The Mining Charter – Now no better time to apply for a mining permit of Diamond Licence or start a refinery
On 21 September 2021, a full bench of the Gauteng High Court delivered a unanimous and strong 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). The Court consequently set aside a number of Mining Charter III’s key provisions. 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 clauses.
Background to the judicial review proceedings
Mining Charter III1 came into force on Friday, 1 March 2019 – almost three years after the DMRE circulated a first draft for public comment.2
While the Charter was a significant improvement on the Reviewed Broad-Based Black Economic Empowerment Charter for the South African Mining Industry, 20173 which former Mineral Resources Minister, Mosebenzi Zwane, published in June 2017 and subsequently withdrew, it still contained a number of provisions that were a cause for concern. As we previously discussed (here) these included:
onerous re-empowerment obligations for the renewal and transfer of existing mining rights;
the BEE Shareholding top-up requirements for pending applications; and
the Minister’s seemingly unlimited ability to review and revise the obligations imposed under the Charter from time to time.
In an attempt to address these concerns, the DMRE and the Minerals Council South Africa (Minerals Council) engaged in a series of consultations following the publication of the Charter in September 2018. The parties were, however, unable to find common ground and on 26 March 2019, the Minerals Council instituted a judicial review of the Charter in which it requested the Gauteng Division of the High Court of South Africa (High Court or the Court) to set aside certain of its provisions.4
The judicial review application was heard before a full bench of High Court on 3 to 6 May 2021 and judgment was delivered on 21 September 2021.
Applicant’s and respondents’ contentions
The applicant, the Minerals Council, sought to review and set aside certain provisions of the Charter (impugned provisions). If the High Court declined the request, the Minerals Council, in the alternative, requested the Court to declare that the impugned provisions were inconsistent with the principle of legality which is enshrined under section 1(c) of the Constitution of the Republic of South Africa, 1996 (Constitution). If the Court agreed with the relief sought, the Minerals Council also requested it to set aside the impugned provisions.
The community respondents (comprising three communities affected by mining operations, three organisations representing these affected communities, and two trade unions) did not oppose the relief sought by the Minerals Council. The main concern raised by the community respondents was that, despite mine hosting communities bearing the disproportionate burden of the negative impacts of mining, they had received little to no direct benefit from this.5 As a result, they argued that the Charter did not go far enough in addressing the objects of the Constitution, the Mineral and Petroleum Resources Development Act, 2002 (MPRDA) in general and section 100(2) in particular.6
The Minister of Mineral Resources and Energy (Minister) and the South African Diamond and Precious Metals Regulator (jointly, the State Respondents) opposed the relief sought by the Minerals Council as well as the community respondents. In response, the State Respondents contended that section 100(2) of the MPRDA empowered the Minister to make law through the development of the Charter. The Charter, it was contended, constitutes a unique (sui generis) form of subordinate legislation which is directly binding on the holders of mining rights.
Question in dispute
The question in dispute concerns the ambit of the powers of the Minister under section 100(2) of the MPRDA to make law in the form of subordinate legislation, as well as the legal nature and role of the Charter in the context of the MPRDA.
At issue, therefore, is whether the Charter constitutes law or policy.
A related question is whether the development of the Charter by the Minister constitutes administrative action which is reviewable under the Promotion of Administrative Justice Act, 2000. In the alternative, whether it should be tested against the principle of legality.
High Court’s decision and the relief ordered
The High Court found that section 100(2) does not empower the Minister to make law.
In a carefully considered judgment, Judge Kathree-Setiloane, writing for the full bench, explained that the answers to the parties’ questions must be determined by considering the wording of section 100(2) of the MPRDA (“the empowering provision”):
(2) (a) To ensure the attainment of the Government’s objectives of redressing historical, social and economic inequalities as stated in the Constitution, the Minister must within six months from the date on which this Act takes effect develop a broad-based socio-economic empowerment Charter that will set the framework for targets and time table for effecting the entry into and active participation of historically disadvantaged South Africans into the mining industry, and allow such South Africans to benefit from the exploitation of the mining and mineral resources and the beneficiation of such mineral resources.
(b) The Charter must set out, amongst others, how the objects referred to in section 2 (c), (d), (e), (f) and (i) can be achieved. [own emphasis added]
The judgment did not express any views on the need to “[redress] historical, social and economic inequalities as stated in the Constitution”.7 Instead, it illustrates that the Legislature’s decision to use words such as “charter”, “develop” and “can” indicate that document which the Minister is required to develop is policy and not law. The judgment also held that it is not insignificant that the words “law” and “regulation” are mentioned in various other sections of the MPRDA, but do not appear in section 100(2).
In light of this, the Court ruled that the Charter was not binding subordinate legislation, but rather an instrument of policy. As the Minister was not lawfully empowered to impose binding obligations under the Charter, the High Court consequently reviewed and set aside those provisions which the Minerals Council identified in its founding papers.8 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. (A complete list of the impugned provisions is provided in the schedule which is annexed to this brief.)
The most significant consequences of the High Court’s decision
The empowering provision (section 100(2)) does not entitle the 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 Regulation. 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 by the High Court. For example, the clauses concerning 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 were 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 recognized by the DMRE