Chris Stevens, Director Mining and Resources at Werksmans Attorneys, outlines important issues with pending legislation in South Africa.The South African Minerals Industry finds itself somewhat in 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 which are not yet in force. Furthermore there are promulgated provisions that will only come into force on a date to be proclaimed in the Government Gazette or in some cases the provisions have been postponed indefinitely.
MPRDA amendmentThere have been recent proposed amendments to the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), in terms of the MPRDA Amendment Bill of 2013, which has been passed through Parliament and the National Council of Provinces but is awaiting the signature of the State President. This is the Bill that is potentially going to be referred back to Parliament by the new Minister of Mining, Ngoako Ramatlhodi. It is therefore unclear when that Amendment Bill will have force of law. There are numerous important amendments contained within that Amendment Bill which will have a major impact upon 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 into the future.
Legislative uncertaintyNumerous 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 the new Minister of Mining is taking advice on the constitutionality of the Amendment Bill especially because of the fact that many essential elements of the Bill are left up to regulations. Finally, instead of the MPRDA being a one-stop shop for mining houses to be regulated in their operations within that one piece of legislation, sweeping changes have been made to the National Environmental Management Act, 1998 (NEMA), the National Water Act, 1998 and the National Environmental Management: Waste Act, 2008 which introduce various statutory provisions to be applicable to mining within the ambit of those Acts.
Rules of the gameGiven the above, it is often difficult for investors into 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, currently an investor can acquire a minority interest in a company holding mining rights or prospecting rights without requiring Ministerial consent for such a transaction. However, once the MPRDA Amendment Bill becomes force of 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.
Local beneficiator requirementsAnother 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 only export ore mined once they have complied with those obligations. It will be stipulated in the regulations as to what 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 the production from that company it may be faced with future restrictions upon the ability to export once the MPRDA Amendment Bill becomes force of 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.