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Prove you are Young: Mining Charter III

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Every day in South Africa we are consciously discriminating, but with the launch of Mining Charter III the line between fair and unfair discrimination in South Africa is starting to blur.
Picture this scenario: The year is 2019.  South Africa is facing uncertain times leading up to the next general election. But the attention of the world is riveted on a court case involving a small-town entrepreneur in the North West province, known as South Africa’s platinum province.
The story surrounding this case involves a black military veteran, Mr. Mthembu, who fought the Apartheid system for years under Umkhonto we Sizwe, only to lose both legs, rendering him disabled during an ensuing battle in the townships.  Following the release of Nelson Mandela in 1990, and the change in government in 1994, Mr. Mthembu started a security company that sought to service the security needs of suppliers to mines in and around his community.  Mr. Mthembu faced tremendous odds.  At the conclusion of the Apartheid system, he had two challenges, firstly, to convince mining companies of the legitimacy of his experience in the security industry, then secondly to overcome ongoing discrimination by competitors, specifically larger white owned companies.
Mr. Mthembu however overcame these odds and began providing security services to many of the smaller companies in his area.  Finally in 2003 with the introduction of the BEE legislation Mr. Mthembu competed for a tender issued by one of the larger mining companies in South Africa. He  secured the work, doubling his turnover, then subsequently hired 300 more people.  Mr Mthembu’s company was proud of competing not only through the quality of the training that he provided to his staff, but through the technology that he had implemented to detect and deter theft before it took place.  In 2015, Mr. Mthembu found himself at the pinnacle of his career as he secured a three year contract with one of the largest mining companies in the country, allowing him to employ 1,500 more members of staff.
However, in 2019 at the age of 64, Mr. Mthembu began a legal battle in what could possibly become one of the largest lawsuits in South Africa.  This is due to him filing a class action lawsuit against the Department of Mineral Resources (DMR) for discrimination, based on his age. His claim is that he and others of his age category have lost millions in revenue due to this discrimination.  In addition, he has instituted a lawsuit against a mine that awarded a contract to his much younger competitor.
The younger competitor, Mr. Muroyi, worked for Mr. Mthembu as his company’s personnel manager, until he found that the new procurement regulations of the DMR advanced younger business owners and entrepreneurs above older owners.  With this knowledge Mr Muroyi left the employment of Mr Mthembu and  started a new company that had more than 51% Youth ownership.  In order to compete more effectively Mr. Muroyi decreased the salaries of his employees and put in a tender for a lower price than what he knew his older competitor could afford.  For the mine that was already facing challenging financial times it was a simple change in transaction, and more than that, it was justified based on the requirements set by the DMR.
After careful consideration, Mr. Mthembu realised that the problem he was facing was not the new competition, but the unfair transformation policies that discriminated against him and other companies owned by older people like himself.   Mr. Mthembu resigned himself to the knowledge that even though he had battled an Apartheid system in the past that discriminated against him, his battle was not over.  With this conclusion firmly drawn, he instituted the lawsuit.

Mining Charter III

Although this story is fictional the Department of Mineral Resource’s latest Preferential Procurement requirements around Youth ownership in the Mining Charter III (June 2017) is very real.  The Charter, which the Chamber of Mines rejected and requested the court to block, was lauded by Mining Minister Zwane, as Radical Economic Transformation.  In the Charter,  various clauses have been queried by the mines such as the broadening of the definition of black persons, the request for foreign companies to place 1% of their turnover into a fund that has no mandate, and the top-up quota which would in essence dilute the equity of communities and black people who already own the shares.
The news of the Charter and the implications for the economy led to a R50 billion loss in mining shares, however President Zuma has spoken out in support of the minister and the charter saying: “I believe in what the minister has done … we have said we need to do something to change the economy and ignite it”

The Implications of Youth Ownership

What we might have overlooked in the charter is a point regarding Preferential Procurement.  In this clause, the Mining Minister requires companies to set aside between 3,5% to 4% of their procurement bill for Youth owned companies, thereby discriminating against those aged 36 and above.  This is the first time that companies have been requested or required (depending on the legal nature of the charter which is being disputed) to do so in the Mining Charter. The 2013 Codes of Good Practice does provide bonus points for Youth ownership, rather than it being a direct requirement.  The unintended consequence is that mining companies would now request the owners of all companies across South Africa to provide them with ID documents to determine if the owners are younger than 36 years old.
The administrative burden this places on South African businesses is staggering, both from a PoPI Act compliance perspective, and annually collecting the IDs of all owners involved in the procurement value chain.
Yet what many of us have overlooked is the significant potential human rights violations that this stipulation has instigated.

