Public hearings on the Mineral and Petroleum Resources Development Amendment (MRPDA) Bill continued on September 12, 2013. The day’s agenda included hearings from Standard Bank, Sasol, the South African Maritime Safety Authority, Shell SA, the Federation for a Sustainable Environment, the Centre for Environmental Rights and the Western Cape Department of Environmental Affairs. PetroSA did not present an oral submission.
Standard Bank told the Committee it was aware that Black Economic Empowerment (BEE) was the core focus of the amendments to the Bill. BEE could be considered at any stage of Standard Bank’s work. For the purpose of the amendments, as an entity involved in finance and commercial activity, Standard Bank had outlined issues of risk and investment. For offshore oil and gas, its view was that it was possible -- but unlikely -- that BEE would be active at the exploration phase of the process, because of the nature of risk and because most of the knowledge in that area would be placed outside of BEE. However, BEE investors could make their own decisions and choose to take risk. Standard Bank decided to finance BEE projects based on the bank’s requirements, available capital and on the project’s merits and risks.
Sasol criticised the lack of clarity in the provisions of the Bill. It was of the opinion that the current Bill, if legislated in its current format, would have some unintended consequences and would severely challenge Sasol’s ability to execute its strategy in South Africa, its role in the National Growth Path and in the National Development Plan. Sasol’s 2050 strategy was in line with South Africa’s transformation agenda. Asked if the uncertainties made it easier or harder to operate in South Africa, Sasol said that due to the lack of clarity on investment in the Bill, it certainly would re-look at how and where it would invest.
The South African Maritime Safety Authority (SAMSA) highlighted the fact that transport had to be incorporated into discussions when discussing minerals development. Minerals were the largest commodity that SA transported, but South Africa did not have its own ships or control of its cargo after it was dumped at Richards Bay. South Africa was far behind its trading partners in this regard. SAMSA believed that the Bill needed to be aligned between the Transport Charter and the Mineral Resources Charter to the extent that it enabled SAMSA to leverage cargo.
Shell said it fully supported the government’s BBBEE agenda and its state participation aspirations, but clarity was needed on the scope, mechanism and interplay between the three entities so that investors could confidently commit to long-term investments. This should be defined in the Act. In addition, the absence of regulations accompanying the Bill, indicating how the legislation would be implemented, made it difficult to assess impacts on operations and to make investment decisions. It was critical that companies understood up front how clauses would be implemented to assure protection of their economic interests over time. The current draft Bill included several instances where the Minister had the discretion to decide on aspects such as time frames and exports, which had a long-term impact on oil and gas operations and economics. To give certainty and stability to investors, the discretionary clauses should be clearly defined in the Act.
The Centre for Environmental Rights (CER) said the question was whether giving the statutory mandate to the DMR was in the interests of the environment, would be a better use of public funds, was constitutionally acceptable, and was effective and efficient. It was the CER’s submission that environmental authorities were more appropriately placed to consider the issues and ensure compliance of mining activities in relation to their environmental impact. It was also submitted that the Bill did not make adequate provision for consultation with parties interested in, and affected by, mining activities, or make adequate provision for access to information by those parties. It therefore failed to give effect to the Constitutional rights to fair administrative action and access to information.
The Federation for a Sustainable Environment (FSE), said that there was a lack of clarity on the enforcement of a sustainable plan to address post-closure water-related pollution at mines in the application phase. Typically, failure to include such a provision led to significant costs not being provided for. The risk was to owners, the mining company and anyone who gained benefit from the mine. It had to be clear from the beginning that after a mine closed, the water needed to be treated. The second financial risk was to society and government, which had to step in to treat the environment. The financial risks alone should be enough motivation to state unambiguously, somewhere in the Act, that there had to be a sustainable plan drawn up at the application phase and that it should be part of the financial quantification.
The Western Cape Department of Environmental Affairs contended that there was a difference in how sustainable development was viewed in terms of the MRPDA and the National Environmental Management Act (NEMA). They were virtually the same, except that the MPRDA called for ensuring sustainable mineral development and NEMA called for ensuring sustainable development. NEMA called for all land use to be considered equitably before considering what constituted sustainability, while the MPRDA focused on the mineral development mandate. The WCDEAP had thus persistently maintained that the decision-making mandate should not be transferred to the DMR, as there were two conflicting mandates. The inherent conflict would inevitably result in bias, and this did not constitute good governance.
