06 April 2018

SA High Court rules in favour of principle for black empowerment status

The mining industry has welcomed the South African High Court ruling in favour of the 'once empowered, always empowered' principle, an issue troubling a number of economic sectors.

The South African High Court has ruled in favour of the 'once empowered, always empowered' principle, which entitles a company to keep its black empowerment status even if a black partner exits its stake in a firm. The problem affects many industries, but has come to a head in the mining industry this week after industry body The Chamber of Mines had challenged the government's draft mining charter, which specifies that a black ownership target of 26 per cent must be maintained throughout the life of the mine.

Unchanged

The ruling ensures that black economic empowerment (BEE) statuses remain unchanged even if black owners sell their shares, and historical empowerment transactions will still be recognised by the courts. The court ruled that mining companies could not be expected to maintain a 30 per cent BEE ownership rate. The Department of Mineral Resources argued that the ownership element of the Mining Charter should be a continuous compliance requirement for the duration of the mining right, but the Chamber of Mines took the view that black ownership is a once-off requirement.

Collaborative

A recent public dispute between electricity public utility Eskom and the coal and heavy minerals mining company Exxaro, concerning Exxaro’s BEE credentials falling from 50 per cent plus to 30 per cent, is one of those that may be influenced by the outcome of the High Court ruling. The labour union Solidarity welcomed the ruling, and deputy-general secretary Connie Prinsloo said, “We trust that, given the High Court ruling, further litigation will be prevented and parties will negotiate on a collaborative, rather than an antagonistic footing.”