Mineral and Petroleum Resources Development Amendment Bill: Outstanding Issues & deliberations

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
19 June 2007
MINERAL AND PETROLEUM RESOURCES DEVELOPMENT AMENDMENT BILL: OUTSTANDING ISSUES & DELIBERATIONS

Chairperson: Mr E Mthethwa (ANC)

Documents handed out
Department of Minerals and Energy (DME) presentation on outstanding issues
DME’s Proposed Amendments to MPRDA Amendment Bill
Legal Resource Centre submission
Mineral and Petroleum Resources Development Amendment Bill [B10-2007]

Audio Recording of the Meeting

SUMMARY
The Department clarified its competence in respect of environmental issues in the mining sector. The Committee was deeply concerned as to the lack of consensus between the Department of Environmental affairs and Tourism and the DME on this issue. Some committee members were reluctant to continue with deliberations in view of this conflict, and that it had to be urgently resolved.

The matter of junior mining companies and flow-through shares was discussed, although the discussions were not comprehensive as the DME was awaiting a report from Treasury which will clarify this area considerably. The Committee expressed its concern about operations of junior companies that are owned by largely foreign shareholders. BEE successes should not be undermined, and South Africans should be given every opportunity to enjoy their own country’s mineral resources.

The second session was a thorough analysis of the proposed amendments. The DME put the proposed amendments forward, and the Committee asked questions and raised concerns. The bulk of the amendments were consistent with the objectives of the DME as mentioned above.

MINUTES
Department on the Bill's outstanding issues
The delegation from the DME included Mr Jacinto Rocha (Acting Director General); Adv Martin Mononela (Chief Director: Mineral Development and Administration); Ms Lindiwe Mekwe (Director: Mineral Policy Development); Ms Elize Swart (Director: Mining Environmental Policy) and Ms Monica Ledingwane (Chief Director: Mineral Regulation).

Mr Rocha commenced the presentation by outlining the objectives of the amendments to the Mineral and Petroleum Resources Development Act (MPRDA), and separated the presentation into two categories; firstly, those issues pertaining to environmental authorisation, and secondly, issues related to Treasury.

The DME submitted that, in terms of the Constitution, the Department of Environmental Affairs and Tourism (DEAT) is not delegated sole competence to deal with environmental matters. Accordingly, the DME is competent to deal with environmental matters arising in the mining sector. Having two separate authorisation procedures, one being licensing by the DME, and the other being an environmental (DEAT) authorisation in terms of the National Environmental Management Act (NEMA) proves costly and is an unnecessary duplication. Furthermore, it creates uncertainty within the sector which is undesirable, and some mining operations have been incorrectly informed that they are to shut down due to non-compliance with NEMA. The DME is strict with regard to the maintenance of environmental standards and is to be trusted, it is also best placed to be able to judge the needs of the sector as a whole. The MPRDA expressly provides for the Minister of Minerals and Energy to be the final authority in relation to environmental issues arising from the mining sector, and the DME is merely giving expression to this requirement.

The second issue, those matters relating to Treasury, was then presented by Ms Ledingwane. She emphasised that tax incentives are to be used sparingly, and highlighted many comparative studies, particularly within the Canadian and Australian jurisdictions. The DME is awaiting the outcome of a study which is currently being conducted by Treasury. This study is analysing the role of flow-through shares in junior companies which are prospecting for minerals, and is assessing their use and applicability in a South African context. Basically, it seems to boil down to the granting of tax incentives for high risk projects. Treasury has not formed its views adequately on this. The problem, however, appears to be the fact that the majority of the shareholders in these junior companies are foreign individuals. The DME has to be careful then not to be too lenient with tax deductions, as the benefits could be duplicated in foreign jurisdictions. If this is the case, benefits would largely be enjoyed offshore and BEE efforts run the risk of being undermined. However, one cannot discourage foreign investors as they are important.

Discussion
The Chair decided to split the discussion into environmental issues, matters pertaining to Treasury, as well as community issues.

Mr L Greyling (ID) asked if there was any consensus with DEAT in respect of the competence issue, and expressed his concern as to the apparent conflict within the executive. It would be desirable that DEAT played some role in the environmental aspects of the mining sector.

Mr S Louw (ANC) emphasised that one of the key roles of the MPRDA was to regulate environmental matters within the mining sector and it is therefore a matter of strengthening the existing legal framework. The DME is definitely fit to deal with environmental issues arising within the mining sector.

Mr Rocha stated that DEAT and the DME had not reached consensus and had agreed to disagree. The DME is tasked by law to deal with such environmental matters, and shall not shy away from its duties.

Mr Rocha stressed that the regulatory process must not be confused with the approval process. He pointed out that, as the new Environmental Impact Assessment (EIA) procedure is developed, lacunae will be addressed as they arise. Legislation cannot be used to regulate other departments, and is sector specific. He continued that the DME has been criticised for delaying applications, but added that this is not necessarily caused by environmental matters. Financial reasons, amongst others, also cause delays.

