Newly appointed Mineral Resources Minister Mosebenzi Zwane faces several challenging tasks in the coming year, including improving the declining image of the South African mining industry, seeking closure with regard to the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, clarifying Chamber of Mines litigation and improving the administrative efficiency of the Department of Mineral Resources (DMR), says South African law firm ENS Africa.

The local mining industry is currently suffering from low commodity prices, rising input costs and a lack of private equity, owing to the global financial crisis, which has resulted in a significant drop in market capitalisation.

ENS Africa highlights the mining industry as central to the economic outlook of the country, which is highly reactive to volatile commodity prices. It also points out that the industry is highly politicised and that black economic empowerment (BEE) in mining is a sensitive national issue. Further, the South African minerals regulation system is largely administration-based and requires the Ministry to be responsive to applications and to acts of noncompliance.

Declining Image
Out of 122 mining destinations worldwide, South Africa is currently ranked 67, according to Canadian public policy think-tank Fraser Institute’s Annual Survey of Mining Companies.

South Africa is also ranked eleventh among the top African mining destinations, with Namibia and Botswana ranked first and second respectively.

With this in mind, ENS Africa believes the Minister needs to encourage investment into the industry by bolstering the image of the local mining sector as one that offers opportunities and can provide high returns for investors.

The firm highlights South African midtier gold miner Sibanye Gold’s acquisition of Anglo American Platinum’s Rustenburg operations – Rustenburg Platinum Mines – for R7.7-billion. However, while the transaction is poised to make Sibanye Gold one of the largest platinum-group metal producers in the world, ENS Africa points out that South Africa’s platinum industry still receives much more negative press than positive.

MPRDA AMENDMENTS
Legislative uncertainty is one of the biggest issues for potential investors and the MPRDA Amendment Bill, which is the primary legislation governing the local extractives industry has been subject to a second round of proposed amendments since 2012, explains ENS Africa.

While the Amendment Bill was approved by Parliament in March 2014, South African President Jacob Zuma referred the Bill back to the National Assembly for reconsideration in January last year.

Regulatory uncertainty occasioned, in part, by conflicting interpretation of the law and imprecise provisions of the law have resulted in a need for legislative reform. Yet, 11 months after the President returned the Bill to Parliament, the Portfolio Committee on Mineral Resources has not published a revised Bill. This means that the regulatory uncertainty that has contributed to the declining image of the South African mining industry persists, states ENS Africa.

“Minister Zwane will do well to tackle this issue with the requisite urgency and in concert with the industry,” comments the firm.

The Bill aims to elevate the codes of good practice for the minerals industry, as well as the standards of mine housing and living conditions and the Amended Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, to the status of national legislation.

An issue of concern was the failure of the National Council of Provinces and the legislature to provide sufficient time to hold public hearings.

The Bill had also not been referred to the House of Traditional Leaders and it was a concern that the Bill would conflict with international agreements and treaties.

Chamber of Mines Litigation
Last year, the Chamber of Mines of South Africa launched a High Court application for a declaratory order for the proper interpretation of the Mining Charter to establish the principles applicable in terms of the assessment of the ownership element of empowerment.

The request was attributed to the continuous consequences of previous BEE deals that were consummated by some of the major mining companies operating in South Africa.

This litigation was occasioned by an acute difference in the interpretation of the Mining Charter and the failure of the parties to find a sensible solution to their differences. ENS Africa believes that, at the heart of the dispute is “the bitter crossroads” between law and policy.

The company explains that empowerment is fundamentally a national policy, while the MPRDA and the Mining Charter are regulatory instruments designed to give effect to the policy of empowerment.

ENS Africa argues that the current litigation should have been avoided and that the Minister take the lead in ensuring that there is a long- term and expedient solution to the current empowerment litigation, adding that the DMR has the ability to clarify the law if it thinks that the law does not accurately reflect national policy.

Administrative Efficiency of DMR
Lastly, ENS Africa states that Zwane must build capacity for the DMR to improve administrative efficiency.

South Africa’s minerals regulation system is not self-executing and must be administered by officials; therefore, the implementation of the minerals regulation system hinges on the efficiency of the administrators.

ENS Africa notes that the DMR should improve the training of officials to achieve administrative efficiency and incentivise the retention of those in junior roles rather than taking employees out of the private sector.

Investment in the management and operational functions of the DMR must be a priority, ENS Africa reiterates.
Former Mineral Resources Minister Ngoako Ramatlhodi was previously scheduled to speak at the 2016 Investing in African Mining Indaba but his 15-month stint ended in September 2015 with the appointment of Zwane, a former Free State MEC of Agriculture and Rural Development, as Mineral Resources Minister.

The Mining Indaba will take place between February 8 and 11 at the Cape Town International Convention Centre.