way back. She asked whether the Department had envisaged the MPRDA as a policy or a law in the Department’s view during its drafting process. She said she also found the decision not to appeal perturbing. She asked the Department to explain the reason. For her, the judgment would have ramifications for mining communities as now mining bosses could pollute and get everything they wanted. They could leave mining towns on their own to become ghost towns after all the damage they had done. She said the judgment was fighting against transformation. It was a clear indication that the judiciary still had not been transformed, because it did not see the need.

Response

Mr Alberts confirmed that the Department had indeed been envisaging legislation. After the judgment, the Department believed that the best course of action would be to amend the MPRDA and to strengthen the provisions of transformation in the Act. The current gap is the legal uncertainty around the status of the Mining Charter and whether the Minister could make law in accordance with s102. Since this issue had been decided by the court, the Department believed that it needed to create legal certainty through the Parliamentary process.

In terms of the judgment, and the Committee’s sentiment that it takes the country back and reversed all the gains, he could only say that the Department seeks to improve the situation through a parliamentary process rather than taking the debate to court, where the outcome of the debate is not under any party’s control. The Committee should also bear in mind the lengthy time period that appealing could take.

He said that many of the inputs made by Members were commentaries rather than questions, so he would not respond to them. Public hearings would ultimately be held after the bill was introduced to Parliament. He also guaranteed that there would be extensive consultation with parties and social partners as outlined in the Constitution.

He said the Department took note of Members’ input that legislative amendment must be done expeditiously. The court had made a ruling on the Mining Charter, but not on the MPRDA. That’s why the Department was seeking to address stakeholders’ concerns on transformation in its amendments.

Mr Tseliso Maqubela, Deputy Director-General: Minerals and Petroleum Regulation, DMRE said that the Department, as the regulator, shared the sentiment of the Committee that the judgment took the industry and the country backwards. But the more pressing question is whether the Department still can regulate and enforce the transformative agenda. The answer is “yes”. The biggest winners of this court judgment are the existing mining right holders. The Deputy Director-General reassured the Committee that there was still sufficient leeway in the MPRDA to enforce the transformation agenda as new mining right applicants as well as applicants for renewals will have to demonstrate having achieved the transformation agenda to the satisfaction of the Department. If that was not the case, the Department could invoke s23 of the MPRDA to impose sanctions or decline the right application.

The Department took comfort in paragraph fourteen of the judgment which reiterated the Minister’s power to enforce provisions related to Historically Disadvantaged South Africans as well as their employment and social welfare. What the paragraph means is that the Department, as the regulator, needs to work vigilantly and diligently when adjudicating mining right applications.

The Department could enforce s23 on investors. The Court’s judgment states that the Minister has the right to invoke s23 if a mining company or an investor fails to implement the transformation agenda. Hence, in terms of Mr Lorimer’s concern, he said that frivolous appeals, in which people take the Department to court, denies the country investment. He urged Parliament to use its legislative power to find a solution to that. There are cases where investors are willing to invest billions of rand, but the mining right applications cannot be proceeded with because someone believed that they also had a right to mine [the same area]. They then take the government to court. Such frivolous behaviour deters investments.

The Deputy Director-General said the Department would do its utmost to ensure to effect transformation with the existing executive powers that it had.

Follow up questions

The Chairperson said that he was trying to get a sense of the reason why the DMRE opted not to appeal the court’s judgment. He refused to accept the Department’s explanation that this was because the transformation objective could be achieved via the parliamentary process. He did not think that that explanation sufficed. The Chairperson said he believed that there is ample legal basis for an appeal and he did not recall that there had been an incident in the past of a similar nature that could have led the Department to such a decision. He asked the Department whether or not the case was not winnable or if another court would not rule differently.

The Chairperson expressed his confusion at the court’s judgment which suggested that a policy of government can be un-enforceable. To his understanding, a policy derives from the legislation and hence the power upon which the policy resides also derives from the legislation.

