Minerals Council remains committed to transformation despite court ruling

FIFI PETERS: South Africa’s government has walked away from a fight with the mining industry over the contentious ‘once empowered, always empowered’ clause. Previously government wanted mining companies to maintain a 26% black empowerment holding in perpetuity. This means that if former empowerment partners sold their shares, mining companies would have had to reissue new shares to meet the 26% threshold.

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We have Tebello Chabana, a senior executive of public affairs and a transformation at the Minerals Council of South Africa, joining the Market Update to tell us what this means for the industry. Tebello, thanks so much for your time. Does the mining sector view this as government raising its white flag over this matter, and will this move help drive investments in the sector that were previously on ice because of policy uncertainty?

TEBELLO CHABANA: Government wanting not to appeal this judgment – that is, leave it as law – is positive in that it certainly does provide certainty on a very vexed issue in the mining context. You will recall that this is the third iteration of the mining charter. I think the first one that came, came in around 2004. We’ve had mining companies do deals we know way in excess of R150 billion worth, based on those mining charters, based on the way they were formulated and obviously in discussions with the Department of Mineral Resources and Energy, the DMRE. So when this misunderstanding relating to what happens when the shareholders do sell, when that misunderstanding appeared, it was critical that we actually get it clarified.

Firstly, you do want black investors to realise some value. I mean, that’s why they are in the business, to realise some value. But it was important that we get this clarity. At that stage, Minister Mahlodi…….2:13 agreed that we actually get this declaratory order. Subsequent to that the department did change his mind on this, but we decided to still continue to get clarity on, as you call it, ‘once empowered, always empowered’ because, as you can imagine, if investors do not understand the rules that are applicable, they will not invest. That’s been one of the challenges for mining in that investors, current and future, were uncertain as to, if we do this BEE transaction in good faith, it must have X consequences.

If the DMRE wants to put in place a set of rules going forward that are clear, that are concise and that provide clarity for future investors, so be it. But it’s always important that the investors must know where they stand. If I do A, B, C, D, will that mean E – or not?

FIFI PETERS: I understand that you or the Minerals Council had a discussion with Minister Mantashe shortly after it was announced that government would no longer be challenging this case in the High Court. What did you guys discuss?

TEBELLO CHABANA: Firstly, you must understand that the minister on a public platform said – this was at the Joburg Indaba – that he is unlikely to challenge the judgment. He made this announcement on the public platform. But now you can understand that, prior to that, we had certainly sought to engage him and the DMRE to try to assure them that the industry will continue to transform. We’re still committed to transformation. Certainly that is the strong message that we sent to the minister and his team. You need to look at it in context.

We have known since 2004 that the mining charter is policy. So the legal status of the charter for us hasn’t changed. The judgment merely clarified it. So we’ve known since 2004, we’ve done the transactions based on the first and second iterations, and now the third iteration. Now you’ve had two courts confirm it. So it’s been pretty clear to us, and it hasn’t inhibited us from transforming in any way. It was important that we provide that assurance to the regulator and others that we are still going to continue to transform, even though now we know the court has opined to make it clear that this is a policy instrument. It is a policy instrument that we welcome, by the way, that we support, despite the challenges that we’ve had with some of the previous [versions].

FIFI PETERS: The issue is that transformation hasn’t gone far enough or wide enough in the communities, and so if you’re saying that the sector is committed to transformation, what does that mean? How will you be doing things differently outside of this policy instrument that you are now abiding by, as a result of having committed all these deals? How will you be doing things differently such that we’ve got transformation that is trickling down the entire mining value chain?

TEBELLO CHABANA: I guess maybe where I disagree with you, Fifi, is I think that transformation has been trickling down this entire mining value chain – and I’ll say to you why I think it has been happening. The fact that the industry has not been able, on its own, to totally transform the extent of the poverty and inequality, the joblessness that we have in the country, is not an indictment on the mining industry alone. We cannot do it alone as an industry. Now, what has the industry done if you look at the transactions that have been effected by the industry? Let’s talk about a controversial issue, one producing black industrialists or black capitalism.

For one, I think it is an important endeavour. But you must have ……6:14. And I say if you look at the top 20 richest black South Africans, 90% got their wealth from mining. If you look at the communities, the pro-share-ownership schemes that we’ve implemented, look at the Kumba one where each employee got in excess of a R1million-odd, you go to ……log 6:36 magazine – I think they are also online – the mining industry is the largest contributor to socioeconomic development. You’re in, you’re out. No other sector of the economy contributes to their communities more than mining companies.

We do this through our social and labour plans, so we are doing it. And maybe one last thing – if you look at the average guaranteed monthly wage for entry-level unionised mine workers in gold, platinum and coal – and some of them don’t have a matric – in 2020 they were earning between R19 000 and R25 000 per month. That’s a guaranteed monthly wage for an entry-level worker.

The industry has even transformed its wages – real wages, social wages. Has that been sufficient to radically change the fate of communities where there’s mining, where there isn’t mining, such as the labour-sending areas? I don’t think so, but can the industry do it on its own? No.

Mines tend to be in really far-flung places where the municipalities are poor and what have you. The kind of monies that should be spent by government on social delivery, delivering services, putting in place mechanisms [such as] infrastructure so that other businesses can grow, can come to them, grow and provide jobs. If government was doing that adequately communities wouldn’t have to almost solely rely on this economic activity here on mining and one or two retail outlets in particular areas.

So we can work with government as the mining industry, we can be that catalyst for development. But we certainly cannot work on its own. If you look at the monies that are returned to the fiscus by these municipalities, what we can spend as an industry is a drop in the ocean compared to what government should be doing in those communities.

FIFI PETERS: Point made. Just one last question. It looks like government is looking at other ways to drive transformation. Any idea of what these could be?

TEBELLO CHABANA: We say this mining charter has been an effective instrument for driving transformation. That’s our premise, that’s our parting point. Now the Mineral and Petroleum Resources Development Act (MPRDA), which is the framework legislation, has enabled government to make the content of the mining charter binding on mining companies. It’s important that people understand that. Mining companies, as we speak, have got mining rights, have got social and labour plans that are part of the licence to operate. If they do not implement their social labour plans, the DMRE can take action. They can sanction them, they can revoke their mining rights.

So as it is, mining companies are very highly regulated to drive transformation. A lot of people don’t understand that context because you don’t see it in any other sector of the economy – not in retail, not in construction, not in the financial sector – to the extent that you have it in mining. So people tend to think that there is no legislative framework, especially for driving transformation in mining. It’s there and it has been very effective.

The DMRE has had, as a result of the MPRDA, the power to do other things, to put in place other instruments. It has had these powers; the court confirmed that it has had these powers. I know that the rest of society is waking up to this issue, but those powers have been there for some time.

FIFI PETERS: All right. Tebello, we’ll leave it there for now. Thanks much for joining the show. Tebello Chabana is the senior executive of public affairs and transformation at the Minerals Council of South Africa.