The lack of clarity in the legislative framework of South Africa’s laws governing the mining industry is causing significant uncertainty for companies operating in the country and is hampering the prospects of new investments in the industry, says Africa-based law firm Bowman Gilfillan director Claire Tucker.

She points out that the Department of Mineral Resources has proposed several potentially far-reaching changes to mining laws in the draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill of 2012.

“The proposed changes to the beneficiation regime of the MPRDA are the most significant from a commercial perspective and are receiving a lot of publicity, but there are a number of technical amendments, which will also impact negatively on commercial cer- tainty in the mining sector,” Tucker explains.

Further, she says the regulation of the transfer of mining or prospecting rights in Section 11 of the MPRDA is part of the proposed amendments, and is a significant amendment from a commercial and transactional perspective.

Section 11 regulates both asset and share transactions, she points out.

She explains that, since the commence- ment of the MPRDA, there has been uncertainty regarding the reach and interpretation of Section 11. However, the Amendment Bill does not in any way clarify the ambiguous existing provisions in Section 11, and she adds that the proposed amendments will only further muddy the legislative waters.

Further, Tucker notes that the concept – introduced by the proposed amendments to Section 11 – of a “company holding an interest in a right” is new and requires clarification.

“If the provision is only intended to restrict companies which are the actual holders of a right or share in a right directly, then Section 11 would have limited reach and only require Section 11 applications for shareholding changes in companies which wholly or partially hold mining or prospecting rights,” she says, adding that this interpretation of the law could be received positively by the mining industry.

However, Tucker asserts that the wording of the Act would have to be amended to make it clear that Section 11 does not apply to companies in the chain of ownership of a company holding mining rights, as this would be a significant change to the present approach and would require careful wording to avoid a possible misapprehension about the Act’s true meaning.

Further, she points out that the draft Bill makes it mandatory for the applicant for a prospecting right to give effect to broad-based black economic-empowerment objectives.

Tucker explains that most prospecting companies do not generate any income during the prospecting stage and small shareholders, such as community participants, find it confusing to be shareholders in a company that generates no income, which can lead to disputes.

“Similarly, the alignment of the MPRDA with the National Environmental Management Act, No 107 of 1998 has also been problematic,” she concludes.