Clear up legislative uncertainty in the minerals industry

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THE SOUTH African minerals industry finds itself in somewhat of a lacuna in regard to various important aspects of the legislation applicable to the mining industry and also to the oil and gas industry. There are certain pieces of legislation that have been promulgated but are not yet in force.

Furthermore, there are promulgated provisions that will come into force only on a date to be proclaimed in the Government Gazette. In some cases the provisions have been postponed indefinitely.

And there have been recent proposed amendments to the Mineral and Petroleum Resources Development Act (MPRDA) in terms of the MPRDA Amendment Bill of 2013. The bill has been passed through Parliament and the National Council of Provinces but is awaiting the signature of the president.

That is the bill that is potentially going to be referred back to Parliament by the Minister of Mineral Resources, Ngoako Ramatlhodi. It is therefore unclear when that amendment bill will have force of law.

There are numerous important amendments that will have a major impact on the mining industry and it is therefore difficult for mining companies from an operational point of view to formulate plans when there is uncertainty as to what legislative provisions will apply in future.

Numerous provisions of the MPRDA Amendment Bill leave important aspects up to regulations to be promulgated by the minister and this creates even more legislative uncertainty as many important provisions will be contained within the ambit of those regulations.

Recent press reports have suggested that Ramatlhodi was taking advice on the constitutionality of the amendment bill, especially because many essential elements of the bill are left up to regulations.

Finally, instead of the MPRDA being a one-stop shop for mining house operations to be regulated in one piece of legislation, sweeping changes have been made to the National Environmental Management Act (Nema), the National Water Act and the National Environmental Management: Waste Act, which introduce various statutory provisions to be applicable to mining within the ambit of those acts.

Given the above, it is often difficult for investors in the mining industry, especially foreign investors, to determine now what the rules of the game will be once the investment has been made and what regulatory provisions will apply to the operation once they have made the investment.

For example, at present an investor can acquire a minority interest in a company holding mining rights or prospecting rights without requiring ministerial consent for such a transaction.

Once the MPRDA Amendment Bill becomes law, any change of shareholding in a company holding prospecting rights or mining rights will require ministerial consent. It is difficult now to structure a deal to require minority interest if one may be faced in the future with a requirement to obtain section 11 consent if the MPRDA Amendment Bill becomes force of law before the transaction is consummated.

Another example is related to beneficiation. There are numerous important changes to be brought about by the MPRDA Amendment Bill dealing with the requirement of mining companies to offer a percentage of their production to local beneficiators at an agreed price or the mine gate price.

Such companies may export mined ore only once they have complied with those obligations. The regulations will stipulate which minerals will be subject to the restriction and what percentage of production will have to be offered to local beneficiators.

Therefore if a foreign investor wishes to acquire a company in order to be able to export its production, it may be faced with future restrictions on the ability to export once the MPRDA Amendment Bill becomes law together with the relevant regulations.

It would be better if the MPRDA Amendment Bill become force of law sooner rather than later so we can rid ourselves of this legislative uncertainty.

One of the reasons for the delay in the implementation of the MPRDA Amendment Bill is the debate around oil and gas. The debate is firstly with regard to whether oil and gas should form part of a separate piece of legislation and, secondly, with regard to the controversy regarding the state’s participation in oil and gas projects.

The MPRDA Amendment Bill as currently drafted allows for the State to have a free carry of 20 percent, together with the ability to take a further share on a contributory basis – which could amount an entire share in the project.

The issue of whether oil and gas should be in a separate piece of legislation should in my view be decided in the affirmative. Oil and gas is covered by an entirely separate chapter of the MPRDA and there are different types of rights that are granted and a different empowerment charter that applies.

Furthermore, the oil and gas sector, from a practical point of view, appears to be separated from the mining industry and has different markets and methods of exploration and production.

When is comes to the environmental aspects relating to prospecting and mining, the state of the legislation currently can be described only as a shambles.

Sections 39 to 42 of the MPRDA dealing with environmental provisions relating to mining and the obligation to apply for approval of an environmental management programme before being able to commence mining have been repealed.

However the replacement sections requiring an applicant for a mining right – for instance to apply for an environmental authorisation under Nema – were suspended until December 7 in terms of the MPRDA Amendment Act, 2008. However, the Nema Amendment Act 2014 deletes the provision bringing into effect these requirements with effect from December 7, which repeal will take place today.

There will therefore be a lacuna indefinitely as to what legislation applies.

Currently in practice, the Department of Mineral Resources is still applying sections 39 to 41 of the MPRDA, although the relevant pieces of legislation have been repealed.

It is therefore unclear when the requirement to obtain an environmental authorisation for mining in terms of Nema as opposed to an environmental management plan in terms the MPRDA will come into force or effect. Many mining companies apply for an environmental authorisation under Nema, as well as an environmental management programme under the MPRDA which is cumbersome, time consuming and costly.

Given the unsteady state of the mining industry as a result of strikes and the slow global economy, one hopes that the government would go to great lengths to ensure legislative certainty to encourage investment and that the issues mentioned above can be rectified sooner rather than later.

Chris Stevens is the director for mining and resources at Werksmans Attorneys.


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