Policy is not law, says court as it reins in Mining Charter

Policy is not law, a court says about the Mining Charter, after Minerals Council South Africa brought an application against the minister of mineral resources and energy to review and set aside certain clauses of the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry of 2018.

As an alternative, the council asked the North Gauteng High Court to issue a declaration that the challenged clauses are inconsistent with the principle of legality and should be set aside.

The council brought the application under the Promotion of Administrative Justice Act (PAJA).

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Implication of Mining Charter judgment

The implication of the judgment is therefore that a mining right holder will not be required to “top up” its empowerment credentials on renewal of the mining right and will have more flexibility in structuring empowerment transactions, Jonathan Veeran, Bruce Dickinson and Rita Spalding from law firm Webber Wentzel say.

“The judgment is sound in law but is likely to be appealed.”

The question before the court was the power of the minister of mineral resources and energy under section 100(2) of the Mineral and Petroleum Resources Development Act (MPRDA) to make law in the form of subordinate legislation and whether the 2018 Charter constitutes law or policy.

The matter was heard before a full bench that consisted of judges Fayeeza Kathree-Setiloane, Elmarie van der Schyff and Brian Ceylon.

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Minerals Council welcomes judgment

The council said in a statement after the judgment that it welcomes the judgment released on Tuesday that the Mining Charter is a policy document, that the continuing consequences of previous black economic empowerment deals should be recognised and that the specific challenged provisions in the document should be removed.

According to the council, its members are still committed to the transformation objects of the MPRDA, but the objectives must create policy and regulatory certainty for long term investment and inclusive growth in the mining sector.

The judgment removes the clauses dealing with the renewals of existing mining rights as well as the transfers of mining rights that compels companies to top up their BEE shareholdings to the charter levels. This would dilute shareholders and stifle investment in the sector.

In addition, the judgment sets aside the provisions regarding procurement of goods and services, especially the capital goods target and supplier and enterprise development. The council argued tha these provisions contained unachievable targets for mining companies and makes it difficult to comply with the charter.

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Another win for Minerals Council

Another win for the council was the court removing provisions in the charter regarding non-compliance with ownership and mine community development requirements that would mean they are in breach of the MPRDA that could lead to the suspension or cancellation of their mining rights.

The judgment also set aside provisions in the charter regarding the Diamonds Act and Precious Metals Act that imposes targets for licence holders under those Acts.

After the application was heard on 5 May 2020, the court ordered the joinder of the joined respondents, that included host communities affected by mining operations, organisations representing them and trade unions.

The trade unions opposed the relief sought by the council, while the communities did not oppose it, but sought additional relief on the basis that there was inadequate consultation with them regarding the charter and that it fails to substantially address environmental degradation and gender-based injustice caused by mining, as well as the poverty and inequality of mining-affected communities.

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Arguments about Mining Charter

According to the lawyers from Webber Wentzel, the minister argued that section 100(2) of the MPRDA empowered him to make law through the development of the charter and that therefore constitutes a unique form of legislation which is binding on the holders of mining rights. 

The council, on the other hand, contended that the charter is a formal policy document developed by the minister in terms of the MPRDA and is therefore binding on the minister when he considers applications for mining rights. This provision permits the minister to grant a mining right only if, amongst other things, the grant would be in line with the charter.

The Webber Wentzel lawyers say the minister advanced the argument that the transformation of the mining industry has been ineffective and transformation could be expedited if the charter was directly enforceable law.

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Mining Charter judgment

Judge Kathree-Setiloane concluded that the legislature chose the word “charter” deliberately to indicate something other than a law, while the legislature does not use the word “develop” to describe law-making, but rather refers to formulating policy. The legislature would also have used direct wording if the charter was intended to be anything other than guiding principles.

She declared that section 100(2) does not empower the minister to make law and that the charter is therefore not binding subordinate legislation, but rather an instrument of policy and that certain clauses of the charter are reviewed and set aside in terms of PAJA.

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Unconstitutional aspects

These aspects of the charter have also been found to be unconstitutional:

• provisions requiring compliance with the 30% Historically Disadvantaged South African ownership requirement upon renewals and/or transfers of rights issued under the MPRDA
• provisions which require the implementation of mandated structures, such as community, employee and HDSA (historically disadvantaged South Africans) entrepreneur schemes
• provisions which render the HDSA ownership requirement applicable to holders of permits under the Diamonds Act and the Precious Metals Act
• provisions which allow for a beneficiation offset
• the provision dealing with preferential procurement and
• the enforcement provisions which allow for suspension and cancellation of rights in the event of non-compliance with the 2018 charter.