Mr E Lucas (IFP) stated that this conflict is a worrying phenomenon, and continued that it is desirable to have increased harmony, particularly at this level of government. He added that the DME has always been a forerunner of progressive change and should not put the brakes on this.

Mr C Kekana (ANC) state that the consultation process cannot continue indefinitely. He reiterated the concerns of Mr Lucas.

Ms N Mathibela (ANC) asked for clarification as to what the crux of the problem is, particularly in light of the express competence conferred on the DME by the MPRDA.

Mr Rocha stated that this confusion is rife, and needs to be sorted out. The environment is a very broad category and includes many subcategories. The DME has taken what, in its view, is the correct route. He stressed that there is no dispute as to the principles, as they both agree that EIAs and Environmental Management Plans (EMPs) are crucial in what amounts to a continuous approach to environmental management. However, the crux of the disagreement appears to be who is empowered to deal with which environmental matters, and in terms of which legislation it is to be dealt with. He highlighted that NEMA principles have been included in the MPRDA and thus having separate requirements and procedures is unnecessary. Accordingly, the term ‘’environmental authorisation’’ is not appropriate, and the word ‘’environmental management programme’’ is a better option. However, if the former term is used, it is perhaps necessary to include a deeming provision in order to ensure that EMPs are equated with authorisation for the purposes of the Act. The MPRDA adequately deals with a wide range of environmental issues and just needs to be supplemented. There is no need for a separate process.

The Chair expressed his agreement with Mr Greyling in that environmental matters are an ongoing concern. Red tape and ‘bottlenecks’ are not constructive and need to be done away with. He reminded the DME that mining is an area of national competence and emphasised that the MPRDA is an important tool for transformation.

Mr W Spies (FFP) reiterated the concerns of his colleagues in that the dispute is worrying, and added that the legislature is not the correct body to deal with conflict in the executive. He maintained that this is a separation of powers issue, and a forum at executive level would need to be established to find a solution.

Secondly, Mr Spies asked whether the same provisions which were to apply to communities were to apply to individuals. He also asked whether this legislation will reduce red tape in respect to projects launched by other agencies and departments (National Roads Agency, Land Affairs, Water and Forestry, etc). Often, authorisation for a project has to be received from up to four different bodies which was proving very problematic, and had considerably slowed down many projects.

Ms Mathibela asked if there was any other country, apart from Canada and Australia, who had made use of the concept of junior companies. She expressed concern in that South Africans are not benefiting from their own mineral resources.

Mr Louw asked which specific commodities are being targeted by junior companies. Such entities should not be allowed to undermine BEE progress.

Mr Lucas repeated the concerns raised by Mr Louw, and added that newly acquired prospecting rights must be protected and used conservatively. He emphasised sustainability as a long term goal.

Ms Mathibela asked whether the DME had an explanation for the recent television broadcast of a worrying situation within the Limpopo province.

Adv Mononela replied that all individuals and provinces are treated equally by the DME, but added that he did not have sufficient information to comment on the Limpopo situation.

In terms of the Canadian model, he added that it is important to bear in mind that their model presupposes that no social inequity or disadvantaged communities are prevailing. With regard to junior mining companies, usually the whole setup is sold after prospecting rights have been awarded. Beneficiaries are usually the shareholders, not the licence holders. It is important to remember that such companies to whom prospecting rights are awarded, must be able to sustain themselves financially, as otherwise there is no point in awarding the rights in the first instance.

Ms Swart replied to the question relating to the roads agency and related projects. She stated that the DME would not exempt such organs but would enter into a memorandum of agreement. This has been done for the Department of Water Affairs and Forestry (DWAF) and a similar type of arrangement would be considered for the Roads Agency.

With respect to consultation processes, Ms Swart maintained that farmers and land occupiers were definitely also consulted. Legislation directed that consultation would take place with the land owner, but also makes provision for other interested and/or affected parties.

Ms Ledingwane explained that complaints, particularly in the Limpopo province, were directed at the lack of consultation as well as at the lack of benefits received from mining operations. In this regard, the DME is looking at strictly enforcing the respective companies’ existing social responsibilities and legal strategies. Once licenses have been granted, the DME is limited in its ability to intervene. She agreed with the Committee in that the consultation process is in need of formalisation.

Junior mining companies must be distinguished from small mining companies. The DME was awaiting a report from Treasury which would enable it to deal comprehensively with the former; but with regard the latter, financial and institutional support was still required. However, this was a separate issue.

Proposed amendments to MPRDA Amendment Bill
The Department presented proposed changes to the Bill (which were numbered 1 through to 160). The DME delegation read through the list of amendments, and the Committee was able to ask questions. These concerns were then discussed and response given by the various DME representatives.