Fair Discrimination

Preferential Procurement in South Africa is based on the principle of fair discrimination that is regulated in Section 9 in the South African Constitution.  In order, however, for the state to discriminate fairly the state must establish a substantial basis for that discrimination. Specifically, the constitution states:
(3) The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, … age, disability, religion, conscience, belief, culture, language and birth.  (4) No person may unfairly discriminate directly or indirectly against anyone on one or more grounds in terms of subsection (3). National legislation must be enacted to prevent or prohibit unfair discrimination.
This Section specifically relates to the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000In the definitions of the act it references age as: “includes the conditions of disadvantage and vulnerability suffered by persons on the basis of their age, especially advanced age.”  In relation to this we need to note that the act defines discrimination as “imposing burdens, obligations or disadvantage on; or (b) withholds benefits, opportunities or advantages from, any person on one or more of the prohibited grounds.”  The act makes it clear that we are bound not only by the South African Constitution, but by International Human Rights regulations too.
Important to note is that legislation such as the Mining Charter leads to the development of practices and policies by Transformation Managers and Procurement managers across South Africa to ensure that compliance is maintained.  Without questioning these regulations and policies we might find government, companies and individuals starting a narrative around discrimination and more specifically discriminating without just cause.  As South Africans, it is crucial for us to not become blasé in regard to discrimination.  Each day that we enact the Transformation regulations and discriminate fairly, we should do so with deep empathy to both those we discriminate against and discriminate for.

Can we discriminate based on age?

It now becomes important for us to ask some questions relating to age discrimination.  For the state to discriminate fairly we should be asking: “what injustices have occurred before and after 1995 so that we need to discriminate against those aged 35 and older?”  Section 33 in the constitution specifically refers to just administrative action which grants all citizens “administrative action that is lawful, responsible and procedurally fair” and places the burden on the state to prove through an independent review or by a court, that it is indeed fair.
We must note at this time that South African youth unemployment is the third highest in the world and we are therefore heading for a national crisis in this area.  Furthermore, some studies have shown that there is a higher early stage technological adoption rate in youth.
We must however ask if this justifies age discrimination with regards to company ownership?  The statistics from the United States around ownership indicate that older entrepreneurs start more businesses, have more career and life experience, have larger business networks, build more sustaining businesses and have a much higher likelihood to build sustaining businesses.  This in itself is interesting as the Minister of Small Business, Lindiwe Zulu, has praised the Mining Charter as progressive legislation.

Where to from here?

Even though the National Youth Policy of 2015 – 2020 provides no evidence of youth discrimination it does state that lack of skills is one of the highest causes for the high levels of youth unemployment in the country.   In this regard, it specifically discusses the lack of mathematical skills and science at Grade 12 levels and the lack of poor quality results in Primary School.  This has got a significant impact on the uptake of youth into the workforce but also leads to a significant lack of interest in starting a company.  The solution for the youth and youth opportunities in our country is therefore not found in discriminating against those older than 36, but in a radical approach to maths and science competency development.
By discriminating against those older than 36 the unintended consequences of the Mining Charter III might very well be discouraging the very entrepreneurial activity on which South Africa as a nation is dependent.

 

* All characters in the story of this opinion piece are fictional.  The Mining Charter III is not fictional and can be found here.

** In researching this article the DMR was contacted for comment, but has not responded.

 *** If you feel that you, or your company or someone you know has been discriminated against due to age or any other reason then please lodge a complaint with the South African Human Rights Commission by clicking here.

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