Minerals and Petroleum Resources Development Amendment Bill: public hearings

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
29 May 2007
MINERALS AND PETROLEUM RESOURCES DEVELOPMENT AMENDMENT BILL: PUBLIC HEARINGS

Chairperson: Mr E N Mthethwa (ANC)

Documents handed out:
South African Diamond Producers Organisation (SADPO) submission
Anglo American South Africa Representation
Anglo American South Africa Limited Submission
Webber Wentzel Bowens submission by Mr Manus Booysen
Webber Wentzel Bowens presentation by Mr Manus Booysen and Dr Justin Kalima
Webber Wentzel Bowens submission by Mr Peter Leon/ Mr M van der Want
Webber Wentzel Bowens presentation by Mr Peter Leon
AGRISA submission
Chamber of Mines of South Africa presentaion

SUMMARY
The African Karmdin Committee submitted that too short a time frame was allowed for sufficient consultation with affected communities, and that this had affected many similar communities in Northern Cape, North West and Limpopo. It noted that land claimants would not receive notification, and that any notices would be published in English and Afrikaans and in the Government Gazette, all of which were unknown to many claimants. The time period for submission of claim documents under Clause 6 was too short. Members of the community cited examples of problems where they had been excluded from the land and had not received any assistance in their claims from the Department. The Chairperson requested officials to look into these matters.

The Maremang Community raised objections relating to dispossession from their land, that mining operations were conducted on the land over which there was a claim and that the Department failed to take cognisance of pending land claims, failed to consult and would arrest community members for trespass.

Webber Wentzel Bowens submitted extensive remarks on the Bill, commenting that they were not representing a particular client but were giving their opinion as legal practitioners. Firstly they claimed that the Bill did not provide guidelines for the regulation of the industry, and therefore failed to provide security for investors. Secondly it did not align with sound administrative practices as it did not address the lack of objective criteria around the Minister's decision making powers. Although the Act provided for written reasons for administrative action, the Bill did not spell these out. It failed to follow international best practice. It failed to protect the rights of sub lessees under OP26 prospecting licences. They raised specific objections to two definitions under Clause 1, requested clarity on definitions in clause 5, and submitted that Clause 7 did not address the problems inherent in the relevant section 11 of the principal Act. Clause 11 would amend Section 16 but prevented the possibility of different activities on the same land. The dates were queried under Clause 12. Clause 31 should be amended to regulate environmental authorisations under the National Environmental Management Act. the Minister's discretion was too wide. Clause 37 should be amended to provide that amendments of the authorisation or plans should be approved by the minister. the conditions of acceptance of applications needed to be properly regulated in order to promote economic growth. In view of difficulties in obtaining information from the Department of Minerals and Energy all interested parties should be given access to factors considered by the Minister. Clause 34 should be amended to obviate proliferation of trust funds. Registration of statutory surface rights and royalties needed to be clarified in the schedules and provision should be made for the old undivided share prospecting rights. Finally, there was inadequate consultation, and insufficient time for comment.

Members raised questions on the consultation of departments, the possibility of a one-stop shop for regulatory matters, the problems in Nigeria, why there was a need to amend the Act, and the checks and balances in the old Act.

MINUTES
African Karmdin Committee (AKC) Submission on the Minerals and Petroleum Resources Development Amendment Bill, 2007 (the Bill)
Mr Kedi Namerse, on behalf of the African Karmdin Committee, stated that the AKC was from Northern Cape. He objected to the time frame provided both in respect of the Bill, and the meetings, which did not allow the NGO to advise the affected people properly as to what attitude they should take. The AKC had to identify those at grass roots who might be affected, hen find the Chiefs and other power players in the community, then address the community as a whole, and sometimes the women of the community separately, formulate an appropriate response and then discuss this again with the community. This took time as there were many disparate attitudes, levels of education, understanding and role players who had to be recognized and pacified before a community stance could be ascertained. There were many similar communities in the Northern Cape, North West and Limpopo Provinces, which were affected by the proposed bill and required to make inputs, yet had not have sufficient time.

Of particular concern was Clause 5, which provided for notice within 21 days to the landowners, and lawful occupiers, but did not provide for land claimants who were inevitably excluded from these definitions.

