Presentation on the MPRDA
Amendment Bill to the Portfolio
Committee on Mineral
Resources
By the Chamber of Mines of
South Africa,
13 September 2013,
Parliament, Cape Town
Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
2
1.
Introductory comments
• The Chamber of Mines is a private sector employers
organisation that represents 90% of the RSA mining
industry by sales value.
• The Chamber has been substantively involved in
discussions on minerals policy and legislation with the ANC
since 1992.
• In the past week the Chamber has been involved in a
substantive discussion with the DMR on the MPRDA
Amendment Bill.
• Changes to the MPRDA are long overdue.
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1 The Chamber seeks
• Predictable, stable and competitive mining legislation and
regulation that promotes investment, growth, development
and transformation.
• Amendments to the MPRDA that are constitutionally
compliant, provide appropriate guidance to regulatory
discretion and that achieve the abovementioned objectives.
• The encouragement of greater beneficiation by adopting
pragmatic and realistic laws that improve the
competitiveness of the downstream manufacturers as per
global best practice.
• The alignment and streamlining of environmental regulation
to realise “smart green tape”
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1. Growing investment in the RSA mining sector
NDP
Mineral resource
development
Mineral resource
investment
Conducive Regulatory
system
Security of Tenure
Conducive Fiscal
System
PREDICTABILITY, CERTAINTY, STABILITY, COMPETITIVENESS NONDISCRETIONARY
DOES MPRDA AMENDMENT BILL PROMOTE
AFOREGOING?
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1. Positives in the MPRDA Amendment Bill
POSITIVES
ENVIRONMENTAL
STREAMLINING
(BUT STILL ISSUES):
- CLOSURE
-FINANCIAL
- PROVISION
- WATER USE
- RESIDUES
- INTERNAL APPEALS
ASSOCIATED
MINERALS
(BUT WORDING ISSUES)
PARTITIONING
OF RIGHTS
(BUT WRONG METHODOLOGY)
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
7
2. Mining is the key “Flywheel” of the RSA
Economy
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Creates 1.35 million jobs (520 000 direct & 830 000 indirect).
Accounts for about 19% of GDP (9% direct, 10% indirect & induced).
Critical earner of foreign exchange >50%.
Accounts for 20% of private investment (12% of total investment).
Attracts significant foreign savings (24% of value of JSE end 2012).
2012, R20 billion & R5.6 billion in royalties.
R488 billion in expenditures, >80% spent locally.
R94 billion spent in wages and salaries
50% of volume of Transnet’s rail and ports
94% of electricity generation via coal power plants
15% of electricity demand
About 37% of country’s of liquid fuels via coal
R4 billion spent on skills development
R2 billion spent on community investment
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2. But RSA mining has not met its potential
• RSA mining missed out on the last commodity boom with a -1%
p.a. Decline in real mining GDP between 2001 and 2008, versus
5% growth rate in top 20 mining economies mining sectors.
• The prices for gold and platinum have plunged in early 2013.
• Costs have continued to rise too quickly (electricity prices have
trebled in the past 5 years).
• 50% of gold & platinum mines are loss-making at current prices.
• The industry was hit by a wave of unprotected strikes last year
and by the unfortunate Marikana tragedy.
• The industry has faced infrastructure constraints (shortages of
electricity, rail and water).
• The industry has faced bouts of policy uncertainty (the
nationalisation discussion, the review of mining taxation, the
possible introduction of a carbon tax, etc.)
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2. RSA mining sector has shrunk in real GDP terms
in the past 8 years
GDP growth rate Mining vs RSA economy, average annual
2004 to 2012
4
3.5
3
2.5
2
3.6
1.5
Mining GDP growth
Total economy GDP growth
1
0.5
0
-0.5
-0.8
-1
Mining GDP growth
Source: Statistics South Africa
Total economy GDP growth
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
11
3.
Beneficiation proposals in the Bill
• Proposals in Bill
• the Minister be empowered to:
– determine levels of beneficiation, designated minerals, pricing
methodology, and percentages and developmental pricing conditions for
supply for local beneficiation;
– make regulations regarding guidelines for determination of national
development imperatives in relation to local beneficiation as
contemplated in s26;
• producers be obliged to offer Ministerially determined
percentages at Ministerially determined developmental pricing
conditions, for local beneficiation;
• export of designated minerals to require Ministerial consent
subject to conditions determined by the Minister.
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3. Chamber
of Mines Position on Beneficiation
• The Chamber fully supports the ANC policy resolution of promoting
greater beneficiation in South Africa.
• There is already significant upstream and downstream beneficiation
taking place.
