Submission on the Draft Mineral and Petroleum Resources Development Bill of 2012 - 13th March 2013.

The draft Mineral and Petroleum Resources Development Bill of 2012 (the Bill) seeks, among other things, to ‘remove ambiguities that exist within the Mineral and Petroleum Resources Development Act (MPRDA),…streamline administrative processes,…[and] improve the regulatory system’. Instead, the Bill adds to regulatory uncertainty by giving the minister of mineral resources a significant number of new powers framed in such broad terms as to encourage their arbitrary and unequal application.
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You are here: Home Reports & Publications Submissions on Proposed Legislation Submission on the Draft Mineral and Petroleum Resources Development Bill of 2012 - 13th March 2013.

Submission on the Draft Mineral and Petroleum Resources Development Bill of 2012 - 13th March 2013.

The draft Mineral and Petroleum Resources Development Bill of 2012 (the Bill) seeks, among other things, to ‘remove ambiguities that exist within the Mineral and Petroleum Resources Development Act (MPRDA),…streamline administrative processes,…[and] improve the regulatory system’. Instead, the Bill adds to regulatory uncertainty by giving the minister of mineral resources a significant number of new powers framed in such broad terms as to encourage their arbitrary and unequal application.

 

South African Institute of Race Relations

Submission to the

Department of Mineral Resources

regarding the

Draft Mineral and Petroleum Resources

Development Bill of 2012

Johannesburg, 8th February 2013

 

Executive Summary

The draft Mineral and Petroleum Resources Development Bill of 2012 (the Bill) seeks, among other things, to ‘remove ambiguities that exist within the Mineral and Petroleum Resources Development Act (MPRDA),…streamline administrative processes,…[and] improve the regulatory system’. Instead, the Bill adds to regulatory uncertainty by giving the minister of mineral resources a significant number of new powers framed in such broad terms as to encourage their arbitrary and unequal application.

The Bill jettisons the current MPRDA requirement that beneficiation must take place ‘economically’. Instead, it says that the minister ‘must initiate or promote the beneficiation of mineral resources’ in South Africa, irrespective of whether this can be done on an economic basis. 

The Bill also gives the minister an unfettered discretion to make key decisions regarding beneficiation, including the percentage of minerals to be beneficiated, the levels of beneficiation required, and (it seems) the prices that mineral producers may charge to local beneficiators.

This approach overlooks the many obstacles to successful beneficiation: among them, electricity shortages, skills deficits, infrastructural backlogs, and high labour and other input costs.  In combination, such factors make it very difficult for South Africa to compete on price against other developing nations, especially India and China. In these circumstances, the Bill’s insistence on local beneficiation overlooks economic realities and could have crippling consequences.

The Bill also empowers the minister to identify certain minerals as ‘strategic’, but omits to specify any criteria on which her decisions are to be based. It also empowers her to introduce export controls on whatever minerals she chooses to ‘designate’ from time to time.

However, export controls, as the National Development Plan (NDP), has warned, could result in various mining operations becoming financially unsustainable. This could lead to mine closures, job losses, and major economic damage. Even if these outcomes are avoided, mining companies cannot plan, invest for the future, or function effectively when the minerals they produce at great cost could at any time be made subject to such state controls.

The Bill’s restrictions on the transfer of shares in listed mining companies do not make sense. In practice, the minister will not be able to control trading in mining shares abroad, but she could inhibit trading in the shares of mining companies listed on the JSE. This could undermine the capacity of local mining companies to raise funds for mine development.

Though the MPRDA already obliges mining companies to promote the interests of mining communities and labour sending areas, the Bill gives the minister extraordinarily broad-ranging powers to impose new obligations on them in these spheres. It also requires companies to review (and revise?) their social and labour plans every five years, further adding to the burden on them.

The Bill adds to uncertainty by removing the ‘first-in, first-assessed’ principle. It also transfers historical mine dumps and mineral tailings to the State without providing for the payment of compensation to their current common law owners, which could be unconstitutional.

In addition, the Bill accords the State a ‘free carried interest’ in all new oil and gas exploration and production rights. However, giving the Government a share in profits without its having to contribute to capital development costs could also limit new investment.

The Bill significantly increases the penalties for contraventions of the MPRDA. Under its terms, mining companies which fail to promote beneficiation, implement their social and labour plans, or obtain the minister’s written consent prior to exporting designated minerals, could face prison terms of up to ten years, along with fines of up to 5% of annual turnover. Such penalties are extreme and could also deter investment and growth.