Additionally, such Notices were in English or Afrikaans, which were languages unfamiliar to the claimants, and were published in the Government Gazette, which was unknown to them.

Clause 6(b) required any possible minerals claimant to submit their claim documents and consultation reports within 60 days. This time period was too short, nor was there provision for copies of these documents to be made available to the land claimants and communities.

A member of the same community gave an example of the difficulties the land claimants and/or communities encountered. A community had believed a certain property belonged to it, yet a prospecting licence had been provided to a German individual, who would charge the community with trespassing, and did not employ local people but brought in labourers from other areas. This state of affairs had been reported to the Department officials. One female from the community had managed to acquire prospecting rights and was working with that German. Another farm allegedly set aside for the community had already been sold on elsewhere.

She asked whether it was true that minerals belonged to the State. She asked that this community be advised them clearly by Government on the question of mineral rights and black economic empowerment. She was unhappy that a foreigner should be benefiting and believed that the past needed to be redressed.

Maremang Community Chairperson Submission
Mr Boniface Masione, Chairperson of the Maremang Community, alleged that his community had been disposed of their original land, and later, subsequent to the 1913 Land Act, other communities had been similarly dispossessed of their land. He called for a balancing of the rights of the dispossessed for sustained economic development. He submitted that it was the responsibility of the Government to enable the landless to gain access to land and have security of tenure against creditors. This matter had been taken to the SA Human Rights Commission, which said that it had a duty to protect against the injustices of the past. He added that the Maremang Community had lived peacefully on 62 000 hectares 30 kilometres North of Postmasburg.

At this point the Chair intervened to say that the meeting was concerned only with questions around minerals and energy and could not be a vehicle for general land claims.

Mr Masione alleged that the community were the victims of circumstances, in that mining operations were conducted on the land over which there was a land claim, but the Department did not inform the company and allowed it to continue mining. Mr Masione had been assaulted when visiting the site. He had laid a charge which would be heard on 15 June, but he was not legally represented. He had yesterday heard about these public hearings and appealed to the Committee for assistance. He added that the Department did not take cognisance of pending land claims, failed to consult properly, and had community members arrested for trespass.

The Chairperson requested clarity about the individuals allegedly involved in the assault and the land concerned. He asked the officials present from both Department of Minerals and Energy (DME) and Department of Land Affairs (DLA) to take note of the allegations and follow up on them.

Mr C D Kekana (ANC) noted that the one complaint emanated from his constituency and he was aware of it.

Webber Wentzel Bowens Submission
Mr Peter Leon, Webber Wentzel Bowens, stated that the submissions made by the firm arose from discussions with clients of the firm and from their concern as legal practitioners on aspects of the Bill. Webber Wentzel Bowens was in this instance not making submissions directly on behalf of any client.

Mr Leon tabled a summary of his presentation and stated that he would be amplifying upon statements by the Minister of Minerals and Energy at the Mining Indaba on 6 February 2007. He also would raise points about the Bill, the extent to which the Bill brought South Africa’s mining code in line with international best practice, and its failure to afford sufficient security of tenure to current holders of OP26 prospecting sub leases in the oil and gas exploration and production industry.

Mr Leon amplified that the Minister had referred to the “somewhat tentative investor sentiment to the mining sector” and he submitted that the Bill was the obstacle to investment. As it stood, it did not provide any guidelines for the regulation of the industry and did not establish objective requirements for regulating this high risk, high cost industry. Investors would not be prepared to make investments without having some certainty of gaining a return. In support of his submission he referred to the Fraser Institute Survey 2006/7 which surveyed the mineral policy of 65 countries. South Africa was ranked a lowly 53 out of 65 and countries such as Botswana ,Tangier and Mali were ranked higher.

Mr Leon stated that the explanatory memorandum stated that the Bill would align with sound administrative practices and the objects of the Promotion of Administrative Justice Act (PAJA). He submitted that the Bill did not in fact do so because it did not address the lack of objective criteria governing the Minister’s decision making powers in relation to the grant or refusal of rights. In practice the Minister made very few decisions, as these were left to lower-ranking administrative staff . If they did not have set criteria to apply they tended to make no decisions. Additionally Section 6(2) of the Act provided for written reasons for administrative action, but the Bill did not spell out the provisions. The existence of clear written reasons conformed to international best practice. In Nigeria the relevant Minister had split the political and administrative functions by establishing an autonomous Administrative Commissioner,for the emerging Mining Industry. He submitted that without explicit reference to written reasons, particularly with regard to the grating or refusal of rights under MPRDA, there was no stability in the legislation nor any obligation to make decisions and international investors were unlikely to be attracted to invest.

