Key Changes to BEE Requirements for Mining Rights: What You Need to Know

Though the bill seeks numerous amendments, this analysis focuses on four key changes to BEE requirements for mining rights. First, empowerment obligations are to be more closely aligned with those contained in the Broad-Based Black Economic Empowerment Act of 2003 (the BEE Act). Second, the mining minister will be required to impose relevant BEE requirements in granting applications for new mining rights. Third, the minister will be empowered to repeal or amend the empowerment obligations resting on companies with existing mining rights. Fourth, the minister will have the power to make new empowerment rules by regulation.

A shift to black persons and the BEE Act

The existing law the Mineral and Petroleum Resources Development Act (MPRDA) aims its empowerment benefits at historically disadvantaged South Africans or HDSAs, whereas the Bill requires a shift to black persons, as defined in the BEE Act. It also defines broad-based economic empowerment as having the meaning assigned to it in the BEE Act.

In keeping with this change, the draft law goes on to delete the Acts current definition of HDSAs. Confusingly, however, it nevertheless retains a reference to HDSAs in an unchanged sub-section 100(2) of the MPRDA. This provision requires the minister, within six months of the Acts taking effect, to develop a broad-based socio-economic empowerment Charter providing for the active participation of historically disadvantaged South Africans in the mining industry and allowing them to benefit from it.

The bill does not say whether HDSAs are in future to be equated with black persons. Nor does it clarify what its changes might mean for existing HSDA ownership deals that might include white women. This creates uncertainty. However, this problem is far outweighed by the other BEE provisions in the draft legislation.

Imposing BEE obligations on applicants for mining rights

The bill seeks to insert a new sub-section 100(3), under which the mining minister must, in granting applications for mining rights, impose the broad-based socio-economic empowerment prescribed elements of [BEE] ownership, inclusive procurement, supplier and enterprise development, human resources development, employment equity and mining community development.

These BEE elements generally echo those contained in the mining charter gazetted in September 2018. Will the law thereby empower the mining minister to demand compliance with all the key clauses of the 2018 charter from companies seeking new mining rights?

This is doubtful, for three reasons. First, some clauses in the 2018 charter were struck down by the Pretoria high court in September 2021, after the Minerals Council South Africa had challenged their validity. One such clause required 30% HDSA ownership on the transfer or renewal of existing mining rights. Another demanded compliance with extraordinarily onerous preferential procurement rules. A third required 100% compliance with HDSA ownership obligations, failing which companies could have their mining rights suspended or cancelled under the MPRDA. These three clauses are invalid and cannot be restored by the bills becoming law.

Second, the 2021 high court judgment made it clear that the mining minister has no law-making power under the MPRDA. The 2018 Charter is thus a mere instrument of policy and has no binding legal force. This will remain the case after the bill is enacted.

Third, a different Pretoria high court judgment one handed down in April 2018 casts doubt on the validity of both the 2010 and 2018 mining charters. The wording of sub-section100(2) of the MPRDA is crucial here, for it empowers the minister to develop a socio-economic empowerment charter within six months of the Acts coming into operation. Since the MPRDA took effect on 1 May 2004, the single charter it envisaged had to be developed before 31 October 2004. Any charter developed thereafter is clearly ultra vires (beyond the powers) given to the minister.

This second judgment also prevents the minister from overriding a key clause in the 2004 charter. This clause requires that the continuing consequences of all previous deals be taken into account, even after HDSA investors have exited. This bars the minister from demanding top-up ownership deals by mining companies which have previously met the 26% ownership requirement.

One of the main purposes of the bill is to circumvent these two judgments and give the minister the law-making powers he currently lacks. This is also what mining officials have long wanted to achieve. In November 2021, two months after the September 2021 ruling, some of these officials told the relevant parliamentary portfolio committee that no appeal would be lodged against the judgment so as to avoid any risk of becoming bogged down in the courts. Instead, the MPRDA would be amended to incorporate the transformation objectives the judgment had overturned and make compliance obligatory.

Empowering the minister to repeal or amend an empowerment charter

In keeping with this aim, the draft law introduces a new sub-section 100(4) which gives the minister the power, as and when the need arises, to amend or repeal&the broad-based socio-economic empowerment prescribed elements of [BEE] ownership, inclusive procurement, supplier and enterprise development and the like, as earlier listed.

Once the bill is enacted, the minister could use these powers to amend the 2004 charter (the only one that is undoubtedly valid) by repealing its present clauses and inserting instead, say, all the clauses in the 2018 mining charter. This would restore the clauses struck down in 2021. It would also end the continuing consequences principle and require all mining companies to do top-up deals when black investors sell out. The minister could also go beyond the 2018 rules and include higher targets for BEE ownership (and other elements) in his amendments, as outlined below.

Adding new empowerment targets by regulation

The bill also gives the minister additional regulatory powers on empowerment. Under a new subsection 107(1)(jD), the minister will be able, by notice in the Gazette, to make regulations regarding&the promotion of transformative elements of BEE ownership, inclusive procurement, supplier and enterprise development and the like (again, as earlier listed). Such regulations could again either mirror the rules in the 2018 charter or introduce higher BEE ownership (and other) targets.