Mr Kwezi Tiya, Head of Business Acquisition: Transactional Products & Services, Standard Bank, said that the presentation focused on the potential for investments and commercial projects to be undertaken in South Africa’s offshore oil and gas industry. Standard Bank believed that some of the amendments would impact negatively on the country’s ability to attract investment to unlock and realise the value of South Africa’s mineral resource environment.
There was a risk involved in a company investing its skills, time and money in mining to unlock potential value beneath the ground. Coal mining, for example, could take one to three years before mining started. Offshore oil and gas investment was on a different scale. Close to $7 billion and eleven years could be spent trying to find out whether there was mining potential beneath the ground and to develop the product.
Mr Mohammed Bhabha, Head of Investment, Standard Bank, described the economic viability of various model scenarios, based on current and proposed legislation and different risk profiles. This included development costs, funding of state and Black Economic Empowerment (BEE) facilitation, exploration risks, economic impact outcomes, employment potential, royalties and tax, and return on investment in development projects, such as infrastructure and education.
Mr Tiya added that it was critical that broad stakeholder input on the amendments should be considered in order to attain the optimal approach, framework and formula for offshore investment. He proposed that South Africa should look at the approach used by other countries, such as Ghana, Tanzania, UK, Qatar and Norway, when they were at the same stage as SA currently was.
The Chairperson asked if Standard Bank had done a comparative analysis between different countries.
Mr Tiya replied that Standard Bank had conducted its own analysis, but it would be more appropriate for policy makers to source external experts and specialists to conduct an independent analysis.
The Chairperson asked why the MPRDA should be based on the best practice of countries outside Africa.
Mr Bhabha replied that the choice of countries was based on the stage of development of their oil and gas fields and the maturity of the market, as well as their relevance to the South African environment, for optimal use by South Africa’s policy makers.
Mr J Lorimer (DA) asked if Standard Bank, given the proposed MPRDA Bill, believed that SA would attract investments that would result in a viable offshore industry.
Mr Tiya replied that each company made its decisions based on the company’s level of risk. The presentation took cognizance of the current legislation versus the current proposed amendment, and whether the investor was likely to finance or not finance BEE, given that the geology was not certain and there were many unknowns.
Mr H Schmidt (DA) said that the diagram on pages 10 and 11 presented a wide scenario, with a number of unknowns and variables. He was concerned that government was about to embark on a policy without knowing a set of variables. Even Members could not know whether the variables were applicable. The legislature was expected to adopt a Bill without being informed of, or discussing, the basic parameters. He would expect some form of discussion on draft regulations between National Treasury, the banking sector, Department of Finance and SARS to establish parameters, and then to determine how they should be phrased in policy. He asked if Standard Bank had interacted with any of the above entities. The diagram indicated that there had been no meeting of minds as to where the parameters should be.
Mr Tiya replied that Standard bank had shared its own observations. All other areas belonged in the area of policy-making and legislation, which was outside of Standard Bank’s mandate.
Mr J Moepeng (ANC) said that the presentation seemed to speculate on the best formula for engagement with investors. The indication was that Standard Bank suggested that the formula used was not correct. He asked what formula the state should use to engage stakeholders.
Mr Tiya replied that Standard Bank had not come across analysis done by the state. It could adopt recommendations from Standard Bank’s shared knowledge.
Mr Moepeng asked why Standard Bank chose to speculate on investment and return. It was not based on reality. He was more interested in the risk that Standard Bank was prepared to take if BEE was realised, and how it was prepared to assist government.
Mr Tiya replied that it was Standard Bank’s core business to provide capital and returns on investment, and it intermediated on the basis of available projects, to enable the country’s development. Standard Bank was the leading finance bank for resources and energy and minerals projects, and was aligned to government programmes worth in excess of R40 billion. Therefore, it was Standard Bank’s core business to identify projects that may realise revenue.