The Bill substantially increases the discretionary authority of the minister and her officials, thereby contradicting the NDP’s call for ‘regulatory reforms that provide policy certainty’. Since the NDP is supposed to have ‘overriding effect’ over all conflicting policies, this alone provides sufficient reason to withdraw the Bill in its entirety.

Thereafter, effective ways need to be found to cure the ambiguities in the MPRDA; introduce a transparent, timely, and objective adjudications process for mineral-rights applications; put an end to threats of further onerous regulatory change; and give the holders of mineral rights the unshakeable security of tenure needed to restore confidence in South Africa’s minerals regime and encourage the mining investment vital to the country’s prosperity and growth.

 

South African Institute of Race Relations                                                            8th February 2013

IRR TV

 

South African Institute of Race Relations

Submission to the

Department of Mineral Resources

regarding the

Draft Mineral and Petroleum Resources

Development Bill of 2012

Johannesburg, 8th February 2013

 

Executive Summary

The draft Mineral and Petroleum Resources Development Bill of 2012 (the Bill) seeks, among other things, to ‘remove ambiguities that exist within the Mineral and Petroleum Resources Development Act (MPRDA),…streamline administrative processes,…[and] improve the regulatory system’. Instead, the Bill adds to regulatory uncertainty by giving the minister of mineral resources a significant number of new powers framed in such broad terms as to encourage their arbitrary and unequal application.

The Bill jettisons the current MPRDA requirement that beneficiation must take place ‘economically’. Instead, it says that the minister ‘must initiate or promote the beneficiation of mineral resources’ in South Africa, irrespective of whether this can be done on an economic basis. 

The Bill also gives the minister an unfettered discretion to make key decisions regarding beneficiation, including the percentage of minerals to be beneficiated, the levels of beneficiation required, and (it seems) the prices that mineral producers may charge to local beneficiators.

This approach overlooks the many obstacles to successful beneficiation: among them, electricity shortages, skills deficits, infrastructural backlogs, and high labour and other input costs.  In combination, such factors make it very difficult for South Africa to compete on price against other developing nations, especially India and China. In these circumstances, the Bill’s insistence on local beneficiation overlooks economic realities and could have crippling consequences.

The Bill also empowers the minister to identify certain minerals as ‘strategic’, but omits to specify any criteria on which her decisions are to be based. It also empowers her to introduce export controls on whatever minerals she chooses to ‘designate’ from time to time.

However, export controls, as the National Development Plan (NDP), has warned, could result in various mining operations becoming financially unsustainable. This could lead to mine closures, job losses, and major economic damage. Even if these outcomes are avoided, mining companies cannot plan, invest for the future, or function effectively when the minerals they produce at great cost could at any time be made subject to such state controls.

The Bill’s restrictions on the transfer of shares in listed mining companies do not make sense. In practice, the minister will not be able to control trading in mining shares abroad, but she could inhibit trading in the shares of mining companies listed on the JSE. This could undermine the capacity of local mining companies to raise funds for mine development.

Though the MPRDA already obliges mining companies to promote the interests of mining communities and labour sending areas, the Bill gives the minister extraordinarily broad-ranging powers to impose new obligations on them in these spheres. It also requires companies to review (and revise?) their social and labour plans every five years, further adding to the burden on them.

The Bill adds to uncertainty by removing the ‘first-in, first-assessed’ principle. It also transfers historical mine dumps and mineral tailings to the State without providing for the payment of compensation to their current common law owners, which could be unconstitutional.

In addition, the Bill accords the State a ‘free carried interest’ in all new oil and gas exploration and production rights. However, giving the Government a share in profits without its having to contribute to capital development costs could also limit new investment.

The Bill significantly increases the penalties for contraventions of the MPRDA. Under its terms, mining companies which fail to promote beneficiation, implement their social and labour plans, or obtain the minister’s written consent prior to exporting designated minerals, could face prison terms of up to ten years, along with fines of up to 5% of annual turnover. Such penalties are extreme and could also deter investment and growth.

The Bill substantially increases the discretionary authority of the minister and her officials, thereby contradicting the NDP’s call for ‘regulatory reforms that provide policy certainty’. Since the NDP is supposed to have ‘overriding effect’ over all conflicting policies, this alone provides sufficient reason to withdraw the Bill in its entirety.

Thereafter, effective ways need to be found to cure the ambiguities in the MPRDA; introduce a transparent, timely, and objective adjudications process for mineral-rights applications; put an end to threats of further onerous regulatory change; and give the holders of mineral rights the unshakeable security of tenure needed to restore confidence in South Africa’s minerals regime and encourage the mining investment vital to the country’s prosperity and growth.

 

South African Institute of Race Relations                                                            8th February 2013

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