Peter Leon | Partner | Africa Chair | Herbert Smith Freehills | mail me |
There are key consequences of the Gauteng Division of the High Court’s decision in Minerals Council of South Africa v The Minister of Mineral Resources and Energy and Thirteen Others (Case No. 20341/19) (Mining Charter III Judgment).
On 21 September 2021 a full bench of the Gauteng Division of the High Court delivered a unanimous and damning judgment declaring that the Broad-based Socio-economic Empowerment Charter for the Mining and Metals Industry, 2018 (Mining Charter III or the Charter) is simply policy and not legislation or subordinate legislation as long contended by the Department of Mineral Resources and Energy (DMRE) (para 55).
Significant consequences of the judgement
As a result of this, the Court likewise set aside a number of Mining Charter III’s key clauses (para 68).
These include the re-empowerment obligations which the charter purported to impose on existing mining right holders when they wish to renew or transfer their rights, the charter’s onerous procurement, supplier and enterprise development targets, as well as some of its penalty and enforcement provisions.
In our view the most significant consequences of Judge Kathree-Setiloane’s decision, writing for the Court, are as follows:
- Section 100(2) of the Mineral and Petroleum Resources Development Act, 2002 (MPRDA) – the provision which provides for the development of a broad-based socio-economic empowerment Charter – does not empower the Minister of Mineral Resources and Energy (Minister) to make law. As a consequence, Mining Charter III is simply a policy document and not a statutory instrument such as an Act or Regulations. It follows that Mining Charter III cannot give rise to legally binding obligations.
- Owing to its status as a policy document mining right holders may, but are not legally obliged to, comply with the remaining requirements imposed under the Charter. This is subject to two qualifications:
- First, not all of the provisions of the charter were reviewed and set aside. For example, the clauses which concern employment equity, human resource development, mine community development, and housing and living conditions still form part of the charter. These clauses will not automatically impose obligations on the holders of existing mining rights, but may do so if such requirements are incorporated as specific terms or conditions of the relevant mining right.
- Second, the clauses which are set aside have now been removed from Mining Charter III. A significant example is the charter’s procurement, supplier and enterprise development requirements imposed under clause 2.2 of Mining Charter III.
- The Court once again confirmed the ‘once empowered, always empowered’ principle. As a consequence the Historically Disadvantaged South African (HDSA) ownership status of existing mining right holders who wish to renew or transfer their rights must automatically be recognised by the DMRE.
- The judgment has a materially positive impact on the security of tenure of existing mining rights holders. As a result, existing mining right holders now know that if they previously satisfied the empowerment requirements imposed under any version of the charter, they will not be required to do so again.
A significant victory for the rule of law
We are delighted that the court reiterated many of the views (including our own) which the industry has held for years. It is a significant victory for the rule of law, regulatory certainty and predictability.
The judgment vindicates my long held view that the charter, in all its iterations, was nothing more than a socio-economic compact between government, labour and the mining industry. The original charter, signed in October 2002, reflected exactly this principle.
Regrettably the 2010 and 2018 versions purported to turn what was no more than a compact into a binding legislative instrument with all the associated regulatory uncertainty.
Hopefully this carefully reasoned and strong judgment will give the DMRE cause to reflect on what has gone wrong in the last ten years and put the industry back on a much needed path of regulatory certainty and predictability.