https://www.miningweekly.com

Regulatory environment stifling investment

PAUL MILLER
Mining Indaba brings key mining industry players together and provides an efficient way of networking with multiple capital-providers

PAUL MILLER Mining Indaba brings key mining industry players together and provides an efficient way of networking with multiple capital-providers

Photo by Duane Daws

27th January 2017

By: Robyn Wilkinson

Features Reporter

     

Font size: - +

South Africa’s mining industry will continue to feel the effects of regulatory uncertainty and political turbulence in 2017 compounding various developments in the sector this year, says banking services provider Nedbank Corporate and Investment Banking investment banker Paul Miller.

“As commodity prices begin to lift, the key question is whether South Africa can position itself to take advantage of the improved circumstances and perhaps even grow the industry in the near future. Given the issues in its regulatory environment currently, this is unlikely.”

Miller highlights that the controversies regarding the promulgation of the new Mineral and Petroleum Resources Development Act (MPRDA) are likely to come to a head this year, as well as key court cases pertaining to the regulation of the mining sector.

“From a regulatory perspective, the outlook for South Africa’s mining industry for 2017 is dire, which is not going to do anything to foster investor certainty. The mining industry is robust and established players will be able to weather this period; however, it is doubtful that South Africa will be able to attract new investment and grow its mining sector.”

Sketching Bleak Picture
Miller notes that, while amendments to the MPRDA were passed by Parliament in November, many industry stakeholders, including the South African Chamber of Mines (CoM), have raised concerns about both the process involved in passing the amendments and the subsequent outcome. Thus, uncertainty reigns about whether these changes will be implemented in their current form or be amended further.

In addition, more regulatory uncertainty has been fostered by a number of legal battles relating to the mining sector, the most notable of which centres on the possibility that the CoM may seek to restart its court case against the Department of Mineral Resources (DMR) to get a declaratory order on the issue of “once empowered, always empowered”, in respect of the new Mining Charter.

In November, Mining Weekly reported that CoM CEO Roger Baxter had stressed that the cumulative effect of all the DMR’s proposals in the new charter, combined with existing corporate taxes and royalties, skills development levies and more, will materially affect the viability of an industry already in crisis. He claimed that the DMR had not actively engaged stakeholders, including the CoM, on the draft revised Mining Charter; the DMR has disputed this claim.

Further, law firm Malan Scholes has moved to have the entire Mining Charter set aside as unconstitutional, with the case due to be heard this year.

In addition, there have been legal challenges to the new mining rehabilitation regulations under the National Environmental Management Act, which deal with the financial provision for prospecting, exploration, mining or production operations and have shifted the governance of managing closure and rehabilitation liability from the DMR to the Department of Environmental Affairs. Various stakeholders have taken issue with the potential for duplicate funding, the method for determining the different classes of liabilities – specifically the determination of latent impacts, the validity of financial vehicles used to fund the different liabilities, the role of the independent auditor, insufficient timeframes to transition to compliance and time and cost implications.

Gold producer AngloGold Ashanti’s case against the DMR relating to irrational mine safety enforcement was also conclued in November. Mining Weekly reported that the South African Labour Court had criticised mine safety inspectors for acting outside the bounds of rationality in enforcing mine safety legislation when it granted a final suspension order in AngloGold Ashanti’s case against DMR acting mines chief inspector Xolile Mbonambi and six others. The instructions issued to AngloGold Ashanti under Section 54 of the Mine Health and Safety Act were found to have unnecessarily brought the mining company’s entire Kopanang mine, in the Free State, to a standstill, at a cost of R9.5-million a day.

Miller also highlights the November-released ‘State of Capture’ report by then Public Protector Thuli Madonsela, which implicates Mineral Resources Minister Mosebenzi Zwane. The report will either be taken on review by President Jacob Zuma or see him establish a commission of inquiry to conduct further investigation. “Either way, the allegations surrounding the sale of coal producer Optimum Coal Holdings are likely to be unpacked in the public domain.”

