FIRM OPINION | THE GREAT MINING CHARTER DEBATE
For as long as the Mineral and Petroleum Resources Development Act, 2002 (MPRDA) has been enacted, the South African mining industry has enthusiastically debated whether the broad-based socio-economic empowerment charter, developed by the Minister of the Department of Mineral Resources and Energy (DMRE) in terms of section 100(2)(a) of the MPRDA, is binding and enforceable against mining companies?
This question fuels many great debates, to which the conclusion is often another question. What was the intention of the legislature by including section 100(2)(a) in the MPRDA?
Several mining law experts have weighed-in, and yet no interpretation has been so definitively tested in a court of law, until now…
On 21 September 2021, the full bench of the High Court of South Africa, Gauteng Division, Pretoria (Court), delivered judgement in a case brought by the Minerals Council of South Africa (Minerals Council) against the Minister of the DMRE (Minister). The Minerals Council sought an order declaring that certain sections of the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (2018 Mining Charter) be reviewed and set aside.
The Court surmised that the question in dispute concerned the ambit of the powers of the Minister under section 100(2) of the MPRDA to make law in the form of subordinate legislation, and the legal nature and role of the 2018 Mining Charter in the context of the MPRDA.
Essentially, the Court wanted to determine whether the 2018 Mining Charter constitutes law or policy?
The 2018 Mining Charter as Law
If the 2018 Mining Charter constituted law, it would be directly binding on mining companies (not only at the mining right grant stage or because of its inclusion as a condition of the mining right) and to the extent that mining companies failed to comply with it, their mining right could be suspended or cancelled under the provisions of the MPRDA.
The 2018 Mining Charter as Policy
If the 2018 Mining Charter constituted policy, a breach of its provisions would not result in the cancellation or suspension of a mining right (unless compliance with the 2018 Mining Charter was included as a condition of the mining right).
The Mining Charter as policy or law is one of the most important judgements in mining law today.
In Court, the Minister contended that section 100(2) of the MPRDA empowered him to make law through the development of the 2018 Mining Charter, and accordingly the 2018 Mining Charter constituted a unique form of subordinate legislation which is directly binding on the holders of mining rights.
Contrarily, the Minerals Council argued that the 2018 Mining Charter is a formal policy document and is only binding on the Minister when he considers an application for a mining right (section 23(1)(h) of the MPRDA), and that the 2018 Mining Charter is only binding on the holders of mining rights to the extent that its terms have been lawfully incorporated by the Minister into such mining rights.
In interpreting the provisions of section 100(2)(a) of the MPRDA;
The Court analyzed the language used in the section. It first looked at the legislature’s use of the word “charter.” The Court reasoned that the MPRDA distinguished between the use of the word “charter” in section 100 and the use of the word “regulation” in section 107 of the MPRDA. The Court stated that if the legislature intended the “charter” to constitute subordinate legislation, it would have just used the term “regulation” in section 100 and not “charter”.
The Court also assessed the way the minerals industry and regulators interpreted and implemented section 100(2) immediately after the enactment of the MPRDA (in 2004) to determine its effect. Accordingly, the Court had regard to the wording of the 2004 Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry (Original Charter). The Court reasoned that the Original Charter was a formal document recording a pact between the government and industry - co-signed by them - in which they committed to a framework for progressing the empowerment of Historically Disadvantaged South Africans in the mining and minerals industry. The Court considered this to be the opposite of law which is promulgated as a result of the unilateral exercise of legislative or executive power. In this regard, the Minerals Council stated that the amendment to the Original Charter which was published in 2010 (2010 Mining Charter) and the 2018 Mining Charter were unilaterally adopted by the Minister in a deviation from the expectations of the signatories of the Original Charter.
The Court analyzed the impact of the 2018 Mining Charter that repealed the previous charters and adopted a prescriptive approach by imposing sanctions for non-compliance. The Court stated that the Minister sought to change the interpretation held by all concerned since the commencement of the MPRDA and considered the way in which the Original Charter was developed, as a clear illustration of how the Minister and the mining industry interpreted the charter published in terms of section 100(2), which was not as an instrument of subordinate legislation or as law.
