Insight
Once empowered,
always empowered
The question of
once empowered,
always
empowered finally
seems to have
been answered,
writes Allan Reid.
I
n a split decision, the High Court in
Pretoria recently gave judgment in
favour of the Chamber of Mines against
the Minister of Mineral Resources and its
Director General in the highly contentious
once empowered, always empowered
application. The once empowered,
always empowered principle relates to
mining companies being able to claim
recognition for previous Black Economic
Empowerment (BEE) transactions,
notwithstanding that the BEE entities
involved have since sold their interests
or shares, thereby bringing such mining
companies below the 26% BEE ownership
threshold.
The Department of Mineral Resources
(DMR) has consistently maintained that
BEE ownership has to be maintained at
26% throughout the duration of the mining
right and that if the BEE entity exited
its investment, the mining right holder
was required to conclude a further BEE
transaction in order to achieve a 26% BEE
ownership once more.
In its majority judgement, the court
declared that:
Once the Minister or his delegate is satisfied in
terms of s23(1)(h) of the Mineral and Petroleum
Resources Development Act 28 of 2002 (MPRDA)
that the grant of a mining right applied for in terms
of s22 of the MPRDA will further the objects
referred to in s2(d) and s2(f ) of the MPRDA
in accordance with “the Charter referred to in
section 100”, and has granted the mining right
applied for; the holder thereof is not thereafter
legally obliged to restore the percentage ownership
(howsoever measured, inter alia wholly or partially
by attributable units of South African production)
controlled by historically disadvantaged persons or
historically disadvantaged South Africans (HDSAs)
to the 26% target referred in the original charter
and the 2010 Charter, where such percentage falls
below 26%, unless such obligation is specified as an
obligation in the terms and conditions stated in the
right, as referred to in s23(6) of the MPRDA.
The same principles will apply to old order rights
converted in terms of Schedule II of the MPRDA.
A failure by a holder of a mining right, or converted
[40] MINING MIRROR JUNE 2018
mining right, to meet the requirements of the
original Charter or of the 2010 Charter does not
constitute a breach of a material term or condition of
the mining right for the purposes of s47(1)(a) of the
MPRDA, and further does not constitute an offence
for the purposes of s98(a)(viii), read with s99, unless
an obligation to meet such a requirement is specified
as an obligation in the terms and conditions stated
in the mining right, as referred to in s23(6) of the
MPRDA.
Neither the Original Charter nor the 2010
Charter requires the holder of a mining right or
converted mining right to continue to enter into
further HDP or HDSA empowerment transactions
to address losses in HDP or HDSA participation or
ownership once the 26% participation or ownership
level as referred to in clauses 4.7 and 4.8 of the
Original Charter has been achieved, unless such
obligation is specified in the terms and conditions
stated in the mining right, as referred to in s23(6) of
the MPRDA.
The 2010 Charter does not retrospectively deprive
holders of mining rights of benefits of credits/offsets,
or the continuing consequences of empowerment
transactions concluded after the MPRDA came
into effect, or the right, where a holder has achieved
HDSA participation in excess of any set target in a
particular operation, to utilise such excess to offset
any shortfall in its other operations, as referred to in
clause 4.7 of the Original Charter.
The court was not requested to pronounce
on the validity of the 2010 Charter.
However, the judgment does call into
question the validity of the 2010 Charter
and the court cautioned that the absence
of the pronouncement on the issue should
not be inferred as a confirmation that the
2010 Charter was validly issued in terms
of s100(2) of the MPRDA or that “it is the
charter contemplated in section 100” of the
MPRDA. On the basis of this judgment,
one has to wonder as to the validity of
Mining Charter III, if and when this
next iteration of the Mining Charter is
promulgated. b
Allan Reid is director for the Corporate
and Commercial practice and the head of
the mining and minerals sector at Cliffe
Dekker Hofmeyr.