Proposed Socio-Economic Empowerment Charter for the SA Mining Industry

Published by MAC on 2002-06-15

Proposed Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry

[Issued by the Government of South Africa. June 2002]

Preamble

Recognising:

• The imperative of redressing historical social and economic inequalities as stated by the Constitution of the Republic of South Africa, inter alia in section 9 on equality (and unfair discrimination) in the Bill of Rights, and section 217.2 on procurement where the "organs of state" may implement a "procurement policy providing for categories of preference in the allocation of contracts and the protection of advancement of persons, or categories of persons, disadvantaged by unfair discrimination";
• The policy objective stated in the Minerals and Petroleum Resources Development Bill to "expand opportunities for historically disadvantaged persons to enter the mining and minerals industry or benefit from the exploitation of the nation's mineral resources;
• That lack of relevant skills has been identified as one of the barriers to entry into the mining sector by black people;
• That the mining sector in measures or employment equity ranks last.

Noting

• The enactment of (the Preferential Procurement Framework Act (No 5 of 2000)
• The Employment Equity Act (No 55 of 1998);
• The Competition Act (No. 89 of 1998) (Also ref. To the Amendment Act No. 3S or 1999 and subsequent amendments);
• The Skills Development Act (No. 97 of 1998).

The signatories have developed this Charter to provide a framework for progressing the empowerment of historically disadvantaged South Africans in the Mining and Minerals Industry.

1. Scope of Application

This Charter applies to all parts of the industry and to all parts of the value chain, inter alia:

• Exploration D and production of minerals;
• Beneficiation of minerals;
• Transport, including road haulage and coastal shipping;
• Trading, including import and export;

2. Interpretation

For the purposes of interpretation the following terms apply:

• Broad-Based Socio Economic Empowerment (BBSEE) refers to empowerment that encompasses the cross-cutting RDP principles and objectives of South Africa's industrial policy namely, ownership - Black Economic Empowerment, - job creation, career-pathing and rural development for Historically Disadvantaged South Africans.
• The term Historically Disadvantaged South Africans (TOSA) refers to all persons who, before the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993) came into operation, were disadvantaged by unfair discrimination on the basis of race, gender, or disability.
• HDSA Companies are those companies that are owned or controlled by historically disadvantaged South Africans that operate on a basis to meet all aspects of this Charter.
• Ownership refers to equity participation and the ability to exercise rights and obligations that accrue under such ownership.
• Labour sending areas refers to areas from which the mine workers originally come.
• Control of a business entity can be achieved in a number of ways;
  (a) a majority shareholding position, i.e. 50% + 1 share,
  (b) an effective controlling shareholding;
  (c) a majority of a board of directors; and/or
  (d) a shareholders agreement.
• Sustainability in regard to HDSA Companies refers to:
  (a) Medium to long-term viability and adaptability through a presence across all facets of the minerals value chain;
  (b) Ventures with prospects of long term profitability;
  (c) Requisite levels of skills and access to technology and
  (d) Succession planning mechanisms.

3. Objectives

The objectives of this charter are to promote sustainable development and growth through minerals and energy resources for the benefit of all South Africans by:

• Expanding opportunities for HDSA's to enter the mining and minerals industry or benefit from the exploitation of the nation's mineral resources;
• Utilising the existing skills base for the transformation of HDSA's;
• Expanding the skills base of HDSA's in order to serve the whole community;
• Promoting employment and advancing the social and economic welfare of mining communities and labour sending areas.

4. Undertakings

Member companies and government undertake to create an enabling environment for the empowerment or ADSA's by subscribing to do the following:

4.1 Human Resources Development

The South African labour market does not produce enough of the skills required by the mining industry. Organised industry and government and other stakeholders shall work together in addressing this skills gap in the following manner:

• In its bi-lateral relations with relevant countries, Government shall endeavour to secure training opportunities for HDSA companies' staff, as well as exchange opportunities with mining companies operating outside of South Africa;
• Government shall endeavour, through the MQA and in collaboration with academic institutions, DME associated institutions NGO's, and the Gender Commission, to provide training courses in mining entrepreneur's skills;
• Industry undertakes to build skills of its employees and report on progress annually in an agreed format;
• Industry undertakes to implement succession plans to ensure progress of the employees;
• Industry undertakes to provide, to miners and their families life skills that will sustain them after mine closure;
• Industry undertakes to develop a system through which empowerment groups can be mentored by established mining companies as a means of capacity building;
• The industry, through the standing consultative arrangements shall interface with statutory bodies such as SETA (Sectoral Education and Training Authority) in the development of skills development strategies;

4.2 Employment Equity

Companies shall publish their employment equity plans and achievements and subscribe to the following:

• South African subsidiaries of multinational companies and South African companies focus their overseas placement and/or training programmes on historically disadvantaged South Africans;
• Identification of a talent pool and fast tracking it;
• Ensuring inclusiveness of gender;
• Implementing mentorship programmes;
• Setting and publishing "stretch" (i.e. demanding) targets and their achievement.