Clause 1
Adv H Schmidt (DA) asked for an explanation for the word 'community' in Item 5, as it appeared to be used in two different contexts.

DME explained that such a definition catered for both previously disadvantaged communities and the broader community. The second definition was used in relation to the consultation process and thus needed to be broad, while the first definition was focused primarily on benefits.

The State law advisor highlighted that it should read ‘’For the purposes of this Act,” and pointed out the importance of such a provision. The Chair agreed with the State law advisor.

Adv Schmidt asked for an explanation as to the purpose of the omissions in general in Item 7.

DME explained that the MRDPA contains definitions and the intention was to harmonise such definitions with NEMA within separate regulations, and not within original legislation.

Adv Schmidt requested an explanation as to the significance of the phrase ‘’old order right” in Item 18.

Ms Swart stated that such a term was a reference to current and valid mining licences that were not covered by this Act. They were issued under past legislation and had to be converted to be considered a ‘’new order right.’’

Ms Swart also mentioned that, with regard Item 23, residue stockpiles and deposits are regulated separately.

Clause 4
In light of Item 30, Adv Schmidt suggested that the written notice be defined within the regulations, as it may be open to abuse. There were many forms of written notice, and it was open to interpretation.

The DME stated that this provision was sufficient, as it did not allow a circumvention of the consultation process.

Clause 11
Adv Schmidt asked if Item 42 related to Item 46, and if so, there appeared to be a contradiction. The latter referred to “must” while the former referred to “if.”

Adv Mononela stated that ‘’if’’ would inevitably imply a rejection if the application was not accepted. The DME did have the right of refusal, and this needed to be clarified.

Clause 17
The State Law Advisor emphasised that Item 62 needed to be scrutinised in terms of the constitutional provisions relating to administrative action. She affirmed that, in its current form, it would be unconstitutional.

The Chair stated that he saw nothing wrong with the provision. It simply meant that if there was no compliance, there would be a rejection.

The DME explained that, if this approach were to be taken, the acceptance by the DME would also constitute administrative action. If the application did not comply with the law, the application could also be refused. Accordingly, this would also amount to administrative action. Reasons would be provided, and applicants would be notified of refusals. This proposed amendment was not changing any existing procedure but just needed to be given expression within the Act.

The Chair pointed out that, if there were no problems with the existing framework, the provision should remain unaltered.

The DME replied that the rejection was not final, and that non-compliant applicants, or those who had been refused licencees, may reapply.

Adv Schmidt maintained that the alteration was unnecessary, and stated that the word ‘’rejection’’ seemed to imply a final and absolute decision on behalf of the DME.

Mr M Matlala (ANC) reiterated the concerns of his colleagues, and added that it seemed as if the right to re-submit was being removed.

Mr Lucas stated that he did not find a problem, in that the effect was the same.

The Chair agreed with Mr Lucas.

Clause 37
Adv Schmidt asked what the significance of the provision in Item 105 was.

Ms Swart responded that the old order rights were deemed to be operational, and that it was still necessary for licence holders to officially close such operations.

Adv Schmidt asked if he was correct in asserting that there was an element of retrospectivity in that there would be an element of liability in both previous and current situations.

The DME explained that, under previous legislation, closure certificates used to be issued. If such certificates have not been issued, the mines were still deemed to be operational. It was explained that this provision incorporated section 12 of the previous Minerals Act.

Clause 41
With regard to Item 120, Adv Schmidt asked why the Minister was given such an unfettered discretion. He added that the Dawood case had warned against such arrangements. The discretion needed to be guided in some way or another.

Adv Mononela explained that this type of discretion was very specific to this Act. Mineral scarcity and national interests dictated that such a discretion be issued to the Minister. He added that this had always been the case.

Adv Schmidt stated that the discretion itself was worrying, and could not easily be justified unless it was regulated and guided.

The Chair agreed with Adv Schmidt on this point.

Clause 55
Adv Schmidt asked what the next step would be after consultation was complete. Was any other recourse available?

The DME appreciated that consultation should not just be for the sake of it. Beyond the process, if conflict had not been resolved, further discussions were held. This process was regulated, and those unsatisfied did have recourse to arbitration.

Clause 59
Adv Schmidt asked what the legal implications of Item 131 would be, as they seemed to be juxtaposed with the previous clause. He asked whether the clause amounted to a rejection.

The Chair emphasised the need for consistency.

Clause 83
Referring to Item 156, Adv Schmidt asked in which circumstances 3A would apply.

The DME explained that these specific sections formed part of the transitional arrangements. Currently there was no mention of a decision to refuse or reject.

The Chair thanked the delegation, and mentioned that there were still items that need to be worked through more thoroughly.

The meeting was adjourned.