 Turnaround Tuesday was crucial for South Africa's mining industry and for South Africa's reputation as an investment destination.
South African Mineral Resources Minister Susan Shabangu has been universally commended for most of her statements of August 17, when she invited editors, reporters and mining industry analysts to hear her commitment to:
- overhaul South Africa's "ambiguous" Mineral and Petroleum Resources Development Act (MPRDA);
- provide information on the Department of Mineral Resources' (DMR's) website on the status of exploration and mining licences, from September 1"in the interest of transparency"; and
- have ready for public access a completely new system of 'licence-process tracking' within the next six months.
On the downside is the soon-to-be-gazetted six-month prospecting licence moratorium. This will endure from September 1 until the end of February, to allow for a comprehensive audit of the licences granted since the promulgation of the MPRDA. All other existing licensing activities will continue as normal.
Shabangu, in making here announcements, was flanked by DMR director-general Sandile Nogxina and economic adviser Dr Iraj Abedian.
She admitted to a large media contingent that there were "gaps and weaknesses" within the MPRDA that needed closing and fixing.
"We are confident that we are ready to review the Act and to go to Cabinet soon on the issues," she said.
Those issues include: ArcelorMittal South Africa losing its right to a 21,4% undivided share of the Sishen iron-ore mine, and the subsequent confirmation of the awarding of the lost right to Imperial Crown Trading 289; Sishen controller Kumba Iron Ore's contestation of the award to ICT in the High Court; the awarding of associated mineral rights to Keysha at Lonmin Platinum, and Lonmin's appeal against this.
Shabangu told journalists that the DMR had identified many administrative gaps and that an audit would be done on the DMR's systems and existing mining and prospecting licences, which numbered more than 25 000 since 2004.
"We want to consolidate, to see where we are, as the department and where we are going," she added.
"We also intend dealing with some of the glaring areas in the legislation, which we think might be ambiguous, where we have our own interpretation, and others had different interpretations.
"We want to clarify those issues. We want to revisit the MPRDA and go to Parliament in making sure that, from the beginning of next year, there is a relook at the Act, and improvements in those areas where we think that we've got major challenges. We also want to clarify the letter of the law," she says.
She says, in the DMR's defence, that the MPRDA is "a relatively new piece of legislation", and that there is a lack of well-developed jurisprudence, which would ordinarily assist with interpretation of the law.
In the absence of such precedents, officials applied the letter of the law as opposed, for example, to interpreting the spirit or intentions of the law.
Steps are being taken to improve the administrative processes regarding the issuing of licences. The lack of transparency on licensing data, which is causing "unnecessary suspicion", will be remedied.
The database is being cleaned up, paving the way for the incorporation of uncorrupted data into the new integrated electronic application administrative system.
Chief directors are to be deployed to regional offices to strengthen leadership and oversight at the site of service delivery.
With immediate effect, prospecting rights will cease to be issued at regional office level and will instead be issued from the DMR head office.
The ongoing internal investigation has revealed more than 100 cases of apparent administrative irregularities, which differed in degrees of materiality.
All cases of double granting of licences would be resolved within the next three months.
The upgrading of all nine regional offices will continue, for completion in the next six months.
Allegations of abuse of office and corruption will be dealt with "speedily and effectively".
"Towards this end, we would like to encourage the media and the general public to furnish us with the relevant information in order to investigate and refer for prosecution such cases," Shabangu urges.
"The order of processing of applications the so-called 'packing order' in Chapter 4 of the MPRDA is an area where we will clearly need to make amendments. As a result, a number of areas that need amendment have been identified.
"In general, we have found some of the provisions of the law being open to more than one interpretation," she says.
For example, Section 11, relating to regulating the transferability of rights, is one other area of the law that will be amended, taking from the lessons and experience where rights have been granted to certain entities and sold to others the next day without being exercised in term of the undertakings being made at application stage," Shabangu says.
Another example of serious lessons from the current construct of the MPRDA is the "grey area" with regard to regulating "associated minerals" - which arose with the Lonmin case.
Currently, the law allows for the granting of different minerals to different entities on the same land, and the amendment processes will therefore have to consider a clear format of associated-minerals regulation.
A joint stakeholder task team has identified a list of amendments to the MPRDA and these will be submitted to Parliament for processing as soon as possible.
RESPONSE TO STATEMENT
Regulatory lawyer Peter Leon, who has an intimate knowledge of what it takes for a country to be competitive in mining and who coheads the law firm Webber Wentzel's mining practice group, says: "The statement on Tuesday was a good step forward. I think that it could have been taken much earlier and it is unfortunate that there has had to be a media dust-up before the statement.
"Having said that, I think it could hopefully put the industry back on the right path," Leon tells Mining Weekly.
He says that the high level of discretion that the MPRDA affords to regulators - and the uncertainty that that creates - should be brought to an end.
"The second thing that is very urgently necessary is the introduction of time limits into the Act. In other words, whoever is taking a decision in the DMR has to do it in a fixed time and, failing that, the decision is deemed to be granted," Leon adds.
He looks forward to the creation of a proper mining title system, which is available in real time and which is electronic.
"South Africa must cease having the absurd system that it has at the moment, where an access to information request needs to be brought to find out whether a right has been granted to anybody and whether any rights are available," he says.
He wants the mining title system to work like the deeds registry works, so that anybody can see what is available and the applications that have been submitted.
"The other issue is the apparent abuse of Section 11 of the MPRDA relating to the transfer of rights. Also, section 11 has no time limit so Ministerial consent can take six months or a year, which has the potential to create a lot of uncertainty," Leon adds.
He strongly advocates that the new Amendment Bill repeals the MPRDA Amendment Act, which, though passed by Parliament and signed into law by the President, has not been put into effect.
