Draft MPRDA Amendment Bill shifts regulatory responsibility from Parliament to Minister

1st February 2013

By: Zandile Mavuso

Creamer Media Senior Deputy Editor: Features


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After South Africa became a democracy in 1994, government’s first mission was to create policies that would promote socioeconomic growth and develop the mineral sector.

Cliffe Dekker Hofmeyr Attorneys mining director Allan Reid tells Mining Weekly that the draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, published in December, shifts the determination of certain important aspects of the regulatory framework from the ambit of Parliament to Mineral Resources Minister Susan Shabangu.

“The Bill seeks to amend the definition of the MPRDA to include the Codes of Good Practice, the Housing and Living Conditions Standard and the amended Mining Charter of 2010. These documents do not constitute legislation. They are more in the nature of policy documents, can be amended at any time by the Minister and should not have the force of law.

“In addition, many of the time periods stipulated in the MPRDA have been [rescinded] by the draft amendment Bill and will be regulated and promulgated by Shabangu. Immediately, you have a situation whereby the Minister can designate time periods and policies that should really be determined by Parliament. Investors want certainty and mining is a capital-intensive industry and heavily dependent on investors and investor confidence,” says Reid.

Brief History of South Africa’s Mineral Regulatory System
The first democratic government had to develop a mineral sector framework that would not only represent a new South African regime but also counter the effect of the policies of the apartheid government.

Following the economic exclusion, labour repression and unsafe working conditions of the apartheid era, the MPRDA was developed as an attempt to reform the mineral sector.

In 2002, the MPRDA was passed by Parliament and, in 2004, it was implemented. The MPRDA seemed to have introduced a system of administrative law based on conditional State licences. It also contained clauses that dealt with the way in which the transition from the old regime to the new regime would take place.

It was important for the first democratic government to tackle socioeconomic issues that would assist in developing the country and its citizens. Although this had been the intent, the MPRDA has frequently caused more ills in the mining industry than rectifying the wrongs of the past, doing more harm than good in the mining industry.

In October 2002, the Department of Mineral Resources and mining industry stakeholders, including the Chamber of Mines, the South African Mining Develop- ment Association and the National Union of Mineworkers, signed the first Mining Charter. Stakeholders agreed to meet after five years to review progress and determine the steps (if any) needed to be taken to achieve the aims of the Mining Charter and to amend the Mining Charter.

The Mining Charter was created to support meaningful transformation in the mining industry in the context of participation by the sector in the international market and in such a way that transformation was a consequence of an economic model that was broad-based and benefited all South Africans, while retaining the international investor confidence. The South African mining industry, therefore, is not to operate as an island in isolation from the South African economic landscape.

In April 2009, the Minister promulgated the Codes of Good Practice for the Minerals Industry and the Housing and Living Condi- tions Standard for the Minerals Industry to set out administrative principles to enhance the implementation of the Mining Charter. However, these codes were frequently ambiguous and in conflict with either the Mining Charter or the MPRDA.

Consequently, the empowerment benefits which the Mining Charter intended to achieve through the mining industry are significantly below the expectations and aspirations of the majority of South Africans. As a result, the Amended Mining Charter was published in September 2010.

However, there remains a degree of criticism levelled against the Mining Charter, namely that, in its current form, it is a blunt, one-size-fits-all tool incapable of managing the broad-based transformation agenda. Additionally, that the goalposts can be moved at any time does little to encourage foreign direct investment.

Substantial amendments were made to the MPRDA by way of the Mineral and Petroleum Resources Development Amendment Act, 2008. Reid states that, although this Amendment Act was passed in 2008, it was never implemented because it failed to address various ambiguities and would have caused even further chaos in the mining industry.

State Intervention in the Mining Sector
The 2010 meeting of the African National Congress’s national general council adopted a resolution on the role of the State in the economy.

The 2010 resolution encompassed more than merely the issue of nationalising the mines and led delegates to instruct the party’s national executive committee to conduct an in-depth study on how best to leverage South Africa’s mineral wealth and other natural resources to achieve the key stra- tegic goal of placing the economy on a new job-creating and more equitable growth path.

This decision was taken following the ANC’s five-yearly 2007 national policy conference. An economic transformation resolution had been passed at this meeting, which aimed to create a democratic developmental state that “. . . must ensure that our national resource endowments, including land, water, minerals and marine resources, are exploited to effectively increase the growth, development and employment potential embedded in such national assets and not purely for profit increase . . .”

The ANC consequently commissioned the ‘State Intervention in the Mineral Sector’ report, which looked at the chal- lenges of the State’s role in the mining industry and which was considered at the party’s national policy conference in June 2012.

It was reiterated at the ANC’s 2012 leadership election conference in December that the party rejected a policy of wholesale nationalisation of the mines, arguing that the country could not afford mine nationali- sation if accompanied by full market value compensation and, if uncompensated, such nationalisation would not only be unconstitutional but would also cause a near collapse of foreign investment and access to finance, as well as widespread litigation by foreign investors, which would result in an unmitigated economic disaster for the country and its people.

The ANC said, however, that the State must capture an equitable share of mineral resource rents and deploy them in the interests of long-term economic growth, development and transformation.

“In order to achieve meaningful long-term viability and transformation, South Africa’s regulatory framework must be clear and certain and enforced through effective, fair and transparent admini- stration. To the extent that the draft MPRDA Amendment Bill seeks to achieve these goals, I believe that it has failed,” says Reid.

He adds that the quality of the Bill is more questionable than its intent, as many concepts introduced by the Bill are welcomed by the industry. However, numerous provisions of the Bill are open to Constitutional challenge or are too vague or simply do not work on a practical level.

South Africa’s reputation as a resource destination of choice has suffered severely over the past few years. “The negative impact of the Marikana incident of 2012 has further damaged investor perceptions. Consequently, any legislative amendments to the MPRDA should be aimed at fostering the sector’s reputation,” he says.

Reid concludes that all stakeholders should be more involved in the amend- ment of the MPRDA through the draft Bill so that the current uncertainties stemming from the Act can be revisited and amended.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online




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