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The “once empowered, always empowered” judgment is unlikely to be the last word on mining empowerment requirements

11 April 2018
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The recent ‘once empowered, always empowered principle’ judgment of the Gauteng High Court does not resolve the bigger question of the empowerment requirements that apply to the minerals industry. Mining companies would be wise to avoid defining their empowerment strategies or taking empowerment decisions solely on the back of this judgment.

On 4 April 2018, the full bench of the Gauteng High Court delivered the long-awaited judgment in the Chamber of Mines’ application on the empowerment requirements applicable to the minerals industry, especially the interpretation of the so-called ‘once empowered, always empowered principle’. The Court was not unanimous and delivered two full judgments (majority and minority). This outcome adds another layer of complexity to an already complex matter.

The gist of the majority judgment

Among others, Barrie AJ writing for the majority, declared that:

  • Once the Department of Mineral Resources (DMR) is satisfied that the grant of a mining right (converted or new order) will further the transformation objectives of the Mineral and Petroleum Resources Development Act, 2002 (MPRDA), the holder of the right is not legally obliged to restore the percentage of ownership controlled by the historically disadvantaged South African (HDSA) to 26% as required by the Original Mining Charter  or the 2010 Mining Charter.   The only exception is when the mining right holder is legally obliged to maintain HDSA ownership if this is part of the terms and conditions of the rights.
  • Once the 26% HDSA ownership has been achieved, neither the Original Mining Charter nor the 2010 Mining Charter requires the holder of a mining right to continue to enter into further HDSA empowerment transactions to address losses in HDSA ownership. Again, the exception is when an obligation of this kind is specified in the terms and conditions of the mining right.
  • The DMR may not compel or direct the holder of a mining right to meet the requirements of the Original Mining Charter or the 2010 Mining Charter. In other words, the DMR may not cancel or suspend mining rights in terms of section 47 of the MPRDA because the HDSA ownership requirements of the Original Mining Charter or the 2010 Mining Charter do not constitute a breach of a material term or condition of the mining right.

Practical effect of majority judgment is limited

In making these orders, Barrie AJ interpreted the provisions of the MPRDA as they stood when the application was launched in 2015. Thus, the majority judgment is limited to interpreting the provisions of the Original Mining Charter and the 2010 Mining Charter.

It did not consider the broader legislative framework in place to redress past imbalances. Nor did the majority judgment take judicial notice of the ongoing developments around the third iteration of the Mining Charter. (These developments are pending, before the same division of the Court.) Furthermore, the judgment did not take judicial notice of the pending amendments to the MPRDA, which include broadening the definition of the Act to include the “Mining Charter” so that it can have the force of law.

The practical effect of the majority judgment is quite limited because most mining rights already include a condition about the empowerment structure or arrangement that binds the holder of a mining right. In terms of section 102 of the MPRDA, a mining right cannot be varied or amended without ministerial consent. Doing otherwise would contravene the MPRDA, which would entitle the DMR to suspend or cancel the mining right.

Minority judgment differs markedly

Siwendu J for the minority sharply disagreed with the majority judgment.

The Judge found that failure to meet the HDSA ownership requirements of the Mining Charters is a contravention of the MPRDA, which could result in the suspension or cancellation of a mining right. She also called for a constitutionally appropriate interpretation of the provisions of the MPRDA and the Mining Charters so as to ensure that all the minerals industry stakeholders prosper from it.
 
Going further, Siwendu J dismissed the argument that mining right holders only need to comply with the 26% HDSA ownership requirements during the licensing stage unless the right specifically requires the holder to maintain 26% HDSA ownership.

The minority judgment could inform grounds of appeal if any party to the dispute elects to appeal the judgment.

Caution advised

It is highly unlikely that this judgment will be the final word on the empowerment requirements applicable to the minerals industry. This is apparent from the Chamber of Mines’ statement, among others. Welcoming the judgment, the Chamber states that it “notes and accepts the High Court judgment. The Chamber is engaged in meaningful processes with other stakeholders, including the DMR, to shape and develop a new Mining Charter that all stakeholders can support and defend.”

The pending MPRDA amendments will actually address some of the issues which led to the majority decision. The process to revise the Mining Charter is currently underway and, if properly done, will contain the empowerment requirements applicable to the minerals industry that will be accepted by all the stakeholders.

In the circumstances, it is not advisable to take empowerment decisions or solely define an empowerment strategy on the back of this judgment.

For more information, please contact Wandisile Mandlana.