“The Mining Charter’s potential as an instrument to guide ESG and growth is undeniable, but it needs recalibration and effort,” says Alchemy Law partner Morné van der Merwe, ahead of the Investing in African Mining Indaba, the world’s largest African mining investment event, being held in Cape Town from 5 to 8 February.
As mining industry companies and stakeholders prepare for the Mining Indaba, Alchemy Law, a Johannesburg-based legal firm, unveils a new white paper that sheds light on the Mining Charter ⎯ an at times contentious yet crucial instrument in navigating the industry’s complex transformation journey. While the Charter’s role in fostering Black ownership and social responsibility is undeniable, questions linger about its impact on overall industry performance and alignment with the greater Environmental, Social and Governance (ESG) movement.
The paper, titled Transformative Pathways in South Africa’s Mining Sector: Chartering an ESG-Aligned Era, takes a look at the Charter’s successes and shortcomings. It acknowledges the significant progress made in Black ownership, which has increased from 2% to 39% since 2004. However, it also highlights concerns about varying degrees of compliance and the need for broader-based participation at all levels.
But the Charter’s impact extends beyond mere ownership. Its emphasis on community investment and engagement as well as socio-economic development aligns with the rising prominence of ESG principles, particularly the social pillar. “The Charter deserves credit for putting South Africa ahead of the curve on the social front,” notes fellow partner Fani Dingiswayo. “Building on this strong foundation, and aligning Charter objectives with broader ESG goals can unlock even greater benefits such as ensuring that mining is not only extractive for the life of the mine, but also becomes a unique opportunity to build a sustainable economic legacy in host communities” he adds.
However, the Charter isn’t without its critics. Industry stakeholders point to policy uncertainty arising from frequent revisions as a major deterrent to investment. This volatility, compounded by broader challenges like inefficient public administration and inadequate infrastructure, has significantly hampered industry growth and exploration despite a global rise in commodity prices.
Frequent Charter revisions cast a long shadow of uncertainty, deterring critical investment. As Van der Merwe explains: “Mining thrives on stability. These revisions are like seismic tremors for project timelines. Mining is a long-horizon activity, and changing the rules of the game midstream throws a spanner in the works.”
Alchemy Law partner Leana Engelbrecht comments: “These regulatory and policy challenges are faced by many regulated industries, not only the mining industry. The South African government has adopted a multi-faceted approach to expedite economic transformation, growth and to realise broader public interest benefits through industry specific regulatory interventions and more general mechanisms, such as the mandate of the competition authorities to ensure that public interest benefits that go beyond economic transformation are achieved when, for example, assessing merger transactions.”
So, is the Mining Charter a catalyst for transformation or a stumbling block to industry growth? The paper argues for a nuanced approach. While acknowledging the need for continued transformation efforts, it emphasises the importance of addressing broader systemic issues affecting the industry. Improved public administration, streamlined licensing processes, and upgraded infrastructure are key to unlocking true potential, regardless of specific Charter provisions.
Ultimately, the paper paints a balanced picture, acknowledging the Charter’s valuable contributions while calling for a holistic approach to industry growth. It emphasises the need for constructive engagement among key stakeholders; acknowledgement of the unique South African context; and the adoption of broader ESG principles to effectively foster both transformation and sustainable development.
“Whatever one’s view is of the Charter, the necessity and importance of broader ESG and inclusivity requirements and practices are quickly becoming one of the most important issues facing the mining industry worldwide. Furthermore, their incorporation in all aspects and at all levels of the industry sector is critical and also need to be addressed in the financing of any activity or project. They simply cannot be ignored by any participant,” emphasises Alchemy Law partner Wildu du Plessis.
As South Africa navigates its mining future, Alchemy’s white paper provides insights for striking this crucial balance between compliance and realising the opportunities that arise from implementing effective ESG strategies inspired by the existing policy framework.