Following Statistics South Africa's (StatsSA) announcement last week that South Africa's economy contracted by 0.6% during the third quarter, law firm Herbert Smith Freehills (HSF) this week questioned the impact of the proposed amendments to the Mineral and Petroleum Resources Development Act (MPRDA) Regulations, following its publication by Mineral Resources and Energy Minister Gwede Mantashe last month.
With the economy likely to contract further in the fourth quarter, especially as another round of electricity blackouts occur owing to embattled power utility Eskom's load shedding, HSF lamented that the proposed regulations "may well exacerbate the regulatory uncertainty which has long plagued the mining sector" and that promulgation of these "is likely to be an investment negative".
The economy's current travails are mainly driven by a contraction in the mining, manufacturing and transport sectors. The mining sector, in particular, contributed 6.1% less in this quarter to the country's gross domestic product following a decrease in production of platinum group metals, coal and iron ore.
StatsSA's announcement followed that of the International Monetary Fund (IMF) in its Article IV Mission to South Africa on November 25 that South Africa's medium term growth outlook remained subdued. According to HSF, the IMF explained this was largely owing to stagnant private sector investment and exports coupled with declining productivity. This dearth of investment, both foreign and local, is in turn driven by a lack of reform to address weaknesses in the business climate, including regulatory constraints, labour market rigidities and inefficient infrastructure.
It is within this context that the proposed amendments to the MPRDA should be considered, HSF warned, adding that of particular concern should be whether or not the proposed amendments will promote or deter investment in the South African mining industry.
"While the Draft Regulations seek to streamline the processes associated with applications for prospecting and mining rights and the manner in which these rights should be exercised, the obligations which they impose on applicants or right holders are often unduly burdensome. In certain cases the proposed amendments appear to conflict with the provisions of the MPRDSA or seek to grant the administration greater powers than the Act affords it. If so, the lawfulness of these amendments is questionable," the firm stated.
In a separate report compiled by the law firm Webber Wentzel’s Jonathan Veeran, Rita Spalding, Bruce Dickinson and Manus Booysen, the company outlines that the draft amendments envisage various amendments to the MPRDA regulations.
The most notable aspects of the amendments touch on consultation with interested and affected persons, social and labour plans (SLPs), environmental regulation for mineral development, petroleum exploration and production, as well as pollution control and waste management regulations.
In respect of consultations with interested and affected persons, Regulation 2 of the MPRDA regulations sets out the requirements and manner of lodging of an application for any permission, right or permit under the MPRDA, the firm explains.
Prior to the draft amendments, Regulation 3 of the MPRDA regulations set out the steps required by the regional manager or designated agency to make known to interested and affected persons that an application contemplated in Regulation 2 was accepted by the Department of Mineral Resources and Energy (DMRE) and being considered.
According to the law firm, Regulation 3 determined that interested and affected persons meant "a natural or juristic person or an association of persons with a direct interest in the proposed or existing operation or who may be affected by the proposed or existing operation".
The draft amendments, however, propose an expanded definition of interested and affected persons to be set out in Regulation 3 to include, but not to be limited to, specifically listed stakeholders.
These stakeholders can include host communities; land owners; traditional authorities; land claimants; lawful land occupiers; holders of informal rights; the Department of Agriculture, Land Reform and Rural Development; any person whose socioeconomic conditions may be directly affected by the proposed prospecting or mining operation; the local municipality and the relevant government departments, agencies and institutions responsible for the various aspects of the environment and for infrastructure which may be affected by the proposed project.
The draft amendments also propose to add regulations obliging an applicant under Regulation 2 to consult with land owners, lawful occupiers and interested and affected persons in accordance with the terms of the public participation process prescribed in Chapter 6 of the Environmental Impact Assessment Regulations of 2014.
