Once empowered, always empowered?

Posted on:
23 Jan 2017
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Commercial, News
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“I own a mining company. In 2005 we sold a 26% stake in our company to a black entrepreneur in order to meet the requirements of the Mining BEE Charter. The same partner recently decided to sell his shares back to us, which means we have lost our BEE ownership. I have however heard of the principle of ‘once empowered, always empowered’ applying in the mining sector. Is this true and will my company still be recognised as having BEE ownership?”

By: John Mophethe
The so-call principle of ‘once empowered, always empowered’ refers to the situation where a mining company, after the exit of a black partner that held a stake in the company as a result of a BEE transaction, continues to be recognised as being BEE compliant in order to retain its mining rights, despite losing its black ownership due to such exit.

The original Mining BEE Charter introducted this principle. Subsequent amendments to the Mining BEE Charter in turn became silent on this principle implying its removal, but left the situation unanswered as to how companies that had been empowered but then lost their empowerment partners prior to the amendments should be dealt with. Would the principle still apply as was in place when the deal was made, or would the company have to again obtain empowerment partners? This uncertainty has left companies that have lost their BEE partners prior to the 2010-amendment with the dilemma of having to decide whether to seek other BEE partners or stick to the argument that the ‘once-empowered, always-empowered’ principle is still applicable. This matter is also the subject of a current case in which the court is asked to clarify the position regarding this principle.

In April last year a revised BEE Mining Charter was published for comment. The draft charter specifies that the black ownership target of 26% must be maintained throughout the life of the mine and that at least 5% of the shares must be distributed equitably between workers, black entrepreneurs and community members respectively. There must also be a BEE transaction for each mining right granted and a special purpose vehicle created for each empowerment transaction. The draft appears therefore to clarify the uncertainty and unequivocably requires that black shareholding must be maintained, thereby effectively terminating the ‘once empowered, always empowered’ principle for all mining companies. Should the draft charter accordingly, in its current form, become law then it would also render moot the outcome of the court case which seeks to clarify the ‘once empowered, always empowered’ principle.

This article first appeared on the Phatshoane Henney Attorneys July 2016 newsletter.

info@probonomatters.co.za

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