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Sep 07, 2012

Legislative framework for mining in SA

Webber Wentzel's Peter Leon discusses the current state of mining legislation in South Africa. Camerawork: Nicholas Boyd. Editing: Darlene Creamer.
Mangaung|Africa|Botswana|Building|Environment|Export|Housing|Mining|Petroleum|Resources|SECURITY|System|Webber Wentzel Peter Leon|Africa|South Africa|Energy|Energy Constraints|Law|Manufacturing|Infrastructure|Power
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The National Development Plan 2030 (NDP), which was released last month by Minister in The Presidency Responsible for the National Planning Commission Trevor Manuel, focuses on strategies to improve economic growth in South Africa, with the elimination of poverty and a reduction in inequality by 2030 as the main goals.

According to the plan, South Africa can realise these goals by drawing on the energies of its people, growing an inclusive economy, building capabilities, enhancing the capacity of the State, and promoting leadership as well as partnerships in society.

Head of Africa mining and energy at law firm Webber Wentzel Peter Leon says the legislative framework for mining is a key factor that can potentially lead to a more equal South Africa in the future.

“South Africa needs a regulatory system that is objective and transparent, which imposes time limits on decision-making and doesn’t create uncertainty,” explains Leon.

“The NDP dealt directly with [the] lack of regulatory certainty and predictability that has characterised the industry. I believe this is a strong message to government to fix the current minerals regulatory system. The NDP recognises weaknesses in the system, such as the infrastructure and energy constraints facing South Africa, which have a negative impact on the mining sector,” he states.

He says that the NDP’s release six weeks after the ruling African National Congress’s (ANC’s) policy conference makes it clear that there is an obvious dissonance between the outcomes of the policy conference and the NDP.

Mineral and Petroleum Resources Development Act

Leon notes that there are long-standing proposals to amend the key provisions of the Mineral and Petroleum Resources Development Act (MPRDA) to improve the legislative environment for mining. He believes that the inclusion of a more objective regulatory system, in which the requirements to obtain a prospecting or mining right are clearly set out in legislation, is key.

“There should be no backdoor discretion, as well as limited room for administrative discretion and all the problems associated with this, such as the regulatory delays we have seen in the past,” he notes.

Leon emphasises the need for mandatory time limits on the making of decisions.

“One of the problems that has bedevilled the Act since it came into force in 2004 is licensing delays, which we see regularly with regard to the MPRDA.

“If we move to a model similar to that of the Competition Act, where the regulator, which in this case is the Department of Mineral Resources (DMR), would have to make decisions within a specified time, this would go a long way towards addressing many of the problems that we are tackling.

“This also needs to be coupled with a change to the architecture of the Act. We should move to a system more akin to that of Botswana, in which the objectives for licences are set out clearly in the law and it simply becomes a question of whether the applicant, the mining company or the prospecting company is qualified to obtain the licence,” Leon explains.

A real concern in the industry is the ongoing discussion regarding these amendments.

“There was a clear undertaking last year by the Minister of Mineral Resources to introduce the necessary amendments to Parliament in the 2011 session. That was slightly delayed, but the Amendment Bill was expected in the August 2011 session of Parliament, which again has not happened,” notes Leon.

He believes, however, that the amendments have indeed been drafted by the DMR and it is simply a matter of time before they are introduced to Parliament and subjected to public comment.

Leon suspects the amendments have been delayed for political reasons and that the Amendment Bill will only be introduced to Parliament next year, after the ANC’s elective conference in Mangaung in December.


Meanwhile, Leon states that the mining industry growth and development task team (Migdett) was reactivated two-and-a-half years ago. He feels that it has led to increased support between government, labour and business.

“The situation we had before, where the Department of Mineral Resources would suddenly spring a regulatory surprise on the mining industry, no longer occurs. The controversial codes of good practice, released in April 2009, which were ostensibly aimed at ending uncertainty about empowerment transactions, is a good example of this.

“In the past, the industry had no warning about which changes or new regulations would be implemented and they were sometimes promulgated by the previous Minister a day before the statutory power expired,” he explains. Both the codes of good practice and the housing and living conditions standards are good examples of this, he notes.

Leon says that there is a more cooper-ative tripartite approach through Migdett.

“I think Migdett is certainly a step forward. How effective it actually is, however, remains to be seen,” he says.

Strategic Minerals

Meanwhile, the ANC’s ‘State Intervention in the Mining Sector’ (Sims) report, which was released in February, states that although full-scale nationalisation of the mines is not an option government wishes to explore, it does focus in great detail on the need to declare certain minerals strategic and suggests the imposition of certain regulatory require- ments pertaining to these strategic minerals.

“According to Sims, minerals that are exported will be subjected to some form of export duty and there will be a com-pulsory supply agreement for the local industry on a cost-plus basis,” he explains.

Leon says this was discussed at the ruling party’s policy conference in June, but the conference made no clear decision either way about Sims or nationalisation itself.

He explains that there are two reasons for government wanting to declare certain minerals strategic – concerns about energy security and a notion that more needs to be done in terms of downstream manufacturing and industrialisation. “The government believes that the mining industry has not sufficiently come to the party on these issues,” he concludes, “although it really must be questioned whether mining companies can be involved in downstream manufacturing.”

Edited by: Shannon de Ryhove
Creamer Media Senior Deputy Editor Polity & Multimedia
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