June 28, 2002

SOUTH AFRICA: New Mineral and Petroleum Bill passed by Parliament among ecstatic jubilation

Parliament in Cape Town passed the historic Mineral and Petroleum Resources Development Bill on June 27, 2002, with cheers and loud jubilation among ANC MPs.

The bill, which was introduced to Parliament on April 22 this year - after its first draft had been published in December 2000 –, is another important step towards transforming the mining industry which up to now has been a stronghold of big (and white) business interests.

Now, and for the first time in South Africa’s 130-year-old mining history mineral rights will be vested with the state, in line with international practice. In return for 30-year-non-transferable mining rights, companies have to pay royalties to the government. Vehement protests against this clause had earlier been expressed by the Chamber of Mines, the Foreign Investors Prospecting and Mining Forum (which particularly represents Chinese, French, Canadian, Australian and British investors), the oppositional Democratic Alliance and others saying that making the state the custodian of SA's mineral deposits would lower profits of mining companies "significantly" and make the SA mineral industry unattractive to foreign investors.

Other controversial provisions contained in the Mineral and Petroleum Resources Development Bill are the obligation of companies to give early warnings in case of planned mass retrenchments and the necessary compliance by mining houses with national environment standards. Companies in future will be responsible for any environmental damage, pollution or ecological degradation inside or outside the boundary of the prospecting or mining area.

While the adoption of the new Bill markes a big victory for Mineral and Energy Affairs Minister Phumzile Mlambo-Ngcuka, implementation of the new legislation has still a long way to go. Apart from being signed by the State President – who might first wish to send the Bill to the Constitutional Court in order to make clear its constitutionality also to the international community -, a Treasury Bill to determine the allocation of royalties will have to be introduced by the Ministry of Finance in the next session of Parliament.

It is expected that mining royalties in future will go to a fund earmarked for socio-economic development in communities around mining operations or sending migrant labour, and for the rehabilitation of ghost towns surrounding defunct mines.

Prospecting and mining licences will have to be re-applied within a five-year period after the Bill becoming law, but will not be automatically granted. According to Minister Mlambo-Ngcuka, environmental management plans as well as empowerment requirements would be taken into account; as she indicated, the government would like to see a meaningful participation of at least 26% of previously dispriviledged (“black”) companies or communities.

Enforcement is key – wrote the Mail and Guardian in a commentary:

“All the acrimony around the Minerals and Petroleum Resources Development Bill should not obscure one central fact - there was no way a majority-rule South Africa could hang on to the mineral rights regime of the past. More than any other industry, with the possible exception of agriculture, the mines symbolise white domination of the economy and the labour repression of the colonial and apartheid eras.

It is this that explains the ecstatic jubilation among black MPs after the passage of the Bill this week. State custodianship of mineral rights, coupled with new requirements for permit applications aimed at advancing black ownership and participation, were felt to be a triumphant assertion of the Freedom Charter's promise that mineral resources would return to the people.

This potent symbolism meant that the mining houses' demands for the automatic renewal of 30-year mining leases was unlikely to be met - however well-founded their argument that continuity of tenure was needed to encourage investment.

The new law will undoubtedly have the effect of forcing established interests to forge partnerships with black mining companies, and this is right and inevitable. But South Africans should be realistic enough to recognise that there is likely to be a cost -- the industry's warnings about foreign investment are more than mere scare tactics aimed at entrenching its privileged position. While state custodianship of mineral rights is pretty much the world norm, the permit requirements in a mining country such as Chile are clear, objective and not excessively onerous. In our Bill the transformation criteria are vague and wide-ranging - raising the fear that undue ministerial discretion has been reimported through the back door.” (Mail & Guardian, Business Day)


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