Mineral Resources Minister Gwede Mantashe Picture: African News Agency/ANA

JOHANNESBURG - Mineral Resources Minister Gwede Mantashe has drawn the praise of trade unions, economists and mining houses with the out-of the-blue declaration that the government will withdraw the controversial Mineral and Petroleum Resources Development Act (MPRDA). 

This has brought palpable relief, particularly to the mining sector, as the industry has been operating under a cloud of regulatory uncertainty with the expectation that the unpopular bill would be passed as is and scare away investors. 

Persistent regulatory uncertainty, coupled with declining productivity and escalating costs, have suppressed activity in the mining industry. Gold mining has particularly seen marked weakness since the start of the year. 

The sub-sector saw output tank 19.2 percent in June, worse than the 14.1 percent fall in the prior month. 

The sector was a major contributor of the first quarter’s 2.2 percent contraction – the economy’s first in nine years. 

The mining sector contracted 9.9 percent during the quarter, extending the 4.4 percent drop in the fourth quarter, mainly due to lower production of gold, platinum group metals and iron ore. 

The Department of Mineral Resources’s next move is to present the bill to the cabinet for ratification before it is finally withdrawn. 

“We have appealed to Parliament to proceed with speed to finalise the bill. The ministry expects the tight deadlines to be met, because bringing finality to these processes is key in entrenching regulatory and policy certainty, which is necessary for investment, thereby attainment of sustainable growth, development and transformation in the sector and society,” Mantashe told Parliament’s portfolio committee on mineral resources. 

Commentary The Minerals Council South Africa said that it was contemplating the unexpected move by the minister and would be releasing further commentary this week. 

The bill has been sitting at the the National Council of Provinces (NCOP) for some time and in June the select committee on land and minerals was told the amendments made by provinces would not form part of the bill. 

The National Assembly passed the bill in 2015, but former president Jacob Zuma referred it back to the House for correction. 

It was also referred to the National House of Traditional Leaders in March 2016 and several months later it was referred to the NCOP. Maarten Ackerman, a chief economist and advisory partner at Citadel, said this was a positive move by Mantashe, likely to be welcomed by the industry. 

“The MPRDA bill has been bouncing around for a long time, adding considerable uncertainty to the mining industry. Having said that, unfortunately, the big unknown remains the Mining Charter and hopefully by November we will be able to get some clarity on that. So although this is bringing some certainty to the table, the real elephant is still in the room,” Ackerman said.

He said practically the move to withdraw the MPRDA means that the issue of gaining permission to export certain minerals no longer needed to be sought from the minister.

“The industry feared that such a requirement might come with certain conditions, making mining more onerous than it already is. The removal of this potential obstacle is particularly positive, given that we are a huge exporter. “There was also a requirement in the MPRDA that for designated minerals there was a certain minimum percentage that would need to be offered to local beneficiators, so by removing that requirement, it is also making the industry more flexible in terms of operating,” Ackerman said. 

Trade union Solidarity said this was a huge relief for the mining sector as the announcement will bring certainty on the bill. Gideon du Plessis, the general secretary of Solidarity, said the bill had created uncertainty in the mining sector over the past five years. 

“At retrenchment consultations and wage negotiations, trade unions constantly have to hear that the low commodity prices, uncertain regulatory environment and high electricity tariffs are the reasons behind a retrenchment or a low wage increase. The removal of these said regulatory restrictions will, therefore, be a huge boost for the industry,” said Du Plessis.