• The Chamber’s members are already supplying R95 billion in sales of
primary minerals to domestic beneficiators (steel, stainless steel,
automotive, catalytic converters, chemicals, plastics, fertilisers, cement,
construction, electricity, roads, pharmaceuticals, etc.)
• The Chamber also reiterates the critical need to create a conducive
environment for attracting investment into the key mining sector as
captured in the MIGDETT Growth Strategy, the Deputy President’s
Mining Dialogue process and as per the objectives of the NDP.
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3. Chamber of Mines Position on Beneficiation
• The Chamber does not believe that the proposed section 26 MPRDA
amendment’s will address the fundamental issues affecting the
competitiveness (and hence growth) of the downstream
beneficiation/manufacturing sector.
• While the Chamber understands the concept of encouraging security of supply
of minerals in the domestic market for domestic economic activities, the
Chamber does not support the concept of mining companies being compelled
to subsidise the downstream manufacturing sector.
• The mining sector cannot carry both “market risk” and potential “government
pricing interference risk” in terms of the developmental pricing proposal. The
Chamber believes this will significantly undermine funding for mining projects
and transformation, and is likely to curtail investment in the mining sector to the
detriment of the country.
• The diamond example where the Diamonds Amendment Act required local
mining companies to sell locally did not address the fundamental
competitiveness issues facing the diamond cutting industry.
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3. Chamber of Mines Position on Beneficiation
• There are concerns that the discretion conferred on the Minister is
unfettered (not yet guided by regulation – what will this regulation look like?)
• There are Constitutional concerns with s26 amendment:
– the requirement that a producer sell at less than it could obtain on the open market
would constitute an expropriation in terms of s25 of the Constitution
– a regulation promulgated in terms of the proposed s26 which requires a producer to
sell its raw production to a local beneficiator at less than the price which the
producer could obtain on the open market would for purposes of s25 of the
Constitution constitute not only a deprivation of property but also an expropriation of
that property by way of a compulsory diversion of income earned by a producer to a
local beneficiators
– the reference to consents to export being subject to conditions determined by
the Minister gives no guidelines as to what such conditions should be and
hence contravenes the rule of law requirement in s1(c) of the Constitution
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3. Chamber of Mines Position on Beneficiation
• There are trade agreement concerns with s26 amendment
– implementation and enforcement of the proposals would constitute a breach of
South Africa’s international trade obligations in terms of the General Agreement on
Tariffs and Trade, 1994 of the World Trade Organisation (“WTO”) of which South
Africa is a member; of the WTO Agreement on Subsidies and Countervailing
Measures; of the WTO Agreement on Trade-related Measures; of the Agreement
on Trade, Development and co-operation entered into in 1999 between South Africa
and the European Community; and of the Southern African Development
Community Trade Protocol, 1996 to which South Africa is a party; thus also
rendering the delegated legislation and the powers exercised in terms of s26
unreasonable and therefore invalid, meaning that any power exercised by the
Minister pursuant to the proposals would be subject to challenge in the South
African Courts for inconsistency with South Africa’s international trade law
obligations; all of which should deter Parliament from passing the proposed
amendments to s26;
• There are bilateral investment treaty related concerns with s26
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3. Chamber of Mines Position on Beneficiation
• Proposed solutions:
– The section 26 amendment should be changed to promote security of supply but not
include developmental pricing.
– The mining industry, manufacturing industry and government need to work together to
create the appropriate enabling environment for growing both upstream and downstream
beneficiation. This includes the adoption of industrial policy measures such as Special
Economic Zones (duty and VAT free, special tax rates and incentives, access to key
markets, big expansion of R&D, huge effort on skills development, establishment of a
DFI sponsored “material funding scheme” to provide funding to the inventory pipeline at
very competitive financing rates, etc.)
– The country needs 120 million tonnes of new coal supply in the next decade requiring
R100 billion in capital investment. A substantive collaborative approach between
government and the mining industry that unblocks infrastructure constraints and provides
an enabling framework for investment is the key to ensuring energy security in the
medium and long term.
– A substantial discussion on beneficiation is taking place between the Chamber of Mines
and the DMR.
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
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4.
4.1
•
Invitations for applications: s9
Proposals in Bill
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•
•
Ministerial invitation system # voluntary application system
decisions on comparative merit # first come, first served
Terms and conditions determined by Minister
Issues
•
•
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•
•
Applications
existing system provides for access (in applications) and optimality (in grants): problems are
administrative rather than legislative
new system gives scope for subjectivity and irregularity
unfettered discretion regarding terms and conditions: legislation by regulation
will freeze the system due to appeals and reviews by unsuccessful applicants
Chamber’s suggestions
•
•
proposals not proceed, or
have both systems, i.e.
 voluntary applications based on first come, first served
 Ministerial invitations based on comparative merit
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4.