4.3 Migrant Labour

Government and industry undertake to:

• Change the migrant labour system in a way that protects the interests of migrant mineworkers;
• Review the system of compulsory deferred pay;
• Ensure that foreign miners have the right to be treated as any other potential immigrant or temporary resident;
• Ensure that a social plan is in place before mining commences so as to avoid unsustainable settlements; and
• Develop integrated rural development plans for labour-sending areas.

4.4 Housing and Living Conditions

Government and industry, in consultation with the Mine Health and Safety Council, the Department of Housing and organised labour, undertake to:

• Establish measures for improving the standard of housing and nutrition of the employees;
• Source funds for the upgrading of hostels into single accommodation and family units.

4.5 Private Sector Procurement

Participants in the industry shall subscribe to and adopt supportive procurement policies to facilities and leverage the growth of HDSA companies. Such policies include criteria that favor HDSA companies.

• The scope of procurement shall include suppliers, products and all other goods and services.
• HDSA companies are accorded preferred supplier status as far as possible.
• List of suppliers: It is envisaged that information on all HDSA companies wishing to participate in the industry will be collected and published. All participants in the industry will assist in compiling such a list that will inter alia be published by government on the internet and updated regularly.

4.6 Public Sector Procurement

Government will engage with State Tender authorities to draw their attention to the Petroleum and Mineral Resources Development Bill milestones with respect to economic empowerment of historically disadvantaged South Africans, with the aim of giving effect to supportive procurement policies within this sector.

4.7 Ownership and Joint Ventures

Government and industry undertake to negotiate the transfer of ownership of at least 51 % of mining industry assets to HDSA's, within the next ten (10) years. Ownership could be subdivided into two categories, namely, Class A and Class B.

Class A: These are ventures that involve deposits that have significant reliable markets and revenue, are in abundance and its ores are easily beneficiated.

Class B: These are very risky / marginal ventures which for various reasons such as those that involve very deep deposits, deposits with unreliable markets or the assets are too small to make a significant impact. This class is not considered as real empowerment. Government undertakes through the Council for Geoscience, to compile a register of potential mining projects from old exploration and mining records. These will then be made available to HDSA companies.

Mining companies undertake to make available to Black Economic Empowerment companies those deposits that for various reasons do not fit into their business plans. Mining companies undertake to form joint ventures that include a wide spectrum of previously disadvantaged people, such as women, the disabled and host communities.

Mining companies undertake to make available to their HDSA in their employ share option schemes so that they can play a meaningful role in the industry.

4.8 Beneficiation

Recognising that most minerals are of little value in the ore condition, the ore must be beneficiated to yield a product that is useful to industry, mining companies undertake to fully involve HDSA's in the control and management of the beneficiation facilities listed below:

• Production of minerals concentrate;
• Concentrate to bulk-tonnage intermediate production;
• Production of more sophisticated refined product;
• The manufacture of finished consumer and industrial products.

4.9 State Assets

Government undertakes to deal with state assets in a manner that promotes the objectives of the Minerals and Petroleum Resources Development Bill and this Charter.

4.10 Licensing

Government undertakes to consider the following before issuing new licences and converting old rights to new ones:

• That the applicant has a BEE partner with at least 30% equity in an existing operation;
• That the applicant has a BEE partner with at least 51% equity in an new operation;
• Should the applicant be unable to find a suitable partner, government should intervene through vehicles such as the IDC / Development Bank, so that such shares can be warehoused within these organizations.

4.11 Financing Mechanism

Industry participants:

• Acknowledge that terms of credit are important to HDSA companies and agree to take this into account in bilateral activities;
• Undertake to implement internal and external financing mechanisms for giving HDSA companies access to equity ownership Government:
• In consultation with MININGTEK undertakes to facilitate access to mining technology to HDSA companies;
• Undertake to assist HDSA companies in securing finance.

4.12 Regulatory Framework and Industry Agreement

Government's regulatory framework and industry agreements shall strive to facilitate the objectives of this Charter.

4.13 Consultation, Monitoring, Evaluation and Reporting

It is recognised that the achievement of the objectives set out herein entails an ongoing process. The Government conducts an annual survey of the industry to evaluate progress in achieving the objective of the Minerals and Petroleum Resources Development Bill. Companies shall submit such data as is required at the end of each year, including employment equity data, procurement targets, etc.

The aggregated information is published and forms the basis of the annual forum. Parties hereto participate in annual forums for the following purposes:

• Monitoring progress in the implementation of plans;
• Developing new strategies as needs are identified;
• Ongoing government / industry interaction in respect of these objectives;
• Developing strategies for intervention where hurdles are encountered;
• Exchanging experiences, problems and creative solutions;
• Arriving at joint decisions;
• Reviewing this Charter if required.