Some of the proposed amendments to the Mineral and Petroleum Resources Development Act (MPRDA) will add additional red tape to mining companies’ deal-making and conclusion processes, which will introduce another layer of complexity and uncertainty to South Africa’s mining laws, says global law firm Baker & McKenzie corporate mergers and acquisitions head Morné van der Merwe.

Speaking to Mining Weekly on the sidelines of the Investing in African Mining Indaba conference, Van der Merwe explained that the most significant amendments proposed – from a transactional and practical perspective – pertained to the transfer of mining and prospecting rights, as governed by Section 11 of the MPRDA.

“The draft MPRDA Amendment Bill prohibits the transfer of any interest for listed and unlisted companies that hold a right, without the written consent of the Mineral Resources Minister.”

“Listed shares are traded on a daily basis; therefore, the implementation and monitoring of this amendment would be virtually impossible,” he emphasised.

Moreover, Van der Merwe warned that the proposed deletion of Section 9 of the MPRDA removed the first-come-first-served principle.
This implies that an application can be accepted if a prior application is still pending, thereby enabling government authorities to possibly manipulate the transaction or find loopholes in the law.

“Unfortunately, this increased complexity is not what is required at present, especially owing to the fragile state of the South African mining sector as a result of recent labour unrest and decreasing productivity levels,” he added.

Citing Mineral Resources Minister Susan Shabangu’s keynote address at the Mining Indaba, Van der Merwe said he was mostly content with what had been said, specifically with regard to toning down the rhetoric on enforcing beneficiation, as this was a concerning issue for foreign investors, owing to the increased costs that such a move would have on mining operations.

He added that, elsewhere in Africa, several mining legislative changes and developments were likely to occur this year.

“In Mozambique, we expect that government will formulate a new taxation regime for its oil and gas sectors, while in Zimbabwe, there is a strong possibility that positive investment-friendly laws will be enacted.”

Van Merwe added that many countries were following Ghana’s lead in trying to improve their investor friendliness, as Ghana’s Minerals Commission had in the last three years helped to remove administrative uncertainty, reduce bureaucracy and corruption, as well as improve administrative efficiency.

Indaba Importance

As an international transaction-focused law firm, the resource sector is a significant part of the firm’s practice, which is why it sent ten delegates from its South African, UK, Brazilian, Australian, Chilean and Canadian offices to attend this year’s conference.

Baker & McKenzie Brazil mining group head Joaquim de Paiva Muniz’s attendance at the Mining Indaba stemmed from his belief in the importance of gaining insight into the African mining industry.

“We are seeing an increase in South-South trade, as several Latin American countries are successfully setting up mining operations in Southern Africa. This is because Latin American countries share many similarities with Southern Africa, including political, social and legislative uncertainty and labour volatility – Baker & McKenzie is able to successfully overcome these challenges,” he asserted.

Baker & McKenzie Canada mining group head Greg McNab added that with the Toronto Stock Exchange being the dominant global exchange for public resource sector financing, many companies that are investing in African mining operations and/or establishing mines in Africa finance those activities in Canada.

“The Mining Indaba is an important forum for discussion of how mining companies are adapting to a rapidly changing finance model,” McNab concluded.