Mungo Soggot and David Le Page
South Africa’s revolutionary Mineral Rights Bill has been redrafted to make it more industry-friendly but it still raises doubts about whether it secures the tenure of mining companies and the continuity of existing mining operations.
The new version of the Mineral and Petroleum Resources Development Bill, submitted to Cabinet this week, dilutes the wide discretionary powers accorded to Minister of Mineral and Energy Affairs Phumzile Mlambo-Ngcuka in previous drafts. The Bill’s critics are likely to view this as a major step forward. However, it still gives Ngcuka immense powers to regulate and monitor private mining concerns.
The law hands all mineral rights to the state which is common practice elsewhere but goes further by denying companies the right automatically to keep their existing operations and prospecting rights. The redrafted Bill seeks to make it easier for companies to hold on to such rights.
The Bill is designed to allow the government to hand out concessions to new and in particular black players in the mining industry.
Its wide discretionary powers determine the way in which the government can decide on the fate of individual companies’ mining and prospecting rights. It now explicitly ties itself to the Promotion of Administrative Justice Act, which essentially guarantees due process. Mining companies previously expressed alarm at the absence of such a clause and the scope the previous draft gave for unfettered ministerial discretion.
The new Bill says in its preamble that the government is committed to guaranteeing security of tenure and ensuring an internationally competitive regulatory regime for the mining and energy sectors.
The sections dealing with companies’ existing rights suggest that on the vexed issue of tenure security, the devil might still be in the detail.
The Bill contains an expanded set of “transitional arrangements” through which companies can hold on to their existing prospecting and mining rights. Mining companies were hoping that they would be able to secure these conversions of old-order rights through a few simple formalities. But the Bill says they will have to clear several hurdles, including, for example, demonstrating they have a “social plan”. This would limit companies’ ability to retrench.
The previous public draft was more Draconian, putting an onus on companies to show why it was not in the national interest for someone else to take over their rights.
In its latest form the law remains one of the most interventionist pieces of legislation passed since 1994. It still reflects an awkward tension between the government’s desire to simultaneously legislate and administer black economic empowerment and economic efficiency, while remaining industry friendly.
Some of the language of the Bill remains open to a range of interpretations. For example, it talks of the “need to transform the ownership structure of the minerals and mining industry”. This could mean merely giving concessions to the few established black mining companies already in operation, without significant benefit to black industry employees.
The law has important political and symbolic implications because of the many injustices entrenched by the mining industry under apartheid, and seeks to legislate more equitable conditions for employees.
The new version says the minister can expropriate to achieve the goals of the law, but also allows for compensation to affected companies.
Another concession to industry is that companies will not have to pay royalties for 10 years.
The government is hoping to push the Bill through Parliament this year. Revisiting the Bill should have bolstered industry faith in its good intentions. But whether the Bill is practical remains to be seen.