Miller stresses that all these cases produce an unstable picture of South Africa’s regulatory environment: “This is problematic, as mining investors require regulatory certainty. In a bid to provide this certainty, government has sought to pass and enforce regulations, such as the MPRDA, more quickly, but this response has actually been a red herring.

“The uncertainty is built in to the way South Africa’s Acts and Mining Charter are drafted.”

He notes that the regulations pertaining to the mining industry are vague in many respects, for example, in terms of compliance. In addition, officials are granted discretion to determine whether a company has complied. “This is extremely unsettling for investors, who are, as a result, instead looking to more stable, investor-friendly locations outside South Africa.”

Miller confirms that a worrying feature of the uncertain state of affairs involves the current draft of the updated Mining Charter and its attempts to align with the Department of Trade and Industry’s (DTI’s) Broad-Based Black Economic-Empowerment Codes of Good Practice (DTI codes), and the unresolved issue of when a mining licence can be suspended for failure to comply with the Mining Charter.

The initial draft charter was meant to align the Mining Charter with the DTI codes. However, legal services provider Cliffe Dekker Hofmeyr mining head Allen Reid highlights that both the initial draft and the current version have been haphazardly aligned with the codes, in terms of measuring black economic-empowerment compliance.

“Using the DTI codes as a point of reference when pegging targets to be set in the reviewed charter has merit,” he says, but stresses that the DMR should not strive for full alignment with the DTI codes at all costs, particularly as the reviewed charter deals with industry- specific challenges that cannot be adequately addressed by those general DTI codes.

Miller notes that the importance of this lies in the fact that, while noncompliance with the transformation objectives of the DTI codes does not result in the suspension or cancellation of a company’s licence to operate, in terms of Section 47 of the MPRDA, the penalty for noncompliance with the Mining Charter is less clear.

“What is required is for the DMR to engage in meaningful consultation with the CoM and other stakeholders to produce a document that is unambiguous, viable and achievable,” Reid stresses.

Outlook
However, Miller emphasises that the picture is not entirely bleak for South Africa, pointing out that the outcome of the various court cases he mentions will indicate the standpoint of the country’s legal system and its ability to mediate the implementation and enforcement of regulations in the mining sector.

Miller highlights that a particularly interesting feature of the AngloGold Ashanti case is Labour Court judge André van Niekerk’s statement that he would have considered ordering the officials concerned to bear the legal costs in their personal capacities, had he been asked to do so.

“If positive outcomes come from these legal disputes, this may force those in power to go back to the drawing board. Unfortunately, however, it seems we have to hit rock bottom first before things may start to improve.”

He adds that, while South Africa’s regulatory environment has been rapidly deteriorating, other African countries, such as Botswana and Namibia, have gone to great lengths to improve the administration of their mining rights regimes, based on first- and second-generation World Bank standardised mining codes. These countries have attracted investor interest by further emphasising their geological endowments through airborne geophysical surveys.

Nedbank’s networking lounge at this year’s Investing in African Mining Indaba, which will be held from February 6 to 9 at the Cape Town International Convention Centre, will enable attendees to arrange interviews and meetings with Nedbank representatives.

Edited by Tracy Hancock
Creamer Media Contributing Editor

Comments

Showroom

Booyco Electronics
Booyco Electronics

Booyco Electronics, South African pioneer of Proximity Detection Systems, offers safety solutions for underground and surface mining, quarrying,...

VISIT SHOWROOM 
Schauenburg SmartMine IoT
Schauenburg SmartMine IoT

SmartMine IoT has been developed with the mining industry in mind, to provides our customers with powerful business intelligence and data modelling...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (15/03/2024)
15th March 2024 By: Martin Creamer
Gold, hydrogen, mining boost make headlines
Gold, hydrogen, mining boost make headlines
15th March 2024
Magazine round up | 15 March 2024
Magazine round up | 15 March 2024
15th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.122 0.151s - 89pq - 2rq
Subscribe Now