The positive sentiment stemming from the ascention to the Presidency of Cyril Ramaphosa and the subsequent appointment of Gwede Mantashe as Mineral Resources Minister has dampened following the extension of the deadline for the finalisation of the Mining Charter and the decision to lodge an application for leave to appeal against a court judgment upholding the ‘once empowered, always empowered' principle’.
This is the view of law firm Hogan Lovells partner and mining head Warren Beech, who, commenting on Mantashe’s Budget Vote speech and the 8.4% year-on-year decrease in mining production in March, notes: “The question has to be why – after the positive growth last year, which extended into January and February – did we take such a big plunge in March?”
He notes that there are external and internal reasons, including geopolitical uncertainty and stable to declining international demand. However, he implies that the internal factors are more pressing, as they are problems that should have been addressed by government a long time ago.
“Unfortunately, until we get the Mining Charter sorted and until we get the amendments to the Mineral and Petroleum Resources Development Act (MPRDA) settled and finalised, the industry and investor sentiment will continue to be hindered by uncertainty.”
He adds that while Mantashe had recommitted to addressing both the Mining Charter and MPRDA amendments during his Budget Vote speech last month, “unfortunately there have been a couple of things that have impacted on his credibility”.
Firstly, the Mining Charter was meant to be finalised by May. “The new commitment is for June . . . but, as soon as you push out the deadline, the trust deficit kicks in.”
Secondly, he states that Mantashe’s decision to appeal the High Court’s judgment in support of the ‘once empowered, always empowered’ principle – having initially stated that the Department of Mineral Resources (DMR) would not appeal – “adds to the trust deficit”.
However, Beech believes that the decision was purely strategic, as a means of rebalancing the negotiating table. There was a perception that the chamber had won and he believes that Mantashe and the DMR felt they needed to appeal to eliminate that perception.
Beech points out that even if the Minister succeeds and is granted leave to appeal, the actual appeal will only be heard a year or two from now and possibly much later, and is likely to be mostly academic by the time it is heard, especially if the charter and the MPRDA amendments are finalised in the interim.He
also points to Mantashe’s comment during the Budget Vote speech last month, which suggested that the DMR would use the ‘use it or lose it’ principle for mines placed under care and maintenance.
“The mines were put on care and maintenance for good reasons – global demand at the time, cost structures, uncertainty; to threaten those mines with the ‘use it or lose it’ principle was not the most appropriate way of trying to bring the parties together at this stage.”
He explains that the ‘use it or lose it’ principle is not a new concept, as it came up during the Parliamentary processes for the MPRDA, prior to the State acting as the custodian of mineral wealth, when mineral rights were held privately. Beech stresses that the principle was “really to deal with our history and not our current scenario, although Mantashe’s comments have now highlighted the principle again”.