4.2
•
Refusals based on concentration of rights: s23(3)(b)
Proposals in Bill
•
•
refusals of prospecting rights, retention permits and mining rights based on
number of rights held
Issues
•
•
•
•
Applications (cont)
number of rights is not relevant
does not promote national development plan (which requires experienced
companies)
offends against continuity of tenure when applied to mining rights : expropriation
Chamber’s proposals
•
•
delete all references to concentration of rights, or
provide exemptions for continuity of tenure for existing rights
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
21
5. Transfers and Amendments
5.1 Transfers of Parts: s11(2A)
•
Proposals in Bill
•
•
Issues
•
•
•
•
transfers of parts of rights occur by way of new applications
an application and a transfer are different
cumbersome and impractical
new applicant does not take over existing obligations (step into shoes)
Chamber’s suggestions
•
procedure should involve splitting of right (s102) and then transfer of the
split part (Mining Titles Registration Act, 1967)
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5. Transfers and Amendments(cont)
5.2 Extended Areas: s102(2)
•
Proposals in Bill
•
•
Prohibit extended areas greater than existing area
Issues
•
Unlimited extended areas are necessary for
–
–
–
•
Consolidations
Geological and mining engineering purposes
Partial transfers
Chamber’s suggestions
•
Delete proposed s102(2)
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5. Transfers and Amendments(cont)
5.3 Transfers of interests/controlling interests in holders of rights: s11(1)
•
Proposals in Bill
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Ministerial consent can be granted subject to terms and conditions
Issues
•
•
•
•
Ministerial consent required for transfer of:
– any interest in unlisted company
– controlling interest in listed company
consent for transfer of any interest in unlisted company is unduly restrictive and will cause undue
delays
consent for transfer of controlling interest in listed company is contrary to every day trading on
stock exchanges
Discretionary terms and conditions detract from certainty
Chamber’s suggestions
•
•
proposals not proceed, or
consent to transfer of controlling interest in listed companies be required only if the transaction is
an “affected transaction” in terms of the Companies Act (s117)
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
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6. Inputs on Environmental Matters in the
MPRDA Bill
Alignment of the Environmental Function

Integrated licensing system
-
-
-
Environmental matters for mining and related activities are
regulated in terms of NEMA.
Minister of Mineral Resources being the competent authority
to regulate environmental matters in the mining industry, in
terms of NEMA .
Synchronization of timeframes for processing an issuance of
permits in terms of NEMA, MPRDA and other SEMA’s i.e
NWA-water use licenses.
Amendments of NEMA, MPRDA AND NWA to effect the
above
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6. Inputs on Environmental Matters in the
MPRDA Bill
1.
Alignment and Transitional Arrangements
-No alignment between the proposed coming into operation of the MPRDA Amendment Bill, 2013 and
the NEMLA Bill, 2013 one enacted.
(clause 15 of the NEMLA Bill, 2013 comes into operation by presidential proclamation and does not tie in
with clause 80 of the MPRDA Amendment Bill, 2013 which provides that it will come into operation on
separate presidential proclamation.)
Recommendation
The commencement dates of the MPRDA Amendment Bill, 2013 and the NEMLA Bill, 2013 be aligned by
clause 15 of the NEMLA Bill, 2013 being amended to provide that the NEMLA Bill, 2013 (once enacted)
will come into operation on the date of coming into operation of the MPRDA Amendment Bill, 2013 (once
enacted) in terms of s80 thereof.
2.
Continued liability notwithstanding issue of a closure certificate
(Clause 30(a) and s43(1))
-The removal of the exonerating effect of a closure certificate for pre-closure obligations defeats the
objective and certainty provided for by closure certificates.
Recommendation
clause 30(a) be deleted in favour of retention of the existing wording of s43(1) whereby a closure
certificate exonerates the holder from pre-closure responsibility although not from post-closure
responsibility.
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6. Inputs on Environmental Matters in the
MPRDA Bill (cont.)
3.
Retention of financial provision for 20 years after issuing of closure certificate
(Clause 30(e) and s43(6))
-The existing wording of s43(6) already empowers the Minister to retain any portion of the financial provision
for latent and/or residual environmental impact, hence this amendments are not necessary.
Recommendation
retention of the provision in s43(6) in terms whereof the Minister is entitled to have regard to the facts in
determining the period and quantum of retention.
4.
