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SA and Chile dance to their own tune as miners battle policy uncertainty

Jul 13 2017 07:53
Liesl Peyper

Cape Town – Mineral Resources Minister Mosebenzi Zwane signed a memorandum of understanding with Chile to cooperate on mineral beneficiation and processing and share experiences in policy formulation, among other things.

Zwane is currently attending a mining conference, the LatAM Mining Cumbre, in the Chilean capital Santiago where he is expected to address the audience on mining in South Africa.

READ: Mining data deceiving of reality 

According to a statement issued by the Department of Mineral Resources on Tuesday evening, both South Africa and Chile have a rich history in mining and the memorandum of understanding will serve as a framework for closer cooperation between the two mining jurisdictions.

Chile is one of the world’s major mining investment destinations and the largest global producer of copper and lithium. The country, however, also faces a number of challenges, such as the high cost of mining production in comparison with its peers.

Data from Chile’s mining council showed production costs in the country in 2015 were 5.4% higher than its global peers’ average.

Reuters reported earlier that mining companies operating in Chile are putting investment decisions on hold until political uncertainty abates after this year’s presidential elections in November.

Chilean President Michelle Bachelet has over the past three years promulgated a number of changes to the country’s tax and labour legislation to ease inequality.

READ: Tensions rise as strike hits world's top copper mine 

Reuters quoted a foreign miner as saying that the reforms have made the mining sector “timid to announce new investments”, as there has been a loss of confidence in the country.

South African mining faces a similar conundrum on the back of a new Mining Charter with onerous new black ownership, employment equity and local procurement targets – this in an industry where investment has been waning for a number of years.

The new charter came into effect on June 15 2017, when the new regulations were published in the Government Gazette. 

Policy uncertainty is expected to continue for at least a few years, as the Chamber of Mines, which represents 90% of mining companies, has taken the Department of Mineral Resources to court to suspend the implementation of the new charter.

In addition, the chamber has also relaunched its declaratory order to seek certainty on the once empowered, always empowered principle.

READ: Mining Charter: Hope of a 'different' final version 

The legal action will leave the mining industry in limbo and cause investors to look for alternative mining destinations, which will have a ripple effect on South Africa’s economy.

Policy uncertainty in mining is not limited to the new Mining Charter, though. The Mineral and Petroleum Development Amendment (MPRDA) Bill has still not been signed into law and will in all likelihood also be challenged in court.

During deliberations at the National Council of Provinces in June this year, a number of legal experts warned that the bill could be rendered unconstitutional because of new regulations added by the Department of Mineral Resources which have not been subjected to proper public consultation, among other things.

In addition, the sections in the bill that pertain to mineral beneficiation may be in contravention of international trade agreements, while a provision in the MPRDA that would elevate the Mining Charter to legislation could be unconstitutional as it offends the separation of powers between the legislature (Parliament) and the minister.

READ: Minerals Bill: More delays expected 

The MPRDA Bill was passed in the National Assembly on November 1 2016 and was then referred to the National Council of Provinces for further deliberations and consultations with communities at provincial level.

The bill was initially passed by Parliament in 2014, but President Jacob Zuma declined to sign it into law and referred it back to Parliament, citing concerns about the bill’s ability to pass constitutional muster.

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