Draft amended law would hamper mining sector

25th January 2013

By: Zandile Mavuso

Creamer Media Senior Deputy Editor: Features


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A top lawyer has voiced concern about the draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, cautioning that it could have a detrimental effect on the mining sector, which, together with the quarrying industry, contributed R70-billion in nominal value to South Africa’s gross domestic product (GDP) in the third quarter of last year.

Peter Leon, head of Africa mining and energy projects at law firm Webber Wentzel, tells Mining Weekly: “In its present form, the Amendment Bill, unfortunately, not only fails to rectify the defects of the current regulatory regime, such as uncertainty and excessive administrative discretion, but in many respects also exacerbates them. “Issues of crony capitalism, poor infrastructure and bureaucracy are also not addressed. These concerns hinder the growth of the industry and its ability to attract foreign investment.”

Leon points out that the mining industry provides employment for about 500 000 workers and has in the past accounted for up to 60% of South Africa’s export revenue (although export revenues were R12.5-billion lower in 2012, predominantly owing to the strike action in the mining industry). However, he notes that “we are still failing to fully exploit the potential benefits that our mineral resources can offer”.

He says this is perhaps best illustrated by the fact that, during the longest-sustained commodities boom in history, between 2001 and 2008, the National Treasury reported that the value added to GDP by South Africa’s mining sector remained flat.

“While the National Development Plan creates a good framework to achieve the ideals for which we all strive, the problem is that, in many instances, there is a lack of will and/or strategy to implement the plans that are formulated to achieve the intended economic growth and development,” he adds.

“The tumult in the mining sector last year is particularly worrying. According to Minister of Finance Pravin Gordhan, mining production declined by 8.3% year-on-year in September 2012 in the wake of the Marikana shootings and the widespread strike action across the mining sector. “This resulted in direct production losses in gold and platinum amounting to R10.1-billion, and in coal production amounting to R180-million. The Marikana tragedy, as well as the labour unrest, was deeply rooted in dissatisfaction among workers and mine communities, many of whom still live in poor conditions.”

According to Leon, the Department of Mineral Resources (DMR) has the perfect opportunity to remedy many of the areas of concern now while the Amendment Bill is under discussion. However, the Amendment Bill contains a number of aspects that could be in breach of the Constitution and South Africa’s international law obligations if it was enacted in its current form.

Under the Amendment Bill, it is proposed that the Minister of Mineral Resources and the DMR be afforded even greater “back-door discretion”, including in the determination of how and to whom licences should be granted, Leon notes.

“In a number of the Amendment Bill’s draft clauses, there are no objective criteria against which compliance with the MPRDA can be measured. “A lack of an identifiable standard to ascertain whether the criteria in the Act have been met makes it difficult for applicants to determine whether they comply with the Act. “This has been a serious problem with the Act since its introduction in 2004; the Amendment Bill seems to worsen, rather than mitigate, this issue.”

Meanwhile, the licensing process continues to operate slowly, given that key requirements of the mineral regulatory regime are vague, subjective and indeterminate. According to the Minister, the DMR on average takes nine months to grant applications. The time it takes for mining permits to be granted increased from 2011 to 2012, and it appears that the DMR failed to meet internal deadlines for issuing or declining mining permit and prospecting licences applications 82% of the time in 2012.

Although it was expected that the MPRDA Amendment Bill would aim to improve the current position, the application processes for licences have yet to be streamlined, which makes an already prolonged application process even longer.

These challenges to South Africa’s mining industry have the potential to go beyond the mining sector and affect broader society. For this reason, Leon notes that “while the Constitution does not specifically oblige civil society to take positive action, community involvement is undoubtedly an important component of our constitutional dispensation. “An active and aware civil society can also exert influence (be it as voters, shareholders or interested members of the public) by placing pressure on government and mining companies if they fail to fulfil their social contract obligation.

“If the shortcomings in the mining industry and the regulatory environment are not addressed, the country is likely to continue to experience an investment deficit. “If the industry is to succeed, redistribution and growth need to work together,” he concludes.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online




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