Close

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 amendment

There 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 uncertainty

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 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 game

Given 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 requirements

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 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.

Oil and gas debate

One of the reasons for the delay in the implementation of the MPRDA Amendment Bill is the debate around oil and gas.

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% 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 which 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.

Legislation in ‘shambles’

When it comes to the environmental aspects relating to prospecting and mining, the state of the legislation can only be described currently 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 7 December 2014 in terms of the MPRDA Amendment Act, 2008.

The NEMA Amendment Act 2014, however, deletes the provision bringing into effect these requirements with effect from 7 December 2014 which repeal will take place on 2 September 2014. There will therefore be a lacuna indefinitely as to what legislation applies.

Environmental authorisation

Currently in practice, the DMR 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 EMP in terms the MPRDA will come into force or effect.

Currently, many mining companies apply for an environmental authorisation under NEMA as well as EMPR under the MPRDA which is cumbersome, time consuming and costly.

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

Additional Reading?

Request Free Copy