The Chairperson said that Court indicated in its judgment that engagement among social partners and reaching consensus on certain issues cannot be seen as something partners are [required to do], with the exception of the issues that are legislated. The Chairperson believed that it may send a wrong message to people, that would lead to over-legislation and over-regulation. He asked about the responsibilities which social partners had, and the outcomes of those engagements between the DMRE and mining partners. He emphasised that the Department should understand that government needed to avoid making unnecessary legislation to avoid over-regulation in the industry which has been the concern of many mining companies.

Response

The Deputy Director-General said the Department’s basis for its regulation is based on the prescripts given by legislation whilst taking into account government’s policy. In the Department’s view, a mining right holder has obligations in terms of the MPRDA which indicates that mining right holders must comply with those obligations. Since the state is the custodian of mineral resources, the agreement between the state to allow mining right holders to extract on its land is of a contractual nature. In terms of empowering the Historically Disadvantaged South Africans, mining right holders are obligated to fulfil s2(d). Those right holders have also made commitments to the Department that they would substantially and meaningfully expand opportunities for Historically Disadvantaged South Africans.

The challenge which the Department faced as the regulator is to make sure that mining right holders are complying with the agreements and meeting their obligations. To a large extent, the Department believed that an effective way to ensure that right holders keep to their obligations is through strengthening its ability to do compliance checks. If the Department could do that for all mining right holders, it can indeed contribute to the advancement of transformation. So far the Department does not have the capacity to reach all of mining right holders and it can only discover non-compliance when a mining right holder comes forward for right renewal. He was not convinced that every mining holder has met those obligations and urged Parliament to assist the Department in strengthening compliance capacity. If a mining right holder is found to be flouting those obligations, then sanctions must be imposed upon that holder immediately.

Mr Alberts responded to Members’ follow up questions on the Department’s decision not to appeal the court’s judgment. He said that the prospect of overturning the judgment is not looking very good. The DMRE has [lost] two full bench judgments on the same matter. In the second case, the Department relied heavily on the first judgment to argue the second case. The Department had included mining employees, NGOs, affected communities, etc as respondents in the court papers. However, the full bench still unanimously ruled in favour of the argument of the Minerals Council. Based on that, the Department believed that it is in the best interest of the Department and the transformation objective to use a parliamentary process that can engage with more stakeholders and social partners and give them more control. Perhaps this process would even be more expeditious.

Mr Alberts responded to the Chairperson’s remark on whether policy was enforceable. Paragraph 40 of the judgment states that the Mining Charter can be included in the MPRDA depending on the agreements which mining right holders entered into. If there is a breach of such agreement, the DMRE may invoke s47 and s93 of the MPRDA. The actual situation is that, when the Department believed that mining right holders might be in breach of the agreement, it often found that it was not the case when examining the original agreement. So the Department was of the view that the new agreements with new mining right holders must be spot on.

Follow up Questions

The Chairperson summarised the issues which Members had mentioned. The first point was that there was a vote proposed for [the Committee to undertake] public consultation to test the feelings of both mining communities and other stakeholders affected by this judgment. Secondly, the Committee needed to engage with stakeholders to understand how they made sense of the judgment, including the Minerals Council and trade unions. Thirdly, the Committee needed to seek legal advice to review whether it had the authority to compel the Department to [launch an appeal against the judgment]. The last issue was on whether social partners can reach consensus on the basis of trust rather than using enforcement or legislative requirements.

Mr K Mileham (DA) expressed his concern as he felt that going out on a public consultation process when Committee did not agree on a formal way forward was a premature decision. Normally, the public participation process takes place when the Committee has legislation or a policy to be commented on.

Mr Mileham said the judgment did not take the Committee back to 1994 but rather reverted back to 2018 when Mining Charter 3 was initially put in place.

He said the Committee should wait until the Department has tabled the new legislation or put a new proposal for a new Mining Charter—whatever the Department puts forward for the Committee to consider. He believed that it would be a complete waste of time for Members to go out to test the water given that the Committee had nothing concrete to discuss at the moment.