Mr Moepeng asked how many previously disadvantaged individuals or groups had been assisted at the level of risk discussed in the presentation, so that if a company opened its doors to assist these groups, Standard Bank could be approached and relied upon to do so.
Mr Tiya replied that he had not brought the Human Development Index data to the meeting. In principle, Standard Bank had various levels of business which financed these and other programmes that facilitated a number of BEE transactions to enable economic participation, including individual subsidies and the financing of public service clients. He would follow up through the Committee Secretary with the data. Whether Standard Bank should make capital available to aid the objectives of the government would be a government decision.
The Chairperson asked how aligned Standard Bank was to government priorities, and if it could list its performance relating to BEE companies in this particular sector.
Mr Tiya replied that Standard Bank always ensured that its work was aligned with government priorities. The detail on Standard Bank’s investments in government programmes could be submitted to the Committee. Examples were rural development, infrastructure -- including the Gautrain -- and education.
Standard Bank was aware that BEE was the core focus of the amendments to the Bill. BEE could be considered at any stage of Standard Bank’s work. For the purpose of the amendments, as an entity involved in finance and commercial activity, Standard Bank had outlined issues of risk and investment. For offshore oil and gas, its view was that it was possible -- but unlikely -- that BEE would be active at the exploration phase of the process, because of the nature of risk and because most of the knowledge in that area would be placed outside of BEE. However, BEE investors could make their own decisions and choose to take risk. Standard Bank decided to finance BEE projects based on Standard Bank’s requirements, available capital and on the project’s merits and risks.
Mr Schmidt asked how the figure of a 10% shareholding was determined -- key levers for the state were taxation and royalties, not being a shareholder.
Mr Bhabha replied that the modelling scenario, over five years, showed that the different dividends due to the state through its shareholders, was less than the total tax and royalties. It was more beneficial for the state to earn from tax revenues and royalties than through investment.
Mr Tiya added that Standard Bank was offering information, but did not take a view on whether the state should take a stake or not. There were many considerations. In the US, the state had no stake.
Mr Moepeng suggested that Members should delve deeper into a comparative analysis between countries.
Mr Tiya replied that Standard Bank was offering its own analysis, from a financial and commercial point of view, but the policy makers would need to consider far broader perspectives.
The Sasol presentation outlined the company’s background, and domestic and international activities.
Mr Johan Thyse, Head of Public Policy and Regulatory Affairs, Sasol, said that Sasol differed from other companies as it was present throughout the value chain. It was therefore impacted by both policy and regulation. Sasol was of the opinion that the current Bill, if legislated in its current format, would have some unintended consequences and would severely challenge Sasol’s ability to execute its strategy in South Africa, its role in the National Growth Path and in the National Development Plan. Sasol’s 2050 strategy was in line with South Africa’s transformation agenda.
Key comments on the Bill referred to Free Carried Interest (FCI); the Mining Charter; the concept of Concentration of Rights; the transfer of petroleum licensing jurisdiction to regional managers and the disbandment of the Petroleum Agency of South Africa (PASA); beneficiation; environmental management and authorisations, increasing the extent of a mining right through amendments; removal of prescribed timeframes; strategic minerals and restrictions on exports; and transitional provisions relating to existing appeals to the Director-General.
Mr Schmidt asked for clarity on whether Sasol would prefer the FCI and times frames to be determined in the enabling Act, rather than in the regulations.
Mr Lorimer said that the presentation talked about lack of clarity in numerous areas, such as FCI, whether or not the Mining Charter would be applied to upstream exploration, concentration of rights; targets of beneficiation and lack of prescribed time frames. He asked if the uncertainties made it easier or harder to operate in South Africa.
Mr Thyse replied that due to the lack of clarity on investment in the Bill, Sasol certainly would re-look at how and where it would invest.
Mr Schmidt asked whether the issue with rights was “abuse” of a concentration of rights, rather than a concentration of rights.