With regard to international best practice Mr Leon referred again to certain African countries, and submitted that in a global environment, where there was fierce competition for scarce capital, investment companies would be drawn to a country that incorporated international best practice in its regulatory framework. International best practice for mining investment required certainty, stability and predictability, and appropriate guarantees in favour of holders of mineral rights.

Mr Leon noted that the Union Economique et Monetaire Ouest Africaine (UEMONA), where the eight constituent countries had enacted a regional mining code (RMC) that provided for the freedom of investing mining companies to select suppliers, subcontractors and partners, guarantees relating to Foreign Exchange Control, guarantees in terms of management and organisation and a guaranteed stabilisation of the customs and tax regimes.

Under the previous regulatory regime, the holders of OP26 prospecting subleases for natural oil were afforded substantial protection, since the terms and conditions of their prospecting subleases were guaranteed for their duration, thus ensuring legislative and fiscal stability. In the event of a discovery the form of the mining lease was included in the form of the prospecting sub lease.

Mr Leon said that Section 2 (g) and item 2 of Schedule 11 to the MPRD Act protected security of tenure, but despite this did not properly or specifically protect the rights of a sub lessee, despite the State’s guarantees in the OP26 prospecting sub leases. He submitted that the Bill ought to but did not remedy this defect. The draft exploration and production rights did not distinguish between the rights of the holder of an OP26 prospecting sub lease and rights of the holder of a new exploration right, and therefore did not reflect what was in the Bill.

Mr Leon proceeded to make comments on the Bill itself.

Under Clause 1, he said that the amendment of the definition of an “exclusionary act” broadened an already unconstitutionally over-broad definition. He believed that the exclusionary act as now defined was unclear, vague and imprecise. Furthermore the MPRDA provided no guidelines as to how the Minister’s discretion should be exercised. He believed that the terms, as more fully outlined in his submission, were well recognised and established terms of art in Competition law and that accordingly the competition authority should decide whether any practice was in breach of South African competition law.

The amendment of the definition of "day" was welcomed but following regulatory best practice the Bill should impose an obligation upon the DME to decide applications within a specified time.

Clause 5 related to the amendment of Section 9 of the principal Act. It provided that “subsequent applications” must be processed at least 40 days after an application had been rejected or refused. The meaning of “subsequent applications” was unclear, and he suggested that the word “processed” should be replaced by “decided”.

Under Clause 7, relating to amendment of Section 11 (1), Mr Leon submitted that the proposed amendment did not address the problem, which was that on a literal interpretation the consent of the Minister was required to dispose of certain interests. He submitted that the references to company or close corporation should be qualified otherwise the Minister's consent would be required even for disposal of 1% interests in a mining or prospecting licence.

Mr Leon noted that Clause 11 provided for the amendment of section 16. Section 16 set out the procedure and requirements for applications for prospecting rights. The Bill as worded would prevent the possibility of conducting different activities on the same land for different minerals and would therefore lead to stultification of mineral resources, and was inconsistent with Government’s express intention of promoting mining investment.

Mr Leon noted that Clause 12 provided for amendment of Section 17(5), relating to the effective date of the grant of a right. He said that the environmental management programme was not always approved on the same date as the right was executed and therefore the right should become effective on the earlier of the two dates contemplated. Further he submitted that provision should be made for the registration of renewals of rights

Mr Leon summarised that the Bill was an attempt to give effect to the Minster’s stated intention to promote investment in the South African mining industry, and to align the MPRDA both with sound administrative practice and with PAJA, but as drafted it fell far short of these aims.

Mr M Booysen, Webber Wentzel Bowens made some further submissions.

He noted that the Minister’s stated primary interest was the promotion of the mining industry, and that the environmental provisions in the MPRDA were supposed to serve for environmental protection. He believed that conflicting interests might arise between the two Departments of Minerals and Energy (DME) and Environmental Affairs and Tourism (DEAT) and these would frustrate the objects of the Act relating to sustainable development of natural resources, while protecting the environment.

