GEM Bill promises mining revival as SA’s investment appeal fades: Terence Corrigan - Biznews

Terence Corrigan

It’s impossible to understand South Africa without reference to the trove of mineral wealth beneath its soil and the industry that grew up to extract it. The very borders of the country are in large part the outcome of conflict intimately bound up with resources in its soil.

For the liberation movements, the mining industry, suitably refashioned, would be a key guarantor of the wellbeing of South Africa’s people. 

Not for nothing did the Freedom Charter envisage that “The mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole.” This goal at least was substantively achieved through the Mineral and Petroleum Resources Development Act of 2002, which President Cyril Ramaphosa candidly described as having nationalised the country’s minerals.

Mining remains a mainstay of the South African economy. Employing something over 470,000 people, it has a large knock-on effect, meaning that each job in the mining industry supports 10 others. Some 8% of the population depend to some extent on mining. The industry accounts for around 15% of investment, and 23% of foreign investment, by the latest available figures (although this must be seen in the light of South Africa’s derisory rate of investment, which sits at about 15% of GDP: less than half of what its emerging market peers attract).

Mining is sometimes waved away as a sunset industry, a relic of the past and a bygone economy. This is a mistake. It is, if properly managed, an industry of the future. Demand for minerals across the world is robust, and with the demands of green energy and infotech infrastructure, it does not look set to slacken. South Africa’s mineral resources have been estimated at some $2.5 trillion, with significant endowments of strategic commodities. These include as much as 90% of Platinum Group Metals, 38% of manganese, 36% of chromite, 16% of fluorspar, 13% each of rutile and vanadium, 10% of gold and 9% of zirconium.

Yet South Africa has not been able to capitalise on this. A report by the Bureau for Economic Research in January remarked: “South Africa’s mining industry is typically seen as a sunset sector. However, its decline is largely due to policy, regulatory and bureaucratic obstacles rather than geological exhaustion. These binding constraints have significantly reduced the sector’s potential. Fix them, and SA’s great mineral potential could contribute significantly to faster economic growth. Mining could be a sunrise industry once again.”

Foremost index

The Canadian Fraser Institute, which compiles the world’s foremost index measuring mining jurisdictions, puts this into perspective. In 2001, it accorded to South Africa’s overall Investment Attractiveness Index a respectable if unremarkable 61, (out of a possible 100). By 2024, it had fallen to a sub-par 41.

When one asks about what drove this negativity, a few areas stand out. A staggering 84% of respondents said the regulatory environment was a strong or mild barrier to investment, and 2% said that this ruled out investment entirely. 81% said that uncertainty regarding administration was a barrier, and 6% said that they would not invest because of it. 64% said they found environmental regulations a barrier. 80% said that land claim disputes were a barrier to investment, and 3% said that these would prevent them from investing.

Socio-economic agreements, the requirements for social and labour plans, meanwhile made investment impossible for 8%, and was a deterrent for 84% of respondents.

Perhaps nothing illustrates the cumulative impact quite like the fall-off of spending on exploration. This sits at less than 1% of global outlays, compared to around 5% two decades ago. In monetary terms, exploration in South Africa came in at R738 million in 2025; in 2006, it stood at R6.3 billion.

If the geological opportunities exist, and South Africa has undermined itself by its policy and administrative environment, a turnaround will depend on the choices that frame it. This also means that there is a clear path to a better future.

Nothing of the sort

Key to this is reforming the MPRDA. This piece of legislation was meant to harness the mining industry to a national developmental agenda. It did nothing of the sort. The extension of government control over the industry, via state “custodianship” of mineral resources, meant in practice that mining operations were subject to the full implications of state incapacity and the whim of officials.

A response to licence applications could take months or years. Empowerment demands added a layer of costs that could better have been applied to actual mining operations. Attempts to ratchet these up signalled that the empowerment spend was likely never going to be final. Mining operations would frequently find that community investment efforts would become a minefield of competing demands, mediated through rickety local government structures, with little reputational benefit to the mines nominally implementing them.

The IRR has been studying the MPRDA and its impacts since it was passed. Although often a lonely voice, the IRR warned that mining investment would suffer, and that – with the interests of “the people” represented by a politicised bureaucracy – it would not deliver the cornucopia of benefits that it promised to. This is what has happened.

The IRR’s Growth and Employment in Mining (GEM) Bill is an alternative framework aimed at correcting the litany of mistakes made over the past two decades, with an eye on revitalising the country’s mining industry.

The aptly named GEM Bill is a template for a new, rational mining system. It will be one that sees mining as an asset to the country’s economy, and miners as prime contributors to it.

Tough issue

The starting point would be the holding of mineral resources. This is tough issue, since at present the state has a monopoly on ownership. This is the current reality. The IRR believes that this was a mistake at the time it was implemented, and little has been gained from having done so. It’s less apparent what might replace it, or how that would be implemented, given that existing mining rights are held under this system. The proposal is therefore to set a ten-year period to investigate a suitable model for exiting the custodial regime.

