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COMMENT
October 2016
MODERN MINING
3
A
lthough our government often
congratulates itself on South Af-
rica’s mining legislation, which
it appears to believe is world
beating, not everyone shares this
view. Indeed, many industry experts believe
that our mining law has serious shortcomings
and has actually throttled growth in our min-
ing industry.
The latest commentator to find fault with the
legislation is Dr Anthea Jeffery, who is Head of
Policy Research at the South African Institute of
Race Relations (IRR). A highly respected author
(she has ten books to her credit) and an expert
on modern South African politics, she argues
in a policy paper –
Back to the drawing board
on mining law
– which has just been published
in
@Liberty
, the IRR’s policy bulletin, that the
Mineral and Petroleum Resources Development
Act (MPRDA) of 2002 has been deeply flawed
from the start.
She says the MPRDA is one reason why
South Africa’s mining industry shrank by 1 % a
year during the global commodities boom from
2001 to 2008 while the mining sectors of other
countries expanded by 5 % a year on aver-
age over the same period. She also notes that
since the advent of the MPRDA South Africa
has steadily lost ground as a mining invest-
ment destination in the Fraser Institute mining
survey – to the point where it is now ranked
66th out of 109 countries, behind most African
countries including unstable jurisdictions such
as the DRC, Eritrea and Ethiopia.
In her paper, Dr Jeffery takes aim in par-
ticular at the BEE requirements in the Mining
Charter, which she regards as being particularly
problematic. As she writes, “The 26 % BEE
ownership requirement (which had to be met
by 2014) has made it possible in practice for
DMR officials to choose the ‘correct’ BEE inves-
tors for mining companies to partner with by
signalling that an application for a mining right
is unlikely to succeed unless a specific BEE
partner is brought in.”
Dr Jeffery also takes issue with the ‘shifting
goalposts’ in respect of BEE targets and recounts
how in 2015, at the end of the 10-year charter
period, the DMR used revised empowerment
rules to claim that only 20 % of mining com-
panies had met the BEE ownership obligation.
This figure was contested by the Chamber of
Mines, which said that all its members had at
least 26 % black ownership, with the average
black ownership level being 38 %.
She adds that the MPRDA’s require-
ments regarding social and labour plans have
also generated a host of practical problems.
“Applicants must develop plans that are accept-
able to DMR officials; and show that they have
provided, financially and otherwise, for the
implementation of these proposals,” she writes.
“In practice, social and labour plans commonly
include undertakings by companies to improve
living conditions and human capital in mining
areas, but the MPRDA provides little guidance
as to what they should incorporate. Uncertainty
about these requirements has made it easy for
DMR officials to approve or disapprove social
and labour plans on arbitrary, and often spuri-
ous, grounds.”
On the subject of nationalisation, Dr Jeffery
concedes that it is not a stated policy of the ANC
but says the party has “skirted around the issue”
and that many of the steps needed to embark
on a wider process of mine expropriation or
nationalisation “have quietly been taken.”
She is in no doubt that nationalisation – or
anything resembling it – would be disastrous
for South Africa’s mining industry and to prove
her point she quotes the examples of Zambia
and Chile, countries of almost identical physi-
cal size and population. In 1970 both had a
copper production in the region of 680 000 t/a.
At around this time Zambia nationalised its
copper mines while Chile went in the opposite
direction, liberalising its mining regime. The
results were all too predictable. By 2012 Chile
was producing over 5 million t/a of copper
while Zambia’s production (though improving
as a result of reprivatisation of the mines) was
just 675 000 t/a.
How to correct the situation? Dr Jeffery’s
view is that we need to learn from Botswana
which has got much of its mining law right.
“Its rules for the granting and cancellation of
mining licences are certain, clear, and stable,”
she writes. “It does not impose BEE, benefi-
ciation, or onerous socio-economic conditions
on mining investors. It has not threatened the
mining industry with nationalisation or expro-
priation, whether direct or indirect. It has
avoided corruption and other aspects of the
resource curse, and generally used its mining
revenues well to promote growth and increase
prosperity.”
She concludes by saying that South Africa
“urgently needs to go back to the drawing
board on its mining regime” and that it would
be “well advised to follow the example of its
Botswana neighbour which offers a sound way
to bring its mining law into line with interna-
tional best practice.”
Arthur Tassell
“In practice,
social and labour
plans commonly
include
undertakings
by companies to
improve living
conditions and
human capital
in mining areas,
but the MPRDA
provides little
guidance as to
what they should
incorporate.”
Mining law –
South Africa urged
to go back to the drawing board