Mr Sarel Booyens, Sasol Mining Rights and Properties, replied that the Concentration of Rights in current legislation was based on high level criteria. It was unclear whether the rights would be based on the size/volume of the area, or purely the geographical science trajectories of that. Concentration of Rights was sometimes necessary for efficiency, to optimally exploit a reserve or make otherwise uneconomical cases viable. While rights were granted on cadastral boundaries, where coal did not follow cadastral boundaries - there were sometimes pockets of minerals found within a large area which were economical to extract, owing to there being an existing infrastructure. A company may end up applying for rights for ten small areas to fully exploit an area. It was therefore important to consider optimal exploitation and the reason for applying for the right.
Mr Lorimer said that the written presentation had drawn attention to state participation in mining and petroleum in Botswana and Mozambique. He asked how it differed from what had been proposed for South Africa.
Mr Vincent Mashaba, Exploration Lead: Sasol, replied that normally in developing countries, and in most African countries, in the first phase of exploration, which was capital intensive, the state was carried by operating companies, with a shared interest of up to 15%. They did not have to pay for the costs associated with exploration. Upon submission of their development plan, the participating companies had the right to recoup the money spent in “carrying” the government during the exploration phase, based on royalty tax and the entity split of participation during the exploration phase.
The Chairperson asked for Sasol’s comment on the amendments with regard to environmental pollution (and Sasol emissions).
Mr Thyse replied that Sasol’s detailed comments on the amendments relating to the environment were included in the detailed submissions. This was a chief priority for Sasol, which had spent over R4 billion in the past few years to ensure that Sasol’s impact on the environment was minimized. He would submit a written reply to the Committee within 24 hours, as he himself was not the expert in this particular area.
South African Maritime Safety Authority (SAMSA)
Mr Sobantu Tilayi, Executive Head, SAMSA, highlighted the fact that transport had to be incorporated into discussions when discussing minerals development. Minerals were the largest commodity that SA transported, but South Africa did not have its own ships or control of its cargo after it was dumped at Richards Bay. South Africa was far behind its trading partners in this regard.
SAMSA believed that the Bill needed to be aligned between the Transport Charter and Mineral Resources Charter to the extent that it enabled SAMSA to leverage cargo. Furthermore, the UN Convention on Trade and Development (UNCTAD) allowed for counties to transport at least 40% of their trade (the 40:40:20 principle) in order to enable countries to control the shipping of their trade. This arrangement would enable South Africa to begin to build its shipping industry and capacity. The Transnet Infrastructure Programme of R300 billion could contribute towards shipping.
Mr Samuel Nkosi, Executive Head: Policy, Regulatory Affairs and SA Ship Registrar, SAMSA, said that without cargo, SA would not be able to own, charter or operate ships. As a result, SAMSA had examined the amendments and made the proposals as set out in the submission.
SAMSA was engaging with Treasury to ensure that there were no unintended consequences. As of January 1, 2014, there would be no taxation on income and other exemptions. Foreign ships that registered in SA blocked SA ships from fully participating in the shipping industry.
Mr Schmidt asked why SafMarine had left South Africa.
Mr Nkosi replied that SafMarine had been established through a USA and SA partnership. It had later become wholly-owned by SA. By 1991, the majority of shares were owned by Old Mutual. SafMarine left SA when Old Mutual left SA. The reason they put forward was that the tax regime was 29%, whereas in Singapore and Hong Kong it was zero. Even South African ship owners registered their ships outside of SA, because taxation caused them to make very little profit.
Mr Schmidt understood that SA had the ability to build ships, and asked why SA could not build ships and compete in shipping.
Mr Nkosi replied that SA had the capacity to build ships, but they were very expensive. Nobody would provide capital to build a ship unless there was cargo, an off-take agreement, or at least the 40:40:20 principle.
The Chairperson asked if he was suggesting that Transnet’s Infrastructure Plan may have a dead end.
Mr Tilayi replied that while the Infrastructure Plan would increase the amount of cargo by getting it out of the ground and to the port, it could also be participating in the shipping between Saldanha Bay and China.
Mr Moepeng asked how much revenue SA was losing. He understood that billions were made by those who had licences, through the shipping of minerals.
