trending Market Intelligence /marketintelligence/en/news-insights/trending/Hn7JIwYYN25z0n57kybXBQ2 content esgSubNav
In This List

South African miners defend record ahead of court challenge over new rules


Bank failures: The importance of liquidity and funding data


A Cloud Migration Plan for Corporations featuring Snowflake®


Essential IR Insights Newsletter - February 2023


Masters of Risk: Trailer

South African miners defend record ahead of court challenge over new rules

A report on transformation in the South African mining sector has been released by the Mineral Council, which plans to take the government to court in 2020 to challenge economic empowerment requirements in the new Mining Charter, saying it will discourage investment.

Member companies have largely met the requirements of the 2010 Mining Charter, which was in effect until 2018, according to the report released Dec. 4. The report was commissioned by the Minerals Council, with CEO Roger Baxter saying there had been "substantial compliance and significant progress" in the industry, and in its efforts to improve.

The assessment focused on five of the Charter's pillars: ownership, employment equity, procurement, human resources development and mine community development.

Among the report's findings was that of the 32 rights holders analyzed, representing 93% of the employee base of council members, the weighted average of historically-disadvantaged South Africans' shareholding is 39.2%. This exceeds the 26% target that was set in the charter.

In terms of employment equity, the bulk of the companies exceeded targets for all levels of management, as well as procurement of goods from black economic empowerment, or BEE, entities. Data related to appointment of previously disadvantaged individuals to top and senior management as well as women in the mining sector compared favorably with other industries, according to the council. The study also found 78% of community development programs were aligned to community needs.

The 26% BEE target in the Charter was not achieved when it came to "effective ownership" or "meaningful economic participation," largely as the 2010 requirements did not apply when most of the largest transactions took place in the 15 or so years prior to that, Baxter added.

Legal challenge over new laws

Mining companies are mounting a court challenge to clauses in the new Mining Charter in 2020 after talks with the government failed to resolve the dispute.

A spokesperson for the council, Charmane Russell, confirmed that miners want the charter to recognize previous black empowerment transactions even if those shareholders had exited the company since then. They are also challenging local procurement rules. The application was filed by the companies in March 2019, and with the exception of the clauses listed by the companies, there has been agreement on the rest of the new rules.

The charter, which was finalized in 2018 by Minerals Resources Minister Gwede Mantashe, is intended to give certainty to investors and mining companies. However, mining companies operating in South Africa have listed legislative uncertainty alongside rising energy costs and trade union unrest as some of the biggest operating challenges that they face.

Public access to social and labor plans

The Minerals Council launched a portal to encourage transparency around the social and labor plans of mining companies. The information is required by the Department of Mineral Resources and Energy as a prerequisite for granting a mining right, but is not made available to the public.

The launch of the portal, announced Dec. 4, comes as pressure mounts on investors globally to account for environmental, social and governance compliance in their investment process. A report issued by capital markets consultants Opimas LLC earlier this year estimated that the responsible investment market, in terms of assets under management, has grown from US$23 trillion in 2016 to more than US$30 trillion in 2018, and is expected to grow to US$35 trillion by 2020.

According to PwC's SA Mine report, investors are concerned about the sustainability of mining companies and the resulting risks.

Andries Rossouw, PwC Africa Energy Utilities & Resources leader, said mining companies globally need to align financial and sustainable strategies to prioritize green, customer and community-focused strategies to help build a long-term vision of growth, access, equality, innovation and trust.