The Court further discussed the use of the words “developed” and “can,” in section 100(2) of the MPRDA, and concluded that the use of these words lent itself to the interpretation that the 2018 Mining Charter constituted policy and not subordinate legislation or regulation. The Court further reasoned that if section 100(2) was interpreted to make the Minister enact subordinate legislation to set out how the objects of the MPRDA (related to transformation) must be achieved, this would amount to a delegation of absolute legislative power (generally vested in the legislature) to the Minister - which would offend against the doctrine of separation of powers, as section 100(2) contains no parameters, no guidance, and no constraints. The Court stated that on a proper construction of section 100(2), the achievement of the MPRDA’s transformational objectives does not require the 2018 Mining Charter to take the form of subordinate legislation.
The Court criticized the Minister’s argument that the transformation objects of the MPRDA cannot be achieved unless the 2018 Mining Charter is binding subordinate legislation. The Court reasoned that this argument ignored the enforcement structure which is provided in the MPRDA.
After careful consideration of the language of section 100(2) of the MPRDA and considering its ordinary meaning, the context in which it appears and the apparent purpose for which it is directed, the Court concluded that section 100(2) of the MPRDA does not empower the Minister to make law and accordingly, the Court ruled that the 2018 Mining Charter is not binding subordinate legislation but an instrument of policy.
Accordingly, the Court granted the order sought by the Minerals Council and reviewed and set aside several sections of the 2018 Mining Charter. In particular, the Court set aside paragraphs 9.1 and 9.2 of the 2018 Mining Charter which states that a breach of the 2018 Mining Charter constitutes a breach of the MPRDA which would make the holder susceptible to having its mining right suspended or cancelled.
What is interesting to note is that the Court surmised that the question in dispute concerned the ambit of the powers of the Minister under section 100(2) of the MPRDA, and yet the Court did not address the issue of whether the Minister was empowered to amend and/or repeal the Original Charter through the 2010 Mining Charter and the 2018 Mining Charter. A question that was briefly dealt with in 2018, when the High Court of South Africa, Gauteng Division, Pretoria considered the 2010 Mining Charter and handed down the judgment commonly referred to as the “once empowered always empowered judgement”, in the matter of the Chamber of Mines of South Africa v Minister of Mineral Resources (as he was then known) and another.
Whilst this judgement goes a long way to providing regulatory certainty as to the effect and status of the 2018 Mining Charter, this is certainly not the end of the road. The Minister has several options available to him, including appealing the judgement to the Supreme Court of Appeal and/or including compliance with the 2018 Mining Charter as a term of new mining rights. An application for leave to appeal would have the effect of suspending the judgement unless the court, under exceptional circumstances, ordered otherwise.
If compliance with the 2018 Mining Charter is included as a term of new mining rights, this inclusion will likely constitute administrative action which can be subjected to judicial review. The MPRDA can also be amended through the enactment of an amendment bill to place an obligation on the holders of mining rights to comply with the 2018 Mining Charter. It is compliance with the 2018 Mining Charter, as amended by this judgement, that will be included as a term in new mining rights. Remember, that for the grant of new mining rights, the Minister must still be satisfied that the granting of such mining right will further the objects referred to in section 2(d) and (f) of the MPRDA in accordance with the charter contemplated in terms of section 100(2) of the MPRDA.
Considering the various moving parts (the declaration that the 2018 Mining Charter is an instrument of policy and the effect of any potential appeal) the mining industry should still take cognizance of the 2018 Mining Charter, particularly in relation to the application for new mining rights.
About the Author
Muhammed has extensive regulatory experience, advising clients on their rights and obligations under several pieces of legislation in South Africa. He is a Senior Associate in the Mining and Environmental Law department of NSDV and combines his knowledge with the firm’s approach to unpack and demystify major industry events for their clients and the mining sector in South Africa.