Mr Tilayi replied that according to UNCTAD, 12% to15% (R160 billion) of SA trade (R1.2 trillion) went to the cost of international logistics. A study by the University of Natal showed that in 2008 alone, the cost to the economy for shipping transport was R56 billion. This included the insurances and other related tariffs.
Mr Moepeng asked what steps had been taken to popularise shipping among the youth and to increase interest in the industry.
Mr Tilayi replied that skills and awareness were a critical area that needed attention. The Agulhas ship had recently been transferred from the navy to SAMSA, and 58 maritime cadets were on board. The ship trained students to become employed internationally and so far the feedback had been encouraging. SAMSA had also held a maritime exposition to drive awareness and was in close connection with the Department of Environmental Affairs (DEA) to maximise awareness.
Mr Moepeng asked how much of the SA offshore and onshore coastline was not secured, and what measures had been put in place to secure it.
Mr Tilayi replied that SA had 3 000 km of coastline, which was largely porous. There were eight major ports under the International Security Port Facility Code. The smaller ports were a challenge. Measures had been put in place to monitor irregular ship movements: a fleet of ships patrolled the coastline; SAPS and border controls had formed a security cluster which worked together; Maritime Domain Awareness Surveillance had increased; and a satellite tracking system could automatically identify all ships.
Mr Schmidt asked for clarification on whether the Transnet Infrastructure Plan was a project on its own, or was linked to the mining industry. He asked how the rail industry, which has major demand, could be linked to the shipping industry.
Mr Tilayi replied that the R300 billion was for export and import infrastructure. The value chain ended prematurely, before the shipping leg. There would be an increased amount of coal at Richards Bay and the state would derive more benefit from the investment made. This was the relationship.
The Chairperson said that the Committee would like to invite SAMSA back to Parliament to discuss the policy gaps further.
Mr Jan Eggink, Upstream General Manager, Shell SA, highlighted Shell’s upstream and downstream opportunities, its upstream investment and the factors and environment which favoured investment.
In summary, Shells main concerns were: uncertainty in relation to equity ownership provisions in the Mining charter; state participation; Free Carried Interest; and how they interrelated with each other in the oil and gas industry.
Shell fully supported government’s BBBEE agenda and its state participation aspirations but clarity was needed on the scope, mechanism and interplay between the three entities so that investors could confidently commit to long-term investments. This should be defined in the Act. In addition, the absence of regulations accompanying the Bill indicating how the legislation would be implemented, made it difficult to assess impacts on operations and to make investment decisions. It was critical that companies understood up front how clauses would be implemented to assure protection of their economic interests over time.
The current draft Bill included several instances where the Minister had discretion to decide on aspects such as time frames and exports, which had a long-term impact on oil and gas operations and economics. To give certainty and stability to investors, the discretionary clauses should be clearly defined in the Act.
Mr Schmidt said that he understood the need for regulations so that investors could make their commercial determinations, but he needed clarity on whether offshore and mining should be combined under one set of rules, when they were two different environments with different criteria in terms of their legal environment, technology and risk.
Mr Eggink agreed. Mining was different to oil and gas operations, but they could be dealt with in one Act. Shell would like to engage constructively with the Department of Mineral Resources (DMR) on how to do that. Onshore and offshore gas exploration environments were different, but they were otherwise similar and the risks were roughly the same.
Mr Schmidt said that he understood that the processes could be similar, but it appeared that they required specific skills to deal with the different legal structures. The notion was against the removal of PASA and rather to combine energy structures as one and retain the knowledge in one independent structure. He asked for Shell’s comment.
Mr Eggink replied that it was not important whether it was PASA or another entity, as long as the capabilities were preserved. A strong competent regulator was required.
Mr Lorimer asked why Shell could not simply wait for the regulations.
Mr Eggink replied that Shell was waiting for the regulations, but it was difficult to comment or make statements on the MPRDA without sight of the regulations. There were three unknowns, as described earlier, and the only comment he could make was that they were uncertain.
Mr Ivan Collair, Government Relations Manager, Shell SA, added that large scale investors would want certainty of time frames in the Act. The Bill had to be clear.
Ms K Khunou (ANC) asked if Shell could show evidence of the impact of its BBBEE involvement.
