JOHANNESBURG (miningweekly.com) – The Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill 2013 now before Parliament would reduce mineral exports, discourage investment and worsen an already unsustainable 6.5% current account deficit, Webber Wentzel lawyers Peter Leon and Jonathan Veeran warned on Friday.
In a presentation to the Portfolio Committee on Mineral Resources, Leon and Veeran said the Bill would exacerbate the difficulties of the current mineral regulatory regime and damage investor confidence in the South African mining industry still further.
“It is crucial that the Bill is amended,” said the lawyers, who made an extraordinary call for a full regulatory impact assessment of the Bill’s devastating consequences, including a possible repeat of the severe R27-billion losses suffered in the wake of the Marikana tragedy, which saw South Africa stumble under three sovereign ratings downgrades.
Certain policy changes proposed in the Bill were ill conceived and various provisions had been drafted in an ambiguous manner, which created further regulatory haziness for a country the Fraser Institute already ranked at a lowly sixty-fourth out of the 96 mining jurisdictions surveyed.
The lawyers said the Bill promoted “rule by regulation” and “unguided administrative discretion”, which ran counter to the Constitution’s rule of law principle of legislation being administered in a predictable manner.
The Bill also snagged the Framework Agreement for a Sustainable Mining Industry, just established painstakingly under the leadership of Deputy President Kgalema Motlanthe, which sought to entrench the rule of law as a fundamental pillar of South Africa’s democracy.
Condemned were the broad discretionary powers of the Minister to set the developmental pricing conditions required for domestic mineral beneficiation and to oblige producers to give over a percentage of mineral product to local beneficiators.
The lawyers denounced the Ministerial discretion as being “overbroad” and feared that the Bill’s deletion of the word “economically” suggested Ministerial authority to press ahead with beneficiation even if economically unfeasible.
The Bill further introduced an export licensing system that appeared to contravene the World Trade Organisation’s General Agreement on Tariffs and Trade, which could recoil on South Africa should other member countries retaliate by waiving their obligations to this country.
Moreover, the proposed legislation threatened to violate South Africa's obligations under the 23 bilateral investment treaties (BIT), as a result of the Bill creating a significantly different regulatory environment after BIT countries had made investments in the country.
The export of "designated minerals" could furthermore constitute a deprivation of property, which the Constitution precluded.
In reserving the right of the Minister to jettison the "first in, first assessed", or FIFA system, without providing for a competitive process, the Bill again created substantial uncertainty and ignored international best practice, which required that mineral rights be allocated either competitively, or within the FIFA accommodation of the first rights applicant gaining the entitlement, provided basic administrative requirements were met.
In the view of the lawyers, the Minister and the Department of Mineral Resources also lacked the requisite institutional knowledge of competition law to be in a position to deny mineral rights on the basis of a "concentration of rights” being created – a matter more suited to Competition Commission adjudication.
The Bill’s regulation of historic tailings might also amount to unconstitutional expropriation, given the difficulty the State would have to link such expropriation to a public purpose and the State’s failure to be able to provide for "prompt, adequate and effective compensation".
LONG ARDUOUS ROAD
The MPRDA has had a long and arduous journey and the changes to it put forward in 2007 and 2008 were understood to have been shelved indefinitely after several years of attempts to come to terms with the difficult legislation.
What took everyone by surprise, said Fasken Martineau mining law partner Matthew van der Want at a seminar on the MPRDA last month, was the sudden and unexpected return of the amendments.
“Now we’re sitting with the situation where we are effectively amending the amendments of an already difficult Act,” Van der Want said.
Many fear a long drawn out coming to terms with a collection of threatening provisions and, once again, an ignoring the urgent need to get the legislative backbone of the mining sector implemented properly and efficiently to give certainty to investors.
What is again being disregarded is that mining is responsible for half of South Africa's exports and virtually a fifth of South Africa's economy is attributable to the mining sector, which uses inputs and services that keep a myriad of related concerns in business.
Last year the mining industry spent R488-billion on products, services, salaries, funding and on ongoing growth - more than 80% of it in South Africa.
OIL AND GAS
Impact Oil and Gas’s Sean Lunn told the first round of public hearings on the Bill that the proposed amendments would halt petroleum industry investments.
Lunn said that the Bill created uncertainty and the disbandment of the Petroleum Association of South Africa was a tipping point.
Oil and gas companies would simply shift their focus to other global opportunities that provided the desired level of certainty, Lunn said, adding that South Africa’s treacherous seas increased the inherent risk for the oil and gas industry where only 20% of all ventures succeeded, even in good conditions.
Acting Portfolio Committee chairperson Faith Bikani said mining law reform was a complex process in a country like South Africa, which relied so heavily on mining for exports and employment but which also needed to address past legacies.
The committee, which will resume hearings on September 18, has so far received 700 pages in 46 submissions dealing with factors including oil and gas issues, the environment, mining communities and the regulatory regime.