South Africa's development and aspirations to becoming the wealthiest economy in Africa are largely based on its history of mining with the discovery of gold and diamonds having played a major role. With best practices and current trends in environmental, social and governance ("ESG") taking the forefront, investors are increasingly moving towards green business practices and sustainable finance. However, focus has primarily been placed on the 'E' and 'G' in comparison to the 'S'. With mining companies being held to account for their current ways of working, ESG remains the biggest risk to their business and, in particular, their 'social licence to operate'. The question then arises, have the mining laws in South Africa succeeded in achieving their social imperatives?
The principal statute governing the mining and minerals industry in South Africa, namely the Mineral and Petroleum Resources Development Act, 2002 ("MPRDA"), will have been in effect for 20 years, come 1 May 2024. Section 2(d) of the MPRDA, provides for substantial and meaningful expansion of opportunities for historically disadvantaged South Africans ("HDSAs") to enter into and actively participate in the mining and minerals industry and to benefit from the exploitation of the nation's resources. Section 2(f), provides for the promotion of employment and advancement of the social and economic welfare of all South Africans, underscoring two crucial social objectives of the MPRDA which are operationalised through the charter outlined in section 100, and in the implementation of social and labour plan ("SLPs").
Empowerment and the Mining Charter
To ensure the attainment of the Government's objectives in redressing historical, social and economic inequalities, the MPRDA provides for the development of a broad-based socio-economic empowerment charter ("Mining Charter") that sets the framework for targets and timetable for effecting entry into and active participation of HDSAs into the mining industry. The Broad-Based Socio-Economic Empowerment Charter for the Mining Industry, 2004 was published in August 2004, with various iterations thereafter. The latest being the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 ("Mining Charter III"), in an attempt to provide regulatory certainty and strengthen the effectiveness of the transformation of the industry.
Although there are no ownership requirements involving Government participation in the mining right or mining operation, the erstwhile Mining Charter required rights holders to achieve a minimum of 26% Black Economic Empowerment ("BEE") ownership. More recently, Mining Charter III sought to increase this to 30% for existing rights holders, however, in the case of Minerals Council of South Africa v Minister of Mineral Resources and Energy and Others ZAGPPHC 623 (21 September 2021) ("Minerals Council case"), the court recognised the 'flow-through' principle as well as the 'once empowered, always empowered' principle, which provides that historical transactions concluded at any level which achieved 26% empowerment shall be recognised as compliant for the duration of the mining right. Nevertheless, new mining rights must achieve a minimum of 30% BEE ownership at any level, although the distribution of the 30% ownership is no longer prescribed.
The Mining Charter also sets targets for employment equity, including HDSA demographic representation at various levels of a company, targets for total spending on mining goods procured, as well as services which must be sourced from South African-based companies.
Over the years, there has been much controversy surrounding the status of the Mining Charter and the ownership requirements imposed by it. A key takeaway from the Minerals Council case is that the charter is a policy document and not binding in law. It only binds rights holders insofar as its terms have been lawfully incorporated into such rights.
In relation to ownership requirements, there also have been instances wherein empowerment partners do not necessarily benefit from their respective mining ventures as dividends do not trickle down. Managing and monitoring these issues are challenging as the Department of Mineral Resources and Energy ("DMRE")does not always have the capacity and resources to ensure compliance. In some respects, the MPRDA has struggled to overcome these hurdles and adequately affect local content policies to allow for HDSAs and host communities to benefit from the exploitation of mineral resources.
Social and Labour Plans
In order to ensure effective transformation, the MPRDA and the regulations published thereunder ("MPRDA Regulations") require the submission of an SLP as a pre-requisite for the granting of a mining right or production right. An SLP requires applicants to develop and implement, inter alia, comprehensive Human Resource Development Programmes, Mine Community Development Plans, Housing and Living Conditions Plans, and Employment Equity Plans. SLPs also provide for the management of downscaling and closure to minimise the impact thereof on employees, regions and local economies. SLPs are designed to, inter alia, transform the mining industry from its discriminatory past and to counter the reality that when most mining operations shut down, the host areas go from being vibrant economies to very marginalised economies.
In March 2020, the MPRDA Regulations were amended to provide further clarity and guidance on SLPs, including periodic 5 year reviews of approved SLPs until a closure certificate has been issued; Ministerial consent to amend an approved SLP; annual reports on compliance with the approved SLP following a minimum of 3 meetings per annum with mine communities and other stakeholders; publication of approved SLPs within 30 days of approval in English and one other dominant official language; and a review of the SLP from the fourth year, including meaningful consultation with mine communities and other stakeholders (as set out in Regulations 43 – 46B).
Mining rights holders are required to consult with various stakeholders, including municipalities, mine communities, traditional authorities and other affected stakeholders in order to identify developmental priorities, which should be contained in the SLP. These generally include bursaries; scholarships; and the development or upgrade of clinics, schools, roads, water and sewage treatment facilities and other infrastructure required in those communities.
However, in practice, at various stages of the SLP process, mining companies appear to be experiencing bottlenecks when consulting with stakeholders due to differing views on commitments to be made by the mine or factions within the communities with different agendas, which, at times, stalls consultations. In recent years, we have witnessed growing dissatisfaction by mine communities with mining companies and the DMRE alike regarding the implementation of SLPs.
There may also be delays in obtaining input and sign-off from various governmental authorities, who inform the commitments of the SLP. Collaboration between the stakeholders is vital in achieving the advancement of the social and economic welfare of my communities.
Moreover, it is common knowledge that the regulatory authorities are under-capacitated and under-resourced, thus, there may be delays between the submission of an SLP and approval thereof, which further creates delays in implementation. As the MPRDA Regulations require mining companies to report to DMRE annually, the issues faced by the mine impact on progress made with SLP implementation. This then results in mines obtaining directives from the DMRE due to the alleged non-compliance despite efforts being made on their part. Last, of all, the lack of revenue generated when mines are placed on care and maintenance due to commodity cyclical volatility and economic turbulence precludes mines from fulfilling all their SLP obligations, which can be taxing on those communities placing reliance on these commitments.
The implementation of SLPs and the Mining Charter have been successful in some respects as mining companies have met some of their obligations, however, there have been concerns regarding the slow pace of transformation of the mining and minerals industry. That being said, as mining companies and investors rely heavily on regulatory frameworks and legal certainty to inform their business strategies, the proposed amendments to the MPRDA must address the ESG criteria to ensure the sustainability of the mining industry in South Africa.
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