Ms Gheneez Munian, Venture Support Integrator, Shell SA replied that Shell had a sound local policy and level 2 BEE status, with employment equity and development of skills, performance enterprise, economic benefit and development in Corporate Social Responsibility. Shell’s approach was to scale the same leadership positions in the upstream value chain. Shell was focused on skills development, particularly in the communities where it was operating. For example, in the Karoo, skills development ensured participation and economic benefit. Shell also collaborated with local Further Education and Training (FET) colleges to maximise local content as much as possible.
After the Shell presentation, the Chairperson announced that PetroSA had withdrawn from the oral presentations for unknown reasons, but that its written submissions had been accepted.
Centre for Environmental Rights: a joint submission with Endangered Wildlife Trust, Worldwide Fund for Nature South Africa, Birdlife for Africa, Groundwork South Africa, Conservation South Africa, GreenPeace and Prof Tracy Humby
Ms Melissa Fourie, Executive Director: Centre for Environmental Rights (CER), said that the primary objective of their NGO -- a non-profit law centre -- was to ensure that the environmental impacts of mining were adequately regulated, as required by the Constitution, the National Environmental Management Act (NEMA), the MPRDA, the National Water Act 1998 (NWA), and the Promotion of Justice Act 2000 (PAJA). It had taken many years to establish the capacity to achieve this, and the CER believed that this capacity currently did not exist in the Department of Mineral Resources (DMR). The question was whether it was in the interest of the environment, would be a better use of public funds, was constitutionally acceptable, and effective and efficient, to give the statutory mandate to the DMR. It was CER’s submission that environmental authorities were more appropriately placed to consider the issues and ensure compliance of mining activities in relation to their environmental impact.
The CER’s reasons, as submitted to the Committee, were:
• The DMR did not have anywhere near the human resource capacity to implement NEMA and the EIA regulations effectively, and CER had not seen any feasible plans to address this capacity deficit;
• The DMR had a poor track record on environmental regulation in areas such as impact assessment, compliance monitoring and enforcement;
• The DMR had an inherent conflict between its obligations to promote mining and its obligations under NEMA;
• The proposal might be unconstitutional due to the impingement on the mandate of provinces;
• The proposal was inappropriate because it perpetuated special ongoing treatment for the mining industry over other industrial sectors;
• The proposal in the Bill was not an efficient use of public funds; and
• The proposal in the Bill would perpetuate inadequate protection of the environment and an unsustainable development of mineral resources.
In summary, giving the function of mining regulation to the same department that was mandated to promote mining, meant that it was fundamentally not in its interest to be the strong regulator that was required to manage the impact of mining on the environment. This was why South Africa was now spending billions of rands in attempts to halt the detrimental impacts of acid mine drainage and why the country’s public health system was bearing the costs of the impact of air pollution from mine dumps and mining activities on the health of South African citizens.
There had been limited consultation on the Bill, and the CER had not had the opportunity to make its argument in the appropriate forum. This would be an opportunity to free the DMR from the responsibility and strengthen the environmental focus at the same time. The CER believed that the DMR had been reluctant to hand over the responsibility to the environmental authorities, resulting in an overly complicated, inherently conflicted and flawed, unrealistically optimistic regulatory regime. Should the Bill go ahead in its current form, the CER requested that the Committee ensure adequate funding for the DMR to perform its work and also to hold DMR accountable to their obligations, under NEMA - to the environment of South Africa. South Africans needed to drink water and breathe air, and our children could not afford to endure another lapse of legislation, as had happened in 2008.
Mr Schmidt asked the CER what its view was on no-go areas.
Ms Fourie replied that no-go areas were very important. In 2011, the CER had submitted detailed documents to the Minister of Mineral Resources, asking her to exercise discretion and declare no-go areas restricted from mining under the relevant legislation. These were not arbitrary areas, but were well-researched by the Mining Biodiversity Guideline. The CER had explained to the Minister that declaring no-go areas would assist private mining companies to know when and where they could invest. However, the CER had never received a reply from the Minister, but CER was aware that the DMR was in the process of identifying areas suitable for proclamation. These issues had not been discussed publicly. Trust in government was low, as mining companies continued to apply for rights at sources of major rivers and in places that even the Minister had said would not be mined. This was as serious as life and death.
