The Mineral & Petroleum Resources Development Amendment Bill which is before Parliament, seeks to impose a range of unrealistic requirements on a mining industry already facing a maelstrom of adverse conditions. The main objectives of the amendments are to clarify ambiguities in the original act that was passed by Parliament in 2002, however Parliament has been warned that the proposed damaging amendments to the Mineral and Petroleum Resources Development Act would make South Africa less attractive for investment.
The amendments seek to promote beneficiation of raw minerals, allow the minister of mineral resources to declare certain mineral resources as strategic and to allow for an increase in government ownership of companies, (irrespective of whether it can be done cost-effectively). It also gives the minister unfettered discretion to decide the percentages of minerals required for beneficiation, along with the "developmental pricing conditions" to be applied "in the national interest". The bill also empowers the minister to impose export controls on any minerals designated for this purpose. Naturally this could undermine the profitability of mining operations, possibly leading to mine closures and job losses.
The bill introduces a new category of "strategic minerals", defining these as "such minerals as the minister may declare to be strategic from time to time in the (Government) Gazette". Minerals identified as "strategic" are likely to be made subject to export and price controls.
The bill also has also created a number of new offences and penalties. Under the current act, maximum penalties for mining without a mining right or an approved environmental management programme is R100 000, two years in jail, or both. Under the proposed bill, mining companies face maximum fines of 10% of annual turnover, plus the value of the previous year’s exports, or prison terms for directors of up to four years, or both, for such "offences" as failing to "promote economic growth (and the) development of downstream beneficiation industries". The same penalties will also apply to mining companies that export designated minerals without the minister’s permission; infringe the "developmental pricing conditions" (the price controls) imposed by the minister on the minerals she wants locally beneficiated; fail to implement their social and labour plans; or fail to comply with the requirements of the revised Mining Charter. Mining companies that fail, for instance, to implement their social and labour plans will face: a fine of 10% of annual turnover, plus 10% of the value of the previous year’s exports; imprisonment for up to four years for their directors; and the cancellation of their mining rights.
Other aims of the amendments are to boost job creation and to secure supplies, especially of coal, that could be deemed essential for running the economy. The bill also repeals the "first-in, first-assessed" rule, under which applications for mining rights submitted on different dates are dealt with "in their order of receipt". Instead, the minister reserves the right to periodically invite applications by Notice in the Gazette. This proposed system includes no objective criteria and could open the door to yet more corruption in the granting of mining rights.
Furthermore, among the proposals is that government would be allowed to appoint two directors to boards of companies as a means to monitor their compliance with the new law.
Little changes were been made to the initial drafted bill published in December of last year, many damaging provisions have been retained. In February Cynthia Carroll, the departing CE of Anglo American, warned against last year’s draft, "There are glaring shortcomings in the bill that could hamper South Africa’s ability to attract and retain investment in mining. Like any other nation, South Africa will succeed only if it fosters an environment that is attractive to international investors. Mining is an industry with long-term horizons. When making investments, mining companies have to think decades ahead. They need certainty as to the rules under which they will operate. They will not invest if there is a fear of onerous and unpredictable regulatory change. Nor will they invest if there is a threat that existing regulatory requirements will be enforced in an arbitrary and unequal manner," Carroll said.
Presentations have also made to Parliament by various stakeholders such as South African Oil and Gas Alliance (SAOGA), Anglo American, Allan Gray, Actionaid, Lonmin and the National Metalworkers of South Africa (NUMSA). Allan Gray noted that the amendments to the Bill were not investor friendly towards the mining industry as well as the country.
ExxonMobil’s submission states that it wants the entire oil and gas sector to be exempted from the amendments. The rules were acceptable, said Mr Berkoben, but he pointed out the proposed changes would, if implemented, either slow down or stop exploration for offshore oil entirely. Barrisford Brent Petersen Law Inc (BBP) noted concerns with the proposed amendments so far as it related to oil and gas exploration. Speaking as oil and gas lawyers, they said that the Amendment Bill if implemented in its current form would result in the loss of foreign investment in SA oil and gas industry. BBP recommended that a separate oil and gas Act be established in order to keep up with current trends in Africa.
The legislature’s mandate is to represent all South Africans in overlooking this salient warning, the department is trying to defy economic reality. This bill is damaging because it will choke off investment and be detrimental to the country’s great mining potential.