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How to get mining on track to be SA's sunrise industry

If the mining sector is to truly become the "sunrise industry" that President Cyril Ramaphosa wishes it to be, the government will have to become more proficient in how it regulates the industry, said Peter Leon who is co-chair and partner at Herbert Smith Freehills.

Ramaphosa told delegates in February at the 25th Investing in African Mining Indaba in Cape Town that government would introduce a range of reforms in legislation and state-owned entities to ensure that the local mining industry remained in its "sunrise days".

He also praised Minister of Mineral Resource Gwede Mantashe, calling him an experienced authority on mining who "knows the industry in and out". He said Mantashe’s arrival at the department came with policy certainty for investors.

"We moved to speed up the finalisation of the mining charter and legislation around gas and exploration. Leaders in the mining industry never gave up. You raised your voices, concerns and misgivings with us. Now you have our undivided attention," said Ramaphosa said at the time.

Commenting on South Africa's improvement in the Fraser Institute's Annual Survey of Mining Companies Survey, Leon said it was "commendable and largely encouraging".

On the Investment Attractiveness Index, South Africa improved its ranking to 43 out of 83 jurisdictions surveyed in 2018 compared to 48 out of 91 global in 2017. It now ranks second in Africa after Botswana, which stands at 32.    On the Policy Perception Index (PPI), South Africa's performance is still below average at 56 out of 83 jurisdictions. However, it is still significantly better than last year at 84 out of 91 jurisdictions.  

Despite these upticks in the survey, Leon said more can be done to ensure South Africa is able to attract investment.

"The improved performance is certainly owing to government's decisions to withdraw the Mineral and Petroleum Resources Development Amendment Bill (Bill) and the publication of Mining Charter III (Charter)," he said.  

"While both actions have instilled the mining sector with some certainty, South Africa will continue to perform poorly until the issues surrounding the Bill, the Charter and general administration of the Department of Mineral Resources are resolved."

Leon suggested three changes. He said the Bill needs to be formally withdrawn. "It has been six months since Mineral Resources Minister Gwede Mantashe announced plans to withdraw the Bill, yet there have been no further steps to formally do so."

Commenting on the Charter, he said it still contains a number of provisions that are cause for concern. These include:

  • onerous re-empowerment obligations for the renewal and transfer of existing mining rights;
  • the BEE Shareholding top-up requirements for pending applications;
  • the absence of provisions for the amendment of existing mining rights; and
  • the Minister's unlimited ability to review and revise the obligations imposed under the Charter from time to time.   

Leon also recommended that South Africa should follow the approach adopted by Botswana,  which ranks 12 on the PPI and has a score of 94.77%, and amend the Mineral and Petroleum Resources Development Act, 2002 (Act) to promote greater certainty and predictability, in particular the manner in which the Act is administered.  

"Vague and open requirements create breeding grounds for abuse, corruption and unnecessary delays."

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