The South African mining industry has faced an unprecedented and complex range of challenges in 2012 and 2013, including the effect of global economic downturn, industrial action, and the ever-increasing costs of production. The uncertainty regarding the regulatory regime has impacted even further. In this article, we touch on the proposed amendments to the Mineral and Petroleum Resources Development Act (MPRDA), compliance with empowerment requirements, and the proposed amendments to the Mine Health and Safety Act (MHSA).
Proposed Amendments to the MPRDA
While the coming into force and effect of certain provisions of the 2008 Mineral and Petroleum Resources Development Act (the MPRD Amendment Act) aimed to address concerns raised by industry stakeholders, this has not necessarily been the case.
The situation has been impacted further by the Cabinet approval of the Mineral and Petroleum Resources Development Amendment Bill (the Bill) at the end of May 2013, for tabling in Parliament.
The stated purpose of the Bill is to, amongst others, amend the MPRDA as amended by the MPRD Amendment Act, so as to remove ambiguities, to provide for the regulation of associated minerals, partitioning of rights, and enhance provisions relating to the beneficiation of minerals and to provide for enhanced sanctions.
There has been extensive comment and criticism by industry stakeholders, with the majority of the focus being on the negative aspects of the proposed amendments in the Bill.
Not all of the proposed amendments should however be viewed in a negative light — several of the proposed amendments are likely to positively impact the mining industry.
One of the proposed amendments aims to improve the situation regarding associated minerals. Currently, rights are granted to mine for a specified mineral only, and if the holder of the right has not been granted the right to mine a particular mineral, even if this mineral is in “mineralogical association” with the mineral in respect of which the right has been granted, the holder may not mine that mineral, lawfully. The Bill proposes to include a definition of “associated mineral,” namely any mineral which occurs in mineralogical association with and in the same core deposit as the primary mineral being mined where it is physically impossible to mine the primary mineral without also mining the mineral associated therewith.
The ability to lawfully mine associated minerals is, however, subject to compliance with the proposed section 102(3), which provides that any right holder mining any mineral under a mining right may also mine and dispose of any other mineral in respect of which the holder is not the right holder, but which must, of necessity, be mined with the first (primary) mineral, provided that the right holder declares such associated mineral or any other mineral discovered in the mining process.
Another proposed amendment relates to partitioning of rights. The Bill proposes the substitution of section 11(1) of the MPRDA with a new subsection, which provides that a right or a part of a right may be ceded, transferred, encumbered, let, sublet, assigned, or alienated with Ministerial consent and subject to such conditions as the Minister may determine. The current provisions of section 11(1) of the MPRDA do not make provision for partitioning of rights.
The ability to partition rights is likely to assist several stakeholders, including entities such as joint ventures.
There has been far-reaching criticism in relation to several of the proposed amendments, including the inclusion of historical mine dumps within the cumbersome parameters of the MPRDA, the repeal of the “first come first serve” principle in relation to applications, Ministerial discretion in relation to beneficiation and the requirements associated with beneficiation, increased sanctions in the form of administrative fines based on the right holder’s annual turnover, and Ministerial discretion regarding timeframes within which applications and related aspects are required to be addressed.
The Bill is the subject of the Parliamentary processes and it is hoped that the comments submitted by industry stakeholders when the Bill was published for comment in December 2012, are properly considered and, where appropriate, incorporated in the MPRD Amendment Act, in
support of the overwhelming desire to ensure that South Africa is an investment destination of choice, and South Africa’s mining industry continues to play a significant role in the development of South Africa.
Compliance with Empowerment Requirements
There has been a mounting sense of frustration in the Department of Mineral Resources (DMR) about what it perceives as a lack of transformation in the mining sector. At the same time, many mining companies express bewilderment as to what more they can do to satisfy the DMR’s requirements. Meeting the transformation expectations may not be as difficult as some mining companies may think, but often, mining companies only face the difficult question of compliance shortcomings, during compliance audits carried out by the DMR. These random audits started approximately two years ago, and look at all aspects of the mining operations compliance record, from how it is implementing its social labor plan to its environmental management and reporting obligations.
Typically, a mining company will only receive about two weeks’ notice of an audit. The DMR is extremely thorough and leaves no stone unturned during these visits. If the company claims that it is running a community development project in the vicinity, the DMR delegation will want to see it. Where the DMR finds that the operations fall short, it will issue a Section 93(1) notice (in terms of Section 93(1) of the MPRDA) which is essentially a directive requiring the company to take rectifying steps within a certain time frame. If the company does not respond adequately, the DMR can then issue a Section 93(2) notice, suspending the operations until the shortcomings have been remedied. In the worst case scenario, the license of the non-compliance company can be suspended or cancelled altogether.
There are usually three areas where companies tend to fall short, namely employment equity, procurement, and community development. Often the shortcomings are a question of differences in interpretation between the DMR and the mining company, rather than a lack of effort or commitment to empowerment. For example, companies often believe that they are doing well on employment equity because their top leadership meets the recommended threshold for race and gender. The DMR might identify the problem as being in senior management or middle management.
In terms of procurement, many companies fall short on local procurement because buying from suppliers in local communities or labor-sending areas is limited.
Because noncompliance is often perceived as a result of differences in interpretation, it is often not as difficult as persons may think to achieve compliance.
For example, while there are challenges to local procurement, one of the ways of overcoming these challenges is to focus on small- and medium-sized enterprise development, concentrating on equipping people from local communities with portable skills, such as plumbing, auto mechanics, or business skills, which can be used in any sector and not just in mining. The mining company can then assist in registering the beneficiaries as a legal entity, such as a co-operative, using the services of the Small Enterprise Development Agency.
Community development initiatives can also be effectively and affordably implemented by concentrating on projects that do not pose unnecessary obstacles. The most difficult projects tend to be in agriculture, where land use often has to be negotiated with authorities, and may never come to fruition. It is much simpler, quicker, and more cost-effective to focus on establishing or supporting schools and clinics in communities.
Proposed Amendments to the Mine Health and Safety Act
Prevention is always better than cure, and being proactive is preferable to reacting to outside pressure. The Mine Health and Safety Amendment Bill, which has been published for comment, aims to amend the MHSA so as to streamline administrative processes, strengthen enforcement provisions, reinforce offenses and penalties, amend certain definitions, and provide for related matters. There is little doubt that all role players in the mining industry need to be committed to the health and safety of employees, and other persons who may be affected by the mining activities. It is hoped that the concerns raised by the industry in response to the proposed amendments are carefully considered and taken into account, to ensure that the objects of the Mine Health and Safety Amendment Bill are achieved.