An immediate imperative is a better system for awarding mining licences. Under the GEM Bill, this would be done according to objective criteria, such as the technical and financial capacity of applicants to carry out mining operations, to comply with health and safety standards, and to deal with the environmental consequences of their activities. The Minister would be required to render a decision on an application within 90 days, and the mining right would be valid for 30 years.

Licences could only be cancelled or suspended where the right was obtained fraudulently, where there had been a serious breach of the Act, or where operations had been abandoned for more than five years without good cause.

Mining operations would be protected against expropriation, and where this might occur, they would be entitled to prompt and adequate compensation. This would give investors, local and foreign, an assurance of the long-term security of their assets.

Licences would not depend on finding suitable partners to meet empowerment demands (something that will often intersect with political demands), or anything else extraneous to the business. Nor would there be demands for such measures as developing local suppliers or beneficiation.

Often dysfunctional

For the same reason, requirements for social and labour plans will be dropped. While intuitively a value-adder for communities, in fact they have arguably done the opposite. What is nominally done for “communities” often better reflects the priorities of municipal administrations. As is now common cause, these are often dysfunctional or badly run.

The upshot is that social spending is frequently directed to vanity projects and towards constituencies of importance to a municipality’s political leadership. Sometimes this is done without any real acknowledgement of the contribution made by the mine. This leaves the mine exposed both to the resentments that come with the presumption of unfulfilled promises and to the headaches of having to manage projects of peripheral interest.

Rather, the GEM Bill envisages mine operators functioning as good corporate citizens by running their operations lawfully and ethically. Social spend or Corporate Social Investment would be a discretionary matter. This is one that the state and civil society can of course encourage, and South Africa’s mining industry has a fairly good record in this respect.

The IRR has proposed rethinking the entire empowerment framework, replacing current BEE requirements with a non-racial system of Economic Empowerment for the Disadvantaged (EED). A new EED scorecard would focus primarily on the economic, labour and environmental contributions made by mining companies to production, employment, salaries, tax revenues, export earnings, innovation, health and safety needs, and the remediation of environmental damage.

However, one part of the EED scorecard would recognise the efforts by companies to benefit communities. Here, mining companies might wish to make scholarships available to young people, or to sponsor local community-based endeavours. There is every reason to believe both that companies would do so and would do it with greater effect than is the case at present. They would naturally want to win some goodwill from those living near their operations and would be able to do so when freed from the complexities of local politics.

Excessive

The Bill acknowledges the importance of maintaining health and safety standards. However, some of the government’s interventions have been excessive, and have harmed mining operations for no good reason. The Bill requires that interventions should be proportional to the aims they seek to achieve.  Work stoppages, for example, may be ordered, but need to be limited to those areas or activities materially affected by the perceived hazard. Shutting down an entire mine is not permissible, unless the entire operation poses a risk.

The Bill also makes provision for institutions to support the efficient operation of the industry. One of these is a digital cadastre. This has been a perpetual work-in-progress for years. The lack of one has contributed to South Africa’s declining mining competitiveness, in particular for exploration. A cadastre is also central to transparency in the industry.

The GEM Bill also proposes the establishment of an Independent Mining Tribunal, which will provide speedy and binding resolutions to disputes under the new regime. In addition, mining companies will be able to refer disputes to independent international arbitration, if they prefer.

The Bill will also introduce a fund to finance the remediation of latent environmental impacts that might become evident only after mine closure. Under this system, mining companies would still be required to rehabilitate the environment impacted by their activities before closing down a mine. However, if this remediation has been properly done, to the satisfaction of independent mining experts, they would obtain a “clean” closure certificate. If, thereafter, any latent or hidden impacts were to come to light, the fund would be available to deal with them. At present, the risk is that mining companies could be held perpetually liable for latent environmental impacts that become apparent only decades after closure, and which they might not in fact have caused.

The grounding idea of the Bill is one of a mindset shift. The current regime is founded on suspicion of mining, and persistent attempts, particularly by environmental activists, to limit mining operations as much as possible despite the economic benefits that mining brings. Existing policy has also become a tool for extraction by individuals and interest groups. What the GEM Bill does is to recognise that mining companies make their greatest contributions primarily through the economic activity in which they engage, the jobs they generate, the taxes they pay and the opportunities for upward mobility that they provide. These are good for society as a whole.

Priority approach

It therefore takes as its priority approach that of facilitating mining rather than controlling it.

What would this mean? Imagine a mining industry that is again attracting 5% of global exploration. Imagine employment reaching 600,000 people, with all the indirect benefits that this implies. Imagine the tax revenues. Imagine South Africa seizing the opportunity presented by the global demand for its minerals, and even of the diplomatic leverage that a rapidly expanding mining sector would enable.

It’s a future South Africa could have, if its policymakers chose it.

Terence Corrigan is the Project and Publications Manager at the Institute of Race Relations

https://www.biznews.com/miningweb/gem-bill-promises-mining-revival

This article was first published on the Daily Friend.