JOHANNESBURG (miningweekly.com) – While the South African mining sector waits with bated breath for the President’s verdict on the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, approved by the National Assembly on March 12, a few stakeholders in the sector say that more amendments are required for the Bill to holistically benefit the South African mining sector.

Despite Parliamentary approval of the Bill, concerns remain about government’s 20% free-carry interest in all new exploration and production rights in the oil and gas sector. Stakeholders have also been vocal about the National Council of Provinces’ (NCOP’s) failure to facilitate public involvement while approving the Bill.

On April 2, the Legal Resources Centre (LRC) submitted a letter to the President on behalf of its clients – Mining Affected Communities United in Action (Macua) and the Land Access Movement of South Africa (Lamosa). The letter argued that the MPRDA Amendment Bill, as passed by Parliament, restricts community participation in mining and the requirement for public participation in the granting of mining rights, and it eliminates the requirement that the socioeconomic conditions of host communities be addressed.

LRC attorney Henk Smith says Macua was formed in 2012 following dialogue among mining-affected communities from eight provinces. The aim of the association is to represent the voice of communities that have not been consulted in the process of allocating mining rights and do not receive benefits from mining being conducted on their land, as well as those that bear the brunt of the negative impacts on health and environmental degradation as a result of mining.

Similarly, 48 dispossessed communities formed Lamosa in 1991. Most Lamosa affili- ates were forcibly removed from their ancestral lands and in 1991 returned to their lands in defiance. Currently, Lamosa works with government and civil society organisations to support community development and land reform in four provinces.

“The LRC and several of the member organisations of our clients (Macua and Lamosa) participated in the public hearings of the portfolio committees of the National Assembly and the relevant committees of the provincial legislatures, where possible. As a result, our clients hold the view that the MPRDA Amendment Bill undermines the socioeconomic position of many rural communities and also fails to promote the rights and interests of the rural communities,” says Smith.

He adds that the failure of the NCOP to take reasonable steps to facilitate public involvement in discussing the Bill before being passed has led to the dissatisfaction of LRC clients with the matter at hand.

“This suggests that the NCOP failed to comply with its duties under sections 72 and 118 of the Constitution. As a result of the rushed manner of assessing the Bill, the NCOP had insufficient time to organise and hold public hearings on the Bill,” Smith points out.

Meanwhile, speaking to Mining Weekly in April, law firm Webber Wentzel mining head Peter Leon highlighted that the lack of public consultation by the NCOP during its consideration of the MPRDA Amendment Bill could potentially render the Bill unconstitutional.

He highlighted that the NCOP had a duty to consult with the public on each legislative proposal affecting provinces. Also, it is important to note that public comment made in the National Assembly, even if transmitted to the NCOP for consideration, is not sufficient to discharge the NCOP of its duty to facilitate public involvement.

“We have seen our government collude with business and the private sector on issues pertaining to mineral wealth and natural resources in the rural areas, but there is no rural voice in any of those platforms. Had we been informed of this, we would not have passed the Bill in its current form,” says Lamosa coordinator Constance Mogale.

She mentions that the current version of the MPRDA Amendment Bill suggests that the rights to South Africa’s natural resources and mineral wealth – despite being contained in the land owned by rural communities – could be granted to anyone who applies for it and, in addition, the Minister is no longer allowed to set conditions for community participation.

“This is in line with Section 23 of the MPRDA Amendment Bill and, as a result, mining-affected communities submitted a complaint. However, the feedback was poor as there was no public consultation with the NCOP on the matter,” Mogale explains.

OIL AND GAS
The MPRDA Amendment Bill’s provision pertaining to oil and gas is another point of concern for the South African mining sector.

The Bill states that government would acquire an automatic 20% free-carry interest in all new exploration and production rights. Also, government would be entitled to a further participation interest in the form of acquisition at an agreed price or in the form of production-sharing agreements.

Rhodes University economics professor Gavin Keeton points out that the Bill suggests different implications for oil and gas respectively.

“In the case of gas, we are looking at a new industry, which proposes that there will be new initial costs of exploration for gas companies. Meanwhile, the question of whether there is gas available in South Africa still stands, as we are only relying on what geologists are suggest- ing. This means a lot of deep drilling to find the gas has to take place, which will require additional costs for gas companies. Subsequently, gas companies will be working at a loss from the onset as already 20% of whatever they discover will automatically belong to government,” he explains.

Keeton emphasises that, unless the Bill is changed, gas exploration will be “stillborn”, as government is allowing its determination to create State-owned minerals and gas companies to obscure the logical outcome of its policies in these industries.

“With oil, exploration is already taking place and the impact is different, as no additional costs for exploration startup are needed. On this note, some of the mineral companies will probably not contest the Bill as it stands.

“However, the challenge for mining companies is that government has given itself the power to sell any mineral and strategic mineral locally at a price that government sees fit, with no consideration of how this might affect business for the mining companies. Although government has given the companies the power to sell locally, it will be at a price that is subject to government approval.

Meanwhile, the Chamber of Mines (CoM) of South Africa expressed its support for the Bill on March 13 in a media statement, stating that significant progress had been made in addressing the mining industry’s concerns with the first draft of the Bill that was pub- lished on December 27, 2012.

The CoM noted in the statement that it supported government’s drive to promote greater beneficiation in South Africa.

The chamber also supports the Minister’s prerogative to designate a mineral as a strate- gic resource in support of the beneficiation objective, which will be done in consultation with the mining companies involved.

The CoM mentioned in the statement that the decisions pertaining to local supply will be made on the basis of consultation and Ministerial determination.

However, Keeton points out that this is likely to affect the South African economy negatively, as foreign direct investment into South Africa has been disappointing since 1994. With government likely being the regulator of the industry, based on the Bill, foreign investors are likely to be put off by the current policies in the industry.

With South Africa recently being overtaken by Nigeria as the biggest economy in Africa, one could argue that the South African mining industry can potentially boost the economy of the country and regain its position in leading the African economy, if the correct policies are in place.

However, it remains to be seen how the newly elected government will perceive this and if further evaluation of the Bill will be initiated.