New Mining BEE Charter Guidelines help clarify the emphasis on local procurement

11 March 2019 350
My business works exclusively in the mining industry providing goods and services to mining companies. I understand the recent Mining Charter guidelines are quite important for suppliers like myself that work in this industry. Is there anything specific I should be aware of?”

The Mining Charter 2018 (“Mining Charter”) was published on 27 September 2018 with the Implementation Guidelines to the Mining Charter (“Guidelines”) published on 19 December 2018. 

The Guidelines provide mining rights holders with detailed explanations and calculated examples on how to comply with the requirements of the Procurement, Supplier and Enterprise Development scorecard elements contained in the Mining Charter.

In this regard, the following aspects can be highlighted:

Calculation and Verification of Local Content  

There is a strong emphasis on local procurement and manufacturing within the South African mining and mineral industry and it is required that mining right holders should procure 70% of mining goods and 80% of mining services from South African based companies. This is good news for any business that will qualify in this bracket.

The Guidelines provide detailed formulas and examples on the calculation of local content. Mining goods with a local value add of 60% or greater will be considered South African manufactured goods, whilst mining goods with a local value add below 60% will be deemed not locally manufactured.  

The Guidelines also stipulates that local content verification needs to be carried out by the South African Bureau of Standards (SABS). Should the mining rights holder pay for such verification of a developing supplier, the cost will be interpreted as part of supplier development costs. Verification certificates from SABS will however not be required during the first two years of the transitional period of the Mining Charter.

Budget Categories for the Procurement of Mining Goods and Services

In order to achieve inclusive procurement, mining companies must ensure that 21% of their total South African mining goods procurement and 50% of procurement spend on services, is sourced from South African based companies that qualify as Historically Disadvantaged Persons Owned and Controlled Companies. 

Mining companies must further procure 44% of mining goods and 10% of mining services from South African BEE compliant companies. 5% of South African manufactured goods must be procured from Woman or Youth owned and controlled companies. The services sourced from South African based companies must equate to 15% from Woman owned and controlled companies and 5% from Youth owned and controlled companies.

The Guidelines here also provide detailed formulas to calculate the budget of each mentioned category in the procurement of local goods and services by mining right holders. If targets for a budget category are exceeded, the maximum percentage weighting contained in the Mining Charter will be awarded and no bonus points will be given. Inclusive procurement reporting templates can be obtained in the Guidelines under table H for mining goods, and table I for mining services. 

Enterprise & Supplier Development

Enterprise and Supplier Development initiatives can only be recognised if the beneficiaries of these initiatives qualify as Historically Disadvantaged Persons owned and controlled companies, with an annual turnover of less than R50 million. Furthermore, all Enterprise and Supplier Development initiatives needs to be formalised in a written agreement between mining right holders and Enterprise and Supplier Development beneficiaries, for a minimum period of five years. 

Supplier Development through Original Equipment Manufacturers

Mining rights holders are allowed to do Supplier Development through Original Equipment Manufacturer (OEM) programmes with their suppliers, in the following manner:

  • The mining right holder and OEM will identify imported components to be locally manufactured.
  • These identified components may be those already in use by the mining right holder or components to be supplied to the mining right holder within five years.
  • The mining right holder can claim supplier development points for monies invested by them in the programme.
The Guidelines further stipulate that Supplier Development done through OEM programmes will only be recognised if it is done on Historically Disadvantaged persons owned and controlled companies, woman and youth owned and controlled companies or BEE compliant companies with a level 4 BEE status and minimum Black ownership of 25%+1 vote. 

As can be seen from the above, there is a strong focus on local procurement as well as the use of BEE companies and supplier development. This can translate into opportunities for businesses that fit the profile envisaged by the Mining Charter. You would accordingly be well-served in acquainting yourself thoroughly with the Mining Charter and Guidelines to ensure you maximize your potential for work in this industry.