Mr Booysen, referring to Clause 31, proposed that the granting of environmental authorisations should be regulated by the National Environmental Management Act (NEMA) or alternatively DME should be required to follow the recommendations of DEAT in relation to the proposed environmental authorization.

Mr Booysen noted that Clause 31 proposed an amendment to the effect that the Minister must prescribe regulations on the procedures, requirements and time frames of a number of matters. However, it did not stipulate the objective criteria which the Minister must take into account in arriving at decisions to grant an environmental authorisation. Furthermore if all matters were covered by regulation this was inappropriate, as it would increase the Minister’s discretion on environmental regulation in relation to Mining.

Furthermore, Mr Booysen submitted that consideration of recommendations alone would lead to a lack of openness and transparency, as interested parties would not be privy to these recommendations. This would not accord with Section 6(1) of the MPRDA, which required that all decisions comply with principles of lawfulness, reasonableness and procedural fairness. Therefore he recommended that Section 39(4)(b) be expanded to provide that recommendations and comments of committees and department could be made available to any interested party who applied for them.

A new wording was suggested for Clause 37 of the Bill, relating to obligations of holders of rights in areas of cumulative impact, so that any amendment of the authorisation or plan must be approved by the Minister.

Mr Booysen noted that Clauses 11, 16 and 22 of the Bill related to amendments to Sections 16, 22 and 27 of the principal Act, by attempting to specify what the regional Manager must do in accepting an application. However, he was effectively given a discretion to accept or refuse any applications. Similar wording applied to all sections dealing with conditions of acceptance. The amendment created a lacuna regarding the basis on which rights were acquired, and negated the the objective to promote natural resource development. The complex issue of several or mixed minerals occurring in the same ore body or ground was not addressed at all. He stressed that the proposed wording was inconsistent with the aim of promoting economic growth and development, and promoting investment in mining.

Mr Booysen submitted that notification and consultation should be provided for under Clauses 11 and 22 of the Bill, in order to avoid disjuncture between the NEMA and MPRD Acts. A new wording of Section 16(4) of the principal Act was proposed, that would require written notice and consultation with the land owner, lawful occupier, and other interested and affected parties, and to include the result/s of this consultation in the basic assessment report

Webber Wentzel Bowens stated that from their experience in the natural resource industry it was apparent that there was a lack of openness and transparency in the decision making process of the DME, and that it was difficult and time consuming to obtain information in terms of the provisions of the Promotion of Access to information Act (PAIA). Therefore they submitted that all interested and affected parties should be given access to the factors considered by the Minister in arriving at decisions.

In relation to clause 34, Mr Booyens noted that the proposed wording required that trust funds must be used for financial provision in respect of each separate right or permit. This would result in a proliferation of trust funds, creating an impractical and unnecessarily costly administrative burden.

The Schedule, item 9(2), required registration of statutory surface rights within one year from the date on which the MPRD Act took effect. There was no mention of the consequences that would follow from failure to comply, and many holders were not aware of the necessity to register. For practical purposes the Mineral and Petroleum Titles Registration Office refused to register transactions relating to those rights unless registered in terms of Item 9(2). This had a detrimental impact on the holders' ability to trade with or transfer such rights. It was also not clear whether this item applied only to previously unregistered rights, or to all statutory rights, or to re-registration. There was no cogent reason for the short time period of one year allowed. Despite DME having apparently sought a legal opinion on this Item, the situation remained unclear. Mr Booysen therefore recommended that the item must be amended, and the most practicable way to do so would be an extension for the date of registration to 30 April 2009. Thereafter the Mineral and Petroleum Titles registration office should register all rights subsequent to 30 April 2009.

Mr Booysen noted that Item 11 of Schedule 11 currently provided for the continuation of any existing royalties under certain conditions. However, he pointed out that there were two categories: those whose right to royalties was preserved under Item 11, and those who had contractual rights to royalties accruing to the State, which were not preserved.

In addition Table 3 to the Taxation Laws Amendment Act, Act 16 of 2004, provided for the continuation of the obligation of lease, royalty or similar payments to the State under certain circumstances. It was submitted that Table 3 had two shortcomings and would cease to apply on 1 May 2009.

