Not only does a state mining company already exist, it also gets special treatment from government.
Amid calls to nationalise South Africa’s mines, unions have overlooked the existence of the African Exploration Mining and Finance Corporation (AEMFC), housed within the Central Energy Fund.
As of October 2008 it became exempt from key provisions in the Mineral Resources and Petroleum Development Act governing the application for prospecting and mining rights and the issuing of mining licences.
Legal experts have criticised the exemption, stating that the AEMFC has been awarded unfair advantage over private-sector counterparts, something the company emphatically denies.
Through a notice in the Government Gazette, Buyelwa Sonjica, the former minerals and energy minister, exempted the AEMFC from the provisions of sections 16, 20, 22 and 27 of the Act for the purposes of ”security of supply”.
The AEMFC is able to prospect and mine for any minerals without applying for the rights to do so, if it is deemed to be in the interests of the security of supply.
ANC alliance partner Cosatu and the ANC Youth League recently called on the government to nationalise South Africa’s mines, raising the eyebrows of foreign investors. But Gwede Mantashe, the ANC secretary general, told Reuters at the time that nationalisation was not on the ANC’s agenda.
The state also oversees the troubled diamond-mining company Alexkor through the Department of Public Enterprises. According to Peter Leon, head of the natural resources and regulatory practice division at law firm Webber Wentzel, the notice may well be unlawful as it arguably falls outside the powers granted to the minister in the Act.
”It creates a skewed playing field,” Leon told the Mail & Guardian, as the AEMFC is exempt from meeting the requirements that other companies must meet to earn mining rights.
What is of equal concern was that the notice introduced the ”long-term spectre of nationalisation of the mining industry”, Leon said.
AEMFC is also exempt from the provisions that require a mining company to submit environmental management plans as well as proof of consultation with affected communities when applying for prospecting or mining rights, under sections 16, 22 and 27.
But Sizwe Madondo, the chief executive of AEMFC, denies that this is the case. He said the company is required to submit the relevant environmental management plans and documentation, with proof of consultation with affected communities. In addition if there is a pre-existing application, AEMFC must ”join the queue, like everyone else”.
The former Department of Minerals and Energy, now known as the Department of Mining and Mineral Resources, has already been criticised by environmental and community groups for awarding rights to private mining companies that would harm sensitive ecological areas and be detrimental to the communities living there.
There is concern around decisions to award rights to companies in both Mpumalanga and Limpopo.
AEMFC was reported to have prospecting rights in the ecologically significant Wakkerstroom area. But Madondo confirmed to the Mail & Guardian that the company was denied rights there because of its sensitivity.
The company’s position in relation to BEE is also unclear. The Financial Mail reported concerns that the state was attempting to acquire equity stakes in private mining companies by asking companies to sign a document agreeing to ”negotiate in good faith for the state to acquire an interest” in the company or the project.
Questions had been raised about whether AEMFC might become a forced partner in any such negotiations.
Again, Madondo refuted this.
”We enter partnerships without reference to our shareholder,” he said.
But he did say the company was seeking to form joint ventures with BEE companies, as well as looking to assist BEE companies which had won rights but had run out of capital.
The Department of Mining and Mineral Resources did not respond to questions sent by deadline.
