After commissioning debate facilitator Mining Dialogues 360˚ (MD360˚) to elicit inputs from industry stakeholders on how current mining legislation enables or frustrates industry growth and transformation, the Minerals Council South Africa has confirmed that excessive and inconsistent regulation is disincentivising investment in the mining industry.

The council early this year tasked MD360˚, in partnership with Good Governance Africa (GGA), to assess the effectiveness of particularly the Mineral and Petroleum Resources Development Act of 2002 (MPRDA) as per three dialogues held and various individual interviews conducted.

MD360˚ obtained insights from large-scale, junior, exploration and small-scale mining companies, labour unions and financial, environmental, legal, social and mining industry service provider groups.

The ‘Minerals Policy Review Dialogues Report’, published in September, summarises the participants’ view across a broad range of issues pertaining to policy, legislation, mining industry economics, transformation, people issues, institutions, governance and the future direction for the industry.

The participants agreed, firstly, that the mining industry is stagnating by any quantitative measure and is essentially in crisis, while the country’s above-average mineral endowment is insufficient to trump the excessively high hurdle rates facing investors in mining projects.

The council says there is an overarching sense that the MPRDA was largely workable when it was first introduced; however, there are some specific sections of the Act that provide for Ministerial discretion that some regard as excessive and, therefore, a source of regulatory inconsistency and instability, which disincentivises investment.

Additionally, while there is a largely acceptable Act in place, its implementation has been hampered by a largely incapable Department of Mineral Resources and Energy (DMRE), which faces serious capacity constraints.

On the issue of transformation, participants in the dialogues agreed that there must be a transformation agenda, but that it must be made clear upfront and should not be subject to random changes. Besides, without investment and growth, there will be nothing to “transform” given the crisis in which the industry finds itself, the council states.

The participants also agreed that the social and labour plan (SLP) requirements of the MPRDA inadvertently narrow the potential impact of companies’ expenditure.

Rather, SLPs should cohere with a broader regional development imperative, and, simultaneously, mines should not be expected to de facto replace local government as a provider of municipal goods and services – “something that is untenable for a developmental State”.

Industry stakeholders are also strongly of the view that the antipathy between industry and government has been extremely unhelpful.

The prevailing sense that the government – through the DMRE – is anti-mining has to be addressed and a new narrative, which cogently advances mining’s benefits, must now be told.

The council clarifies that stakeholders are not suggesting a new kind of grand social compact; rather, they are suggesting that the government and business start speaking to a new narrative that is fundamentally dedicated to attracting new investment into an industry that remains the backbone of the South African economy.

Many participants feel that government is “authoritarian and prescriptive in its approach to regulation and management of the industry, and even obstructive in some instances”, while others believe South Africa has a State that wants to be interventionist but is not capable, and that politicians and bureaucrats are often driven by self-interest.

SPECIFIC PROVISIONS

The participants in the dialogues highlighted specific provisions of the MPRDA that warrant attention, including Section 11 regarding the need for Ministerial consent for the transfer and encumbrance of prospecting and mining rights, as well as Section 53 regarding the requirement for Ministerial approval for the use of the surface of land over which a mineral right has been issued.

The participants also agreed that Section 102 warrants attention, regarding the need for Ministerial consent for the amendment of the variation of rights, permits, programmes and plans.

Section 43, as highlighted by the participants, makes it difficult to obtain a closure certificate for mines, while there is inconsistency around environmental rehabilitation obligations imposed by another piece of legislation, the National Environmental Management Act of 1998.

Lastly, Section 96, which pertains to the open-ended timing of internal appeal processes and access to the courts, is also a point of concern for mining industry stakeholders.

The participants overall agree that there is a high cost burden associated with compliance management given this uncertain policy and regulatory environment.

“This factor undermines the country’s competitiveness as a mining jurisdiction,” the participants state, adding that a possible way forward could be through the creation of a one-stop shop for the regulation of licensing.

The council finds in the report that there is a need for a new narrative in the mining industry, one that is stakeholder-informed and evidence-based.

Through a process of integration with a policy analysis, legislative review and economic analysis already undertaken by the council, MD360° and GGA teams, the product of the dialogue and interview process will be used to formulate draft recommendations that may be considered for policy and legislative reform.

These will then be tested with industry stakeholders consulted to date at a plenary dialogue to be held before the end of November.