Obligation to apply for a water use licence, and Requirement that the applicant
has the ability to comply with the relevant provisions of the National Water Act,
1998.
-to insert a granting criterion for applications for prospecting rights, mining rights, and similar rights, that the
applicant has the ability to comply with the relevant provisions of the NWA, would suggest that the DMR has
mandate on the implementation of NWA.
Recommendation
There is already provision in s5(3)(d) of the MPRDA for water uses relating to prospecting, mining, exploration
or production to be subject to the NWA, so the proposed amendments are not necessary.
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
29
7.
Dumps
Definitions of residue stockpile and residue deposit in s1, and s42a
•
Proposals in Bill
•
•
•
Issues
•
•
•
•
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to include historic residues
to provide continuance of existing rights to historic residues for two years and conversion to
reclamation permits of short duration and non-transferable
expropriation of private property : compensation payable by the State (s25 Constitution, 1996)
historic residues on mining areas are part of operating mines
reclamation permits not suitable : duration too short, non-transferrable
historic residues already subject to statutory obligations (environmental, health & safety)
Chamber’s submissions
•
•
recognition of private property : proposals not proceed, or
possible solution:
– historic residues on mining areas to be regarded as part of the residue stockpiles produced in
terms of the mining right
– rights to historic residues not on mining areas continue for two years during which owner has
right to convert to a mining right
– rights to historic residues not on a mining area and in regard to which no conversion is
lodged cease to exist and such historic residues then to be regarded as residue deposits free
for application and for grant
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
31
8.
Petroleum
Definition of free carried interest in s1, and ss80(7) and 84(6) and (7)
•
Proposals in Bill
•
•
•
Issues
•
•
•
•
•
State free carried interest in exploration and production rights
State option to acquire additional interest in exploration and production rights
disincentive to investment
too vague: no stipulated percentages
Offends against continuity of tenure from existing rights : expropriation
carried interest should not be free but rather should be contributory
Chamber’s submissions
•
•
•
•
•
proposals should not proceed, or
no free carried interest, i.e. contributory carried interest
no further option
percentage interests to be stipulated in Bill
exemptions for existing rights
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
33
9.
9.1
•
Notice of intended cancellation: s47(2)(c)
Proposals in Bill
•
•
no representations on alleged contravention
Issues
•
•
Sanctions
unconstitutional administrative procedure
Chamber’s suggestions
•
proposal not proceed
34
9.
9.2
•
Compulsory suspension orders: s93
Proposal in Bill
•
•
Rectification order must be coupled with suspension order
Issues
•
•
•
Sanctions (cont)
contravention may not warrant suspension
suspension should be of relevant part of operation
Chamber’s suggestions
•
•
Suspension orders should be permissive not compulsory (“may” not “must”)
Suspension orders should relate only to affected part of operation
35
9.
9.3
•
Penalties on turnover: ss 99(1) and (1A)
Proposal in Bill
•
•
•
penalties on turnover and exports
stipulated penalties where turnover not ascertainable
Issues
•
•
•
•
Sanctions (cont)
harsh and unconstitutional
unequal as between percentages and fixed penalties
no indication of factors
Chamber’s suggestions
•
•
•
Proposals not to proceed, or
Fixed penalties apply only to reconnaissance, technical co-operation, prospecting and
exploration
Factors to be stipulated (see s59(3) of Competition Act)
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9.
Sanctions (cont)
9.4 Administrative Fines: s99(1B)
•
Proposals in Bill
•
•
Issues
•
•
•
•
new system of administrative fines
unsuitable for MPRDA #Mine Health and Safety Act, 1996
no provision for notice, representations
double jeopardy of both fine and prosecution
Chamber’s suggestions
•
•
•
proposals not proceed, or
embody administrative law requirements (as in ss55A and 55B, MHSA)
either fine or prosecution, not both
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Presentation Outline
1. Introductory comments
2. Economic landscape
3. Beneficiation/Exports
4. Applications
5. Transfers and Amendments
6. Environmental and Water issues
7. Dumps
8. Petroleum
9. Sanctions
10. Conclusion
38
Conclusion
• We have to get mining back onto a growth track to help
the country achieve higher economic growth.
• The mining sector requires a stable, predictable and
competitive regulatory framework to enable the sector
to achieve its growth and transformation objectives as
embodied in the NDP.
• Amendments to the MPRDA are a necessary step to
achieve this goal.
• The Chamber is supportive of some of the proposed
amendments, but requests that the Committee takes
into account areas where the Chamber has concerns.
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Conclusion
Mining matters for the growth, development
and transformation of South Africa
• The Chamber of Mines:
“Putting South Africa First”
40