Additionally, a holder of a reconnaissance permission, a reconnaissance permit, a mining permit, a prospecting permit or a mining right must give at least 21 days written notice of his/her intention to commence with operations to the land owner or lawful occupier of the land, as well as the regional manager.
The draft amendments also propose to amend Regulation 41 of the MPRDA dealing with the objectives of the SLP, to now include the additional obligation on a mining right holder to ensure that its contribution to socioeconomic development extends to labour-sending areas and not just to the areas in which it operates.
Labour sending, as defined in the draft amendments, means areas from which a majority of mineworkers, both historical and current, are or have been sourced.
The draft amendments further propose to amend Regulation 42 of the MPRDA dealing with the submission of an SLP, to now include an obligation on a mining right holder to consult with communities and relevant structures on the contents of the SLP within 180 days from the date of receiving notification of acceptance for a mining right from the regional manager, to ensure that it addresses the relevant needs of such communities and is aligned with the updated integrated development plans of such relevant structures.
In addition to the above proposed amendments, the draft amendments propose to include important regulations on the publication requirements relating to an approved SLP, as well as the five-yearly review of an approved SLP and collaboration efforts related to approved SLPs.
In terms of environmental regulations for mineral development, petroleum exploration and production, the draft amendments propose to repeal almost all of the regulations which relate to environmental matters; however, Webber Wentzel points out that this excludes Regulations 56 (Principles of mine closure), 57 (Application for mine closure), 61 (Closure objectives) and 62 (Contents of closure plan).
Under Section 52(1) of the MPRDA, a mining right holder must, after due consultation with the relevant and interested parties, notify the Minister where prevailing economic conditions cause the profit-to-revenue ratio of a mine to be less than 6% on average for a continuous period of 12 months, or if any mining operation is to be scaled down or to cease with the possible effect that 10% or more of the workforce or more than 500 employees, whichever is the lesser, are likely to be retrenched in any 12-month period.
The draft amendments propose to amend the MPRDA to include a detailed procedure on submitting this notice in terms of Section 52 of the MPRDA and further propose to include in the MPRDA a detailed list of items required to be included in the notice to be sent to the Minister.
Turning towards pollution control and waste management regulations, under Regulation 73 of the MPRDA, dealing with the management of residue stockpiles and deposits, the draft amendments propose to include in the MPRDA the specific details to be included by an applicant in its application when applying for the approval of the Minister to use the surface of land in a way which may be contrary to the objects of the MPRDA.
Regulation 74 of the MPRDA Regulations, meanwhile, deals with appeals made in terms of Section 96 of the MPRDA against administrative decisions taken by the relevant actors in the DMRE and sets out the procedures, requirements and applicable timelines relating to such appeals.
According to Webber Wentzel, the draft amendments propose to make “substantial and somewhat problematic” changes to Regulation 74 as contained in the MPRDA Regulations.
In this regard, the most “problematic” amendments relate to the timing of submission by a party of its written notice setting out its intention to appeal an administrative decision; as well as the fact that the draft amendments seem to “negligently leave out” the discernment between appeals submitted pursuant to Section 96(1)(a) of the MPRDA and appeals submitted in terms of Section 96(1)(b) of the MPRDA.
Additionally, the law firm notes that the draft amendments only seem to apply to appeals submitted pursuant to Section 96(1)(a) of the MPRDA; and the replacement of the director-general with the Minister as the party responsible to adjudicate appeals submitted pursuant to Section 96(1)(a) of the MPRDA.
Interested and affected parties have been asked to submit written representations to the DMRE within 30 days of publication of the draft amendments. In effect, this comprises 20 business days with the last day for public comments falling on January 2, 2020, when taking the December and January public holidays into account.
“A further aspect to take note of is that, as the draft amendments are amendments to subordinate legislation, the Minister is thus not bound to make changes to the draft amendments based on the comments received,” Webber Wentzel says.
The Minister does, however, have a duty to take such public comments into account before publishing the final amendments to the regulations, the law firm adds.