These provisions were therefore inadequate to regulate lease, royalty or similar payments that accrued to various organs of the State, who would be prejudiced if those payments ceased to be payable on 1 May 2009. Mr Booysen indicated that sometimes organs of the State had granted valuable consideration in exchange for contractual rights to receive such payments, Eskom being an example, and he recommended that these inequities be resolved by expanding the provisions of Item 11 of Schedule 11 to provide for such payments.

Mr Booysen said that the MPRDA did not provide for acquiring prospecting rights, pursuant to conversion in terms of Schedule 11, in undivided shares. Prospecting permits were issued in the past to holders of undivided shares, without reflecting the undivided shares, under the Minerals Act. There was therefore now uncertainty as to what the holder of an undivided share in an old order prospecting right would acquire on conversion. This could give rise to illogical results if he could convert his partial right to a full order right and could lead to other unintended consequences as there would have been cogent reasons why some investors had preferred to form unincorporated joint ventures. The Bill provided an ideal opportunity to address the issue by amending the Act.

Overall Mr Booysen submitted that the Bill provided the ideal opportunity to address various shortcomings in the Act or improve its implementation, but had failed to do so. Furthermore, he submitted that an inadequate public participation process was conducted and that inadequate time was allowed for proper consideration of the proposals set out in the Bill.

Discussion
The Chairperson wished to know who Webber Wentzel Bowens represented.

Mr Leon and Mr Booysen stated that these submissions had been made from knowledge and comments gleaned from their interaction, as professionals, with the clients of Webber Wentzel Bowens. Only Eskom had agreed to be named. Mr Booysen reiterated that he was making the representations not on behalf of any particular client but based on his legal experience.

Adv A Schmidt (DA) was concerned that only four departments of State had been consulted and there appeared to be wider ramifications to this Bill. The NGOs had not been consulted and nor had most landowners and land occupiers.. He felt that there were conflicting points between this Bill, PAJA and the Constitution, and accordingly had reservations about it.

The Chairperson claimed that there had been discussion.

Ms B Tinto (ANC) wanted to know why there could not be a one stop shop for the regulatory matters, including health problems associated with the old asbestos mines. She was of the opinion that the environmental regulatory matters should be tightened up.

Mr C Molefe (ANC) noted the suggestion that Nigeria's model be followed He was concerned that the troubles in the Niger Delta had not been referred to Webber Wentzel Bowens. He noted the suggestions about curbing the Minister’s discretion but asked what checks and balances had been in the old Act

Mr S Louw (ANC) wished to know what provisions were intended for a management plan. He noted the suggestions that sections should be deleted or changed but enquired why there should be change to what was working. NEMA required authorisation and as far as he was concerned this implied a permit, an application and a process. He noted that although this Bill was being criticised, yet no fault was found with the 1991 Act. He too would like to know what checks and balances were in the old Act

Mr Leon firstly clarified that he and Mr Booysen were appearing before the Committee to represent the firm of Webber Wentzel Bowens itself, not its clients. The proposals for amendment had been made in order that the Bill, in accordance with its stated intention,attracted investment, and conformed to the Constitution and PAJA. Webber Wentzel Bowens were of the opinion that as presently worded it did not achieve these objectives.

In answer to the suggestion of a one stop shop, he referred to the well publicised dispute between the Independent Communications Authority of South Africa (ICASA) and the Competition Commission in regard to telecommunications. What had been suggested conformed to best international practice, for the benefit of South Africa.

Mr Leon clarified that the Niger Delta trouble related to the oil and gas Industry and not the mining Industry. In Nigeria there was a distinction in mining between legislation and regulation, and regulation had been de-politicised by the appointment of an independent regulator.

Mr Leon stressed that the 1991 Act, in his opinion, was incompatible with the principles of administrative justice, which were specifically legislated for in 2000. Mr Booysen added that South Africa must in addition aspire to good governance

Mr Leon added that the mining industry was high cost and highly speculative and any potential investor required the world norm of 30 years, or minimum 25 years as an enticement to invest.

Finally Mr Booysen reiterated that he did not believe the Bill had been widely enough publicised or discussed, and that insufficient consultation time was allowed.

The meeting was adjourned.