The Chairperson said that the CER had written to the Portfolio Committees on Mineral Resources and Water and Environmental Affairs, which were both dealing with the NEMA Bill. The CER had made input on the Bill. He asked the CER to comment on the presentation by the Joint Committee on Water & Environmental Affairs the previous day, regarding bringing in a ‘one stop shop’.
Mr S Mohai (ANC) asked the CER to be more specific regarding legacy issues,
Ms Fourie said that from an environmental point of view, black and white-owned companies violated human and environmental rights in the same way. The most affected people were the poor black people, who could not afford to move away from polluted water and air.
Environment compliance and regulation had to be enforced by people with specific training, including criminal and legal training. SAPS did not understand mining or environmental legislation and would not prosecute cases. Some mining crimes were organized crime. It had taken a long time for the environmental authorities to understand this.
Federation for a Sustainable Environment
Dr Koos Pretorius, Director: Federation for a Sustainable Environment (FSE), said that there was a lack of clarity on the enforcement of a sustainable plan to address post closure, water-related pollution in the application phase. Typically, failure to include such a provision led to significant costs not being provided for.
The risk was to owners, the mining company and anyone who gained benefit from the mine. It had to be clear at the beginning that after the mine closed, the water needed to be treated. The second financial risk was to society and government, which had to step in to treat the environment. The financial risks alone should be enough motivation to state unambiguously, somewhere in the Act, that there had to be a sustainable plan drawn up at the application phase and that it should be part of the financial quantification.
The Department of Water Affairs had indicated that water-use licences for post closure water treatment would put significant mines into distress because they had not budgeted for this at the application phase. The mining companies did not know what they were in for.
FSE described various scenarios for owners and third party mining and the costs involved (see attachment). Scrutiny of the calculations by the public would make a difference, but currently the calculations used were not available for public comment.
FSE welcomed the fact that the time frames had been scrapped, but the Minister now had the discretion to determine the time frame for submission of the Environmental Management Programme Report (EMPR). Previously 180 days was too short, but it could now be 181 days or 2 000 days. FSE wanted the Act to stipulate the new time frame -- say, 360 days -- and the regulations to prescribe how the process within that period should be followed. FSE did not support the Minister having all the power of discretion on the time frame, as it was not possible to evaluate and commit to a section of the Act without knowing the time frame involved.
FSE also submitted a request for the Social and Labour Plan to be submitted together with the EMPR, as they influenced each other. Lastly, FSE requested that the 12 Catchment Management Agencies (CMA) in the country responsible for the management and quality of water resources should participate in the Regional Mining & Developmental Committee (RMDEC), as currently RMDEC was for government departments only. CMAs were ceded the regional and provincial work of both Water Affairs and Mineral Resources.
Mr Schmidt said that he was concerned that neither of the two Departments had taken forward planning seriously. He asked what the current situation was regarding the costs related to the thousands of mines that had closed 20 years ago.
The Chairperson said that the DMR had figures indicating that 6 000 mines were unaccounted for and their owners untraceable. The DMR had approached Treasury, but had not received the full amount of funding for rehabilitation. Sanctions were being applied.
Mr Schmidt said that the Department of Minerals and Energy (DME), at the time, had quoted a figure of R50 billion for the rehabilitation of the abandoned mines.
Dr Pretorius commented that many of the 6 000 mines were small mines in the Western Transvaal area, and were not abandoned. In the Belfast, Carolina, Brighton and Ermelo areas, all mines were owned. The owner might not easily be found, until someone applied for prospecting rights. In Gauteng, only 8% of the 105 mining companies were abandoned. The others were held in a trust by another company. These owners typically had forsaken the liabilities and taken the assets. It would be important to have a breakdown, per commodity, of the 6 000 mines. The R50 billion quoted by the DME was for surface rehabilitation only, not water rehabilitation.
Centre for Environmental Rights: a joint submission from GreenPeace, Groundwork South Africa, Earthlife Africa, Environmