The Minerals and Petroleum Resources Development Act (MPRDA) came after sustained pressure from the Congress of South African Trade Unions (COSATU), the National Union of Mine Workers (NUM) and the South African Communist Party in the late 1990s, in response to the lack of transformation in the mining sector in the South African economy. The “left” felt that the working class did not benefit from the long wave boom, especially in platinum group metals. This started in 1968 with the introduction of stricter air control legislation and regulations to control exhaust emissions from combustion engines on the crammed highways of United States cities. Given that the USA was the biggest global car market at the time, manufacturers in Japan and Europe quickly adapted to compulsory platinum-based catalysers for their vehicle engines. Demand for platinum internationally soared as a consequence.
Policy Gap 1, the first report of the Bench Marks Foundation on corporate responsibility in platinum mining in South Africa, warned that although three mining corporations operating out of South Africa had an oligopolistic grip on platinum mining, producing more than 80% of platinum between them, the high platinum prices would serve as an incentive to the motor car industry to move away from combustion engines. Platinum dust from vehicle exhausts in Europe and elsewhere was starting to show up negatively in health research in places like London. And the demand for platinum was largely based on a single use in manufacturing, and more research and development was needed to diversify its uses.
The mining industry and the Chamber of Mines, now the Minerals Council, responded to the pressure for stricter legislation and regulations by suggesting that mining corporations would improve their behaviour if guided by a voluntary mining charter instead of strict legislation and regulations. Voluntary compliance, the Chamber of Mines suggested, would not “scare away investment”, while a strict regulatory environment would.
The beginning of BEE
The debate occurred against the backdrop of a crisis in the ruling party, faced with ever-rising costs of election campaigns. Fierce policy discussions took place in the Tripartite Alliance (the African National Congress, the SACP and COSATU) about deploying comrades onto the boards and management structures of leading corporations in all sectors of the economy, ostensibly to use their positions towards mitigating the financial woes of the ruling party. This led to the Bret Kebble assassination scandal, and to the appearance of prominent ANC figures on the boards and management structures, especially of mining corporations, and to the “Black Economic Empowerment” (BEE) policy.
NEDLAC, where big government, big business and big labour converge, agreed on charters which would direct the social, economic and environmental responsibilities and transformation of the private sector. The notion of private ownership was never challenged, and NEDLAC resisted any ideas that would promote the public and common interests of society. When it became clear that BEE benefited mostly ruling party luminaries and politically connected individuals, BEE got two additional “B”s and was renamed the Broad-Based Black Economic Empowerment policy (BBBEE).
The Mining Charter
The first South African Mining Charter was introduced in 2002, as a broad-based socio-economic empowerment charter for the South African mining and minerals Industry. It was a government-led initiative intended to address past imbalances and injustices in the mining industry. The Charter was finalised and signed by mining stakeholders on October 1, 2002, with the aim of facilitating the entry of historically disadvantaged South Africans into the sector. The charter was established through Section 100(2)(a) of the Mineral and Petroleum Resources Development Act (MPRDA).
The primary goal was to transform the mining industry by promoting ownership shares to historically disadvantaged South Africans and implementing quotas on executive management positions. The only real inclusive intervention that would promote generalised ownership to all previously disadvantaged people would be to nationalise and socialise the means of production. But this would require reversing the neoliberal policy of privatisation and amending the property clause in the Constitution of South Africa.
The property clause in the Constitution of South Africa is a legal provision that safeguards private property rights. It serves as a cornerstone of the country’s neoliberal economic framework. Proposals to amend this clause have surfaced as part of debates surrounding equitable transformation and nationalisation, particularly in the mining sector. Amending the property clause would be central to reversing privatisation policies and enabling broader access to the means of production, promoting generalised ownership among previously disadvantaged groups. However, such changes would significantly depart from the existing constitutional framework and require substantial political and legislative action.
The charter was in place from 2002 to 2009, with a review period agreed upon after five years. It aimed to improve the lives of previously disadvantaged black South Africans by ensuring their participation in the mining industry.
The charter has since been revised and amended, with the latest version, Mining Charter III, being implemented in 2018.
The Mining Charter, and its various updated versions, propose that communities should benefit from purchased minority share ownership, and Social and Labour Plans, while they would theoretically be protected by Environmental Impact Assessments and Environmental Management Plans. Various studies conducted by the Bench Marks Foundation over the last 20 years demonstrate that community share ownership schemes, social and labour plans, and environmental management are simply not happening in reality.
Collapse of the platinum price
In 2008, the platinum price collapsed, as Bench Marks Foundation predicted it would. It fell from $2,000 an ounce to $700 an ounce, and it never quite recovered.
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The collapse of the platinum price meant that corporations did not pay any dividends to shareholders at the time. BEE shareholders paid for their shares through bank loans obtained with the assistance of mining corporations, normally with the understanding that loan repayment would derive from dividends. 80% of the dividend payment would service the debt to the banks, and the other 20% would go to the black beneficiary or community to whom the shares were sold. Initially, the agreement was 27% of the shares to black business shareholders and 5% to communities and labour. As a result of the collapse of the platinum price and the resulting collapse of the share prices of platinum companies, the new black shareholders failed to service their debt to the banks and lost their shareholding.
Once empowered, always empowered
This led to the “Once Empowered, Always Empowered” court case. The Minerals Council took the Department of Minerals and Energy to court. They claimed that even if Black shareholders lost their shares, either through cashing in those shares or through payment default to the banks, the company would retain its BEE status, even if in fact it no longer had the 27% (then) or 30% (now) shareholding. It would therefore not be in transgression of the Mineral and Petroleum Development Act (MPRDA). The Minerals Council won the case.
