#MiningIndaba: Land expropriation could be a 'red herring' for mining sector
CAPE TOWN – While the Minister of Mineral Resources Gwede Mantashe made the “right noises” during his keynote address yesterday, which sheds a positive light on South Africa’s mining industry, concerns among investors such as the Expropriation of Land Rights Without Compensation could be a “red herring” for the sector.
This is according to Peter Leon, co-chairperson and partner at Herbert Freehills, who was speaking yesterday at a press briefing on the sidelines of the Investing in African Mining Indaba, currently underway at the Cape Town Convention Centre.
The briefing was in response to the Minister of Mineral Resources Gwede Mantashe’s keynote address.
Leon said despite Mantashe only being in the position since early last year, the minister was trying his best under difficult circumstances.
“Two things a commend him for doing, one of them is resolving the impasse in the Mining Charter 3 last September and, secondly, withdrawing the controversial Minerals and Petroleum Resources Development Amendment Bill which was stuck in parliament for five years and I think if that bill had been in-acted I think it would have done serious damage to the South African mining industry,” he said.
Leon said this was because the bill did a number of bad things one of which was moving any of the remaining timelines in the mining codes.
“Secondly, it made it more complicated to grant consent to the transfer of mining rights which had already caused a problem and, thirdly, it imposed export restrictions on the minerals which were designated by the minister as effectively being strategic and effectively creating the export licencing system for strategic minerals in line with the thinking of some of the African mining visions and governance to focus on beneficitation.
"All of that would have undermined investor confidence in the industry. So I think it was positive and he (Mantashe) has done that,” said Leon.
He said another thing about Mining Charter 3 was that the procurement requirements for goods and services were now much higher, both in terms of South African manufactured goods and services and in terms of black ownership requirements.
Leon added that most of the requirements in the charter were quite stiff, but they reflected some of the similar trends in African countries like Tanzania and DRC.
“So I think things are moving in the right direction but it is still very early days and one of the major problems I think in terms of mineral resources is the time it takes to licencing decisions, this has been held by the De Beer Mines for a very long time,” he said.
Leon said the fact that President Cyril Ramaphosa will be addressing the Mining Indaba suggests that the government was extremely concerned about trying to create the right investment climate for mining.
However, he said Expropriation Without Compensation (EWC) was a real concern to investors he spoke to about the investment climate in the country.
“Once you start interfering with property rights, that does not send a good message to investors. In relation to the mining industry, this is something of a red herring.
"Why do I say that, because in 2004 when the act was enacted, mineral rights were expropriated without compensation. Some in the industry were very unhappy about that while the majority went along on the basis that new rights would be granted on an automatic basis, what is known as automaticity would apply. The mining code in 1991 during the De Klerk administration effectively privatised the mineral rights. So this particular horse has bolted,” he said.