Uncertainties in internal administration affecting mining industry

1st February 2013

By: Zandile Mavuso

Creamer Media Senior Deputy Editor: Features


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The instabilities and uncertainties of the last few months in South Africa’s mining sector have threatened to affect investment in the mining industry and, with the draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill published in December last year for comment, Werksmans Attorneys partner Chris Stevens believes that maladministration and the lack of regulatory certainty will affect the mining sector negatively should the Bill be approved in its current form.

“There are numerous new provisions in the Bill which would potentially make investors run scared, especially those giving the Minister wide discretionary powers.”

He mentions that the participation and involvement of various departments and stakeholders, such as the National Economic Development and Labour Council, the National Treasury and the Chamber of Mines, in the drafting of such Bills will add value and more certainty when amendments are being made.

This is despite Mineral Resources Minister Susan Shabangu’s address to the National Council of Provinces in May last year, during which she pointed out that the Department of Mineral Resources’ (DMR’s) review and subsequent proposed amendments to the MPRDA would be aimed at “improving the current construct of the Act to remove any ambiguities, streamlining the licensing process to avoid delays and inefficiencies and supporting the beneficiation strategy”.

The most significant problem with the Bill is that it is written in vague and discretionary terms, therefore, diminishing certainty regarding key licensing conditions and potentially leading to extensive ‘backdoor’ discretion. Applicants have little certainty about whether they will ever receive a licence, even if they ostensibly comply with the statutorily prescribed conditions, states Stevens.

In an example of the maladministration affecting the industry, Stevens states: “The backlog of internal appeals under the MPRDA is increasing daily and currently stands at about 2 000 unresolved cases. The main spoke in the wheel is the sheer volume of appeals being lodged and the lengthy, convoluted appeal process, which is unavoidable. This does not only affect local mining companies, but also the rate of foreign companies investing in the country.

“For example, several Australian mining companies are actually considering further investment in South Africa, but several high-profile disputes regarding the granting, or refusal, of mining or prospecting rights during the last four years have made them reluctant to invest in mining.”

Currently, the MPRDA allows, besides others, for the right of appeal to any person or party who is aggrieved by either a decision to accept or reject a prospecting right or mining right application, or a decision to grant or refuse a mining right or prospecting right application. The MPRDA and the regulations in force set out the process for submitting an appeal and the timeframes they require, but no timeframe is stipulated in terms of receiving a response.

Stevens points out that the process is challenging because it is an internal administrative process managed by the DMR and there is no option available for an administrative review through the courts in the first instance.

Steps in Lodging an Appeal
He explains that, firstly, any party wishing to appeal must do so within 30 days of gaining knowledge of the decision or becoming reasonably aware of the decision and such a party must submit its appeal to the correct appeal authority.

If the regional manager or another officer of the DMR made the decision concerned, the correct appeal authority is the director-general of the department. If the director- general made the decision, the appeal must be directed to the Mineral Resources Minister.

After receiving the appeal, the director- general or the Minister must send copies of it to whoever in the department made the decision and also to any person whose rights could be affected by the outcome of the appeal.

These parties have 21 days to respond in writing. Generally, the appeal is sent to the DMR regional manager who would have recommended the granting or refusal of the right. Those responses, in turn, must be sent by the director-general or the Minister to the appellants to allow them to respond.

Within 30 days of receiving the latter response, the director-general or the Minister must either confirm the initial decision, set it aside, amend it, or make another decision in the place of the original one.

“The problem with this process is that often the regional manager delays the process by not timeously furnishing the director-general or the Minister with reasons for his decision or the director-general or the Minister delays taking a decision on the appeal after having received all the prescribed responses,” adds Stevens.

As a solution to this, Stevens suggests that the MPRDA and the regulations define time limits all the way through the process and give the aggrieved party the option to go to court if the party wishes to do so. He believes that this would provide better accessibility and speed up the process, which will then benefit all parties involved.

Stevens adds that the most effective way of approaching an appeal is to ensure that the process is followed correctly and completely, including submitting all the required documentation and directing the appeal to the correct appeal authority within the prescribed timeframe.

“It might also be advisable for involved parties to aim for commercial settlements, which could benefit both the parties involved, as it can obviate long drawn-out disputes from which potentially no party will eventually benefit.

“Also, the rights, which are the subject of the dispute, may lapse before the dispute has been finalised. The costs of funding the case – throughout the entire process up to court – could also be high,” he says.

The one good aspect of the Bill is that the two-tier appeal process of first appealing to the director-general and then to the Minister has disappeared and the Minister is the only appeal authority.

However, he adds that the introduction of the Bill is a good opportunity for government to introduce further measures to ensure the smooth and timeous processing of appeals and for the option to be given to an aggrieved party to go straight to court for a high court review rather than initiate the appeal process, if the party wishes to do so.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online



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