The review and consequent setting aside of these provisions had several implications. First, mining right holders who already have a 26% BEE shareholding, and whose BEE partners left before the introduction of the Mining Charter, will be recognised as BEE compliant for the duration of their rights. Second, the “once empowered, always empowered” principle will persist regardless of the renewal or transfer of their right, which was granted pre-Charter – i.e. before 2018. Third, although the Mining Charter introduced a new BEE shareholding threshold requirement of 30%, there is no need for 5% of that shareholding to go to qualifying employees and host communities, and a 20% effective ownership to BEE entrepreneurs. Mining rights granted post-Charter allow the holder the freedom to comprise their BEE shareholding as they wish. Fourth, non-compliance with the Mining Charter will no longer lead to a subsequent breach of the MPRDA, which can render the right of the breaching party subject to suspension and/or cancellation.
Motivation for changes
The Department of Minerals and Energy suggests Minister Mantashe’s proposals are driven by a desire to:
- enhance the competitiveness of South Africa’s mining and petroleum sectors;
- address inefficiencies in existing regulatory mechanisms; and
- ensure greater socio-economic benefits for communities affected by mining activities.
One of the central motivations is the declining competitiveness of South Africa’s mining sector on the global stage. Investors and operators have often cited regulatory uncertainty and bureaucratic delays as key deterrents. By refining the MPRDA, the government hopes to create a more investor-friendly climate that will attract foreign direct investment while encouraging local businesses to thrive.
The Minerals Council suggests that the proposed changes will scare away investment, particularly the reference to greater socio-economic benefits for communities affected by mining activities. Private companies are concerned about maximising profit and benefiting shareholders, not about socio-economic benefits for communities. The Council’s rationale is that mining companies pay tax and that the revenues derived from taxation should benefit communities.
However, while the company tax rate between 1980 and 1993 was between 40% and 50%, since the dawn of democracy, it has fallen to 27% currently. This is part of the neoliberal policy of attracting foreign direct investment. The reality is that the state has less resources for service delivery and community upliftment, while the return on investment for shareholders should theoretically be greater and therefore more attractive. Yet, despite this, there has been a steady emigration: major mining multinational corporations from South Africa – BhP Billiton, Anglo Gold Ashanti, Anglo Coal – have all departed, while Anglo Platinum is in the process of leaving.
Neither the government nor the Minerals Council would admit that the real reason for leaving is not government policy ( as can be seen from the corporate tax rate between 1979 and the present, the government is doing everything in its power to be more attractive). It’s the reality of mineral depletion. Most of the gold, coal, platinum and diamond mines have operated for between 100 and 150 years, and they have reached depletion and end of life. No one wants to bear the cost of closure and rehabilitation, and the private sector wants to externalise the cost of the funeral of this exploitative extractive industry to the public.
Key proposed changes
Although the full details of the amendments are yet to be disclosed, several key areas have emerged as focal points in Minister Mantashe’s proposals.
Streamlining processes: Administrative bottlenecks have plagued the industry for years, with delays in granting licenses and permits often resulting in stalled projects and lost economic opportunities. The proposed changes include streamlining application and approval processes, reducing red tape, and introducing time-bound commitments for government agencies.
Community development and social equity: The mining and petroleum sectors have historically been criticised for inadequate contributions to local communities. Mantashe’s amendments aim to strengthen provisions related to community development, ensuring that mining royalties and other benefits are effectively channelled toward uplifting affected regions.
Revised licensing framework: A significant focus is on overhauling the licensing framework to make the process more transparent and efficient. The new system aims to reduce delays and enhance accountability, ensuring that licenses are granted based on merit and compliance with environmental and social standards.
Increased environmental oversight: Environmental concerns have become increasingly prominent in global discourse, and South Africa is no exception. The changes propose stricter measures to mitigate environmental impact, including more rigorous assessments and higher penalties for non-compliance.
Most annual reports of mining companies admit failure to adhere to environmental standards and regulations, as most Policy Gap Reports by the Bench Marks Foundation over the past twenty years have demonstrated. Yet the Minerals Council is opposed to stricter oversight.
Mandatory community engagement: The amendments emphasise the importance of engaging local communities in decision-making processes. Mining companies will be required to demonstrate comprehensive community consultation and provide tangible benefits, such as infrastructure development, education, and healthcare investments.
The Minerals Council does not want to be forced to engage with communities despite the appalling record of failure of voluntary Social and Labour Plans over the entire post-apartheid period.
Empowering local businesses: To foster economic inclusivity, the proposed changes include measures to empower local businesses through procurement policies and partnerships. Mining companies will be incentivised to source goods and services locally, thereby stimulating the economy at the grassroots level.
Bench Marks Foundation has time and again pointed out that local procurement by the mining sector is illusory. The Foundation would welcome measures to realise effective, real local procurement by mining companies.
Potential to reshape the industry
Minister Gwede Mantashe’s proposed changes to the MPRDA have the potential to reshape South Africa’s mining and petroleum industries, addressing critical concerns around efficiency, equity, and sustainability. While the amendments represent a step forward, their success will depend on effective implementation and collaboration among stakeholders.
As South Africa navigates this transformative period, the proposed changes will likely serve as a litmus test for balancing economic growth, environmental stewardship, and social equity.
David van Wyk is a Lead Researcher at the Bench Marks Foundation.