Ms Madokwe said her previous question not been responded to. Since an appeal might take years, she had asked the Department to give a timeframe on the turnaround time for the Parliamentary process. What did the Department plan to do in the interim to ensure mining companies are complying with the transformation objectives [of the MPRDA].

The Chairperson said he had the same question. He asked how long the Department would take to develop a legislative framework and what the Department’s mechanisms are to monitor the current scenario in the mining sector. Has the Department begun the process yet?

Mr Mahlaule (ANC) disagreed with Mr Mileham. He said he did not see anything premature in the Committee’s decisions. The judgment focused on whether a policy was enforceable. As judges dealt with what had been presented, and found that the policy was not enforceable, the Committee needed to legislate to close the ambiguous gap. The process of developing legislation begins with public participation, namely engaging with people on the ground and understanding how they feel about the judgment. Thus, he fully supported the proposal to proceed with the public participation process.

Mr Mahlaule said he endorsed the proposal to seek legal advice from Parliament’s own legal resources. Since government had demonstrated its case and explained why it believed that appeal would not be winnable, Parliament needed to source its own advice before it could come to its own conclusion on whether to appeal the case or not.

Mr Lorimer said he heard Members’ inputs and points on how affected mining communities were unhappy or not benefitting from the extraction of mining resources. He fully agreed with their points, as evidenced by mining communities’ dissatisfaction around the country. He said he also understood Members’ concern on the timeframe to change the policy. But he said that there is one change that would involve the National Treasury to change its policy on income tax that perhaps could be more expeditious and is independent of the Mining Charter. He proposed that part of the tax paid by a mining company gets ring fenced and returned to the local community. That is something that could be changed simply by a change in the Treasury policy.

Mr Kula echoed the view held by Ms Madokwe and Mr Mahlaule. He disagreed with Mr Mileham on the pre-maturity remark, neither did not think Mr Lorimer’s suggestion a good one. He said that the Committee needed to use its own legal resources to ascertain the prospect of success in appealing the judgment. Then the Committee could decide whether or not to start a legislative process which would involve the public participation process.

Department’s response

The Deputy Director-General briefly commented on the timeframe for launching an appeal and said that the timeline had lapsed to his knowledge. However, Mr Alberts could provide with more details. He urged the Committee to see that the actual underlying cause for the delay in transformation is the Department’s limited resources to enforce those targets. Many mining companies know that there is a high chance that they would not be caught. His team had to take a tough stance that no mining company could get permit unless an inspection had been done by the Department. The real issue is the Department’s capacity to ensure compliance, monitoring and enforcement.

Mr Alberts reiterated the Deputy Director-General’s point that it was too late to appeal. It would be about 34 days late for an appeal. The Department could, however, still apply for condonation if they could demonstrate a good cause to proceed with the appeal.

The Chairperson said the Committee would still have to check and reach an agreement on whether it believed that the Department’s decision was a correct one for future references. The Committee also needed to know what options the Committee had if it felt that the Department should go in another way.

The Chairperson also commented on the issue of the parliamentary process. When there is an outcome of the court, the government usually has two options to either contest or to legislate. He suggested the Committee to make a call to the affected communities to listen to their concerns or views on the judgment.

It was important to maintain the harmonious social partnerships which the Department has built with different mining stakeholders. He cautioned against using legislation to force its social partners to oblige as it ultimately this would damage the harmonious relationship and weaken mutual understanding between government and those social partners. This proposed engagement could also be used to understand whether legislation would be absolutely needed or [if the issues] can be resolved by building social partnerships.

The Chairperson said he did not want to comment on Mr Mileham’s comment in his capacity as the Chairperson of the Committee. To his knowledge, some of the judgment points dated back maybe not to 1994 but to 2004 when the first Mining Charter came into effect. Those clauses were carried through and indirectly undermined the Minister’s power to make regulations, etc. But this is not a material argument. Hence, he suggested engaging directly with stakeholders and to ask the Department to report back to the Committee on the legislative process before the end of the first quarter in 2022.

Mr Lorimer emphasised the need to involve affected mining communities.

That concluded the business of the day and the Chairperson announced that the meeting was adjourned.

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