The MPRDA Amendment Act is very controversial and Leon believes that it should be scrapped in its entirety.
"I hasn't been brought into effect, which is fortunate, and I am proposing that one of the sections of the new Amendment Bill should repeal the MPRDA Amendment Act automatically, simultaneously," he adds.
He recommends that the social and labour plans be taken out of the regulations and put into the Act and requirements spelt out in clear detail.
At the moment, he contends that the requirements are extremely vague with different regional offices applying different standards.
Something also needs to be done about community participation in mining operations, which, he says, is not dealt with well currently.
A final point is that the new Amendment Bill contains an opportunity to address the whole issue of environmental authorisation, which the Coal of Africa issue has highlighted as problematic. Environmental authorities have stopped Coal of Africa from mining at Vele in the Limpopo, which is close to the Mapungubwe National Park.
"Again, the Amendment Act creates the worst of all worlds because under that, the DMR will continue to grant environmental authorisations, but subject to the National Environmental Management Act or Nema, with the appeal lying with the Minister of Environmental Affairs.
"This won't make me very popuIar with the mining companies, but I think that environmental authorisation should be taken away from the DMR altogether and handed over to the Department of Environmental Affairs.
"I don't think that the DMR has the expertise to deal with environmental issues. I think that we should follow the model in other countries that the environmental department looks after environmental authorisations, and again, that authorisation will have to be subject to time limits, because the problem with environmental authorisations is that they can take too long," says Leon.
On the six-month moratorium on the granting of prospecting rights, Leon understands the reason why the department has imposed it, but finds it unfortunate.
"I think that it has the potential to throw the baby out with the bathwater. That decision could have a negative impact on applicants who are perfectly within the law and whose applications are not subject to any impropriety or any allegations of corruption.
"It affects the good with the bad so I think a less drastic measure should have been proposed," Leon adds.
On website accessibility from September 1, Leon says: "Well, that's what they claim. I'm absolutely astonished by that. I will be amazed to see it all working. September 1 is only days away."
On the outcome of the Foresti case heard at the International Centre for Settlement of Investment Disputes (ICSID), he says that what happened in the long-running international arbitration is that the DMR agreed to grant the Italian-owned Flintstone, Red Graniti and Kelgran companies in South Africa a 5% black economic-empowerment (BEE) instead of a 26% BEE, on the basis that they beneficiated granite in South Africa.
This was after the members of the Italian Foresti group had challenged MRPDA and the associated Mining Charter at the ICSID.
"Strictly speaking, the DMR will say that it was acting within the law, but it is the only mining company that has ever been given such a huge beneficiation offset.
"In fact, I don't know that any mining companies have been given any beneficiation offsets at all under the Mining Charter. So, strictly speaking it will have no impact, because the government could argue that all it was doing was complying with the Mining Charter, but my view is that the reason government did that was to avoid the arbitration carrying on. That was the way of short-circuiting it."
"To extent that there are still some mining companies have not yet converted their old-order rights to new-order rights, they could take advantage of that if they beneficiate," Leon says.
His understanding is that the Mining Declaration of June 30, covers many of the issues that are going to come out in the Mining Charter review. The South African government, three labour unions, big mining business and small mining business made the historic 13-commitment Mining Declaration, which is aimed at growing and transforming South Africa's still-well-endowed mining industry.
New Administrative Regime
The DMR says that the new administrative regime will be supported by a new quality management information technology (IT) backbone to improve licensing application management and administration of existing rights.
The IT system is said to be designed with robust global information systems capability to enhance land use, protection of sensitive areas and communication with other interested stakeholders.
Workflow capability, which is central to the new system's functionality, will ensure tracking, sequential processing of applications and improve accountability of personnel in the management of the licensing process.
The DMR would be able to conduct mine audits and inspections in line with a priority schedule and enhance document security and management.
"The system will improve reporting to all stakeholders, government, markets, and the departmental principals. Transparency and consistency will be the hallmark in the management of South Africa's mineral resources," the DMR says.
Mining Bedrock
Shabangu reiterates that South Africa's mining industry remains "the bedrock" of the South African economy.
She again draws attention to Citibank of the US placing South Africa in the top global pile with R18-trillion worth of mineral reserves.
Leaders from South Africa's top local and foreign companies warn that the controversy around mining licences in South Africa, which Shabangu is seeking to quell, has "undermined our country's reputation and standing" in the eyes of investors and "caused harm beyond the important sector of mining".
While Shabangu was giving her Tuesday Turnaround address, Business Leadership South Africa (BLSA) chairperson Bobby Godsell, himself a former mining executive, was reporting that executives from 50 of the organisation's 80 member companies had discussed the impact of the mining-licence debacles, along with concerns about threats to media freedom.
Representatives of resources companies such as African Rainbow Minerals, Anglo American, Gold Fields, Lonmin and Sasol attended the meeting. The balance are drawn from large companies as diverse as Absa and Standard Bank, to Media24, Eskom Bidvest and Nestle.
Godsell advocates that "for an economy to work well, the rules have to be clear and certain, and consistently applied".
"There seems to be a need for clarifying, simplifying and reducing administrative discretion in the mining-titled regime. There seems to be a need for that clarified law to be applied in an administratively consistent way and there is a very big case of conflicts that arise - and there will be conflicts - to be resolved expeditiously in the courts," he says.
BLSA, for its part, is finalising an "anticorruption code", which offers a far tighter framework for business in defining corrupt practices that should be avoided. Aspects of this code may be used to bolster the new corporate governance code, King III.
It is now incumbent on the Minister to turn the step change into a sea change.
- With reporting by Mining Weekly Contributing Editor Terence Creamer.
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