Western Cape Finance, Economic Development and Tourism Minister Alan Winde last week slammed the passing of the Mineral and Petroleum Resources Development Act (MPRDA) Amend-ment Bill through the National Council of Prov-inces (NCOP), calling for President Jacob Zuma to address two “problematic clauses” before signing the controversial Bill into law.

Parliament, the National Portfolio Committee on Mineral Resources and the NCOP in March approved the MPRDA Amendment Bill, leaving it, on the eve of the May elections, in the hands of Zuma to promulgate.

Amid concerns the Bill had been creating in the mining and oil and gas industries, the Democratic Alliance (DA), law firms Bowman Gilfillan and Webber Wentzel, investment banking firm Liberium Capital and independent nonprofit public-interest law firm Legal Resources Centre publicly criticised certain aspects of the proposed legislation.

In an open letter to Zuma, Winde, who said the Bill was “unconstitutionally bulldozed” through Parliament by the African National Congress, questioned the State’s right to a 20% free carried interest on all new exploration and production rights of oil and gas, as well as the entitlement of the State to a further participation for which it could either pay an “agreed price” or enter into a production-sharing agreement complete with voting rights.

Mining Weekly previously reported that earlier versions of the Bill entitled the State to a free carried interest of 20% and a further participa-tion interest of 30%, with the total State interest capped at 50%; however, the version that Parlia-ment approved removed the reference to the 30% participation interest as well as the limit of 50%, effectively giving the State the right to take over an existing petroleum operation.

The State was also previously obligated to pay “fair market value” for any participation interest that it acquired; it had now been agreed that it would only need to pay “an agreed price”, which, according to Bowman Gilfillan oil and gas head Lizel Oberholzer, would present “major” challenges in future, as there was no provision for when a price could not be agreed upon.

“Through this Bill, the South African govern-ment is legislating for itself first dibs on 100% of all new oil and gas production initiatives by private companies. The effect of this on foreign investment may be devastating, especially in light of South Africa being up against its far more welcoming neighbours, which are actively competing for foreign direct investment (FDI) as a tool to generate growth and jobs,” explained Winde.

DA shadow Mineral Resources Minister James Lorimer said in a statement that the Bill, which was “passed without amendments”, provided no certainty for investors, which, as a result, would pull their resources, leaving the South African economy “in a shambles”, adding that this would lead to job cuts.

The loss of FDI would damage South Africa’s ‘young’ oil and gas industry, which had the potential to deliver cleaner and cheaper electricity, as well as provide thousands of potential jobs.

“If our oil and gas industry takes an early knock, so too will our potential to reduce our reliance on oil imports to reduce the volatility we currently face as a result of fluctuating prices and exchange rate shifts, and reduce the current account deficit we are stuck with, as a result of our poor trade balance,” Winde added.

However, the Chamber of Mines last month “generally welcomed and supported” the approval of the MPRDA Amendment Bill, adding that it believed significant progress had been made in addressing the mining industry’s concerns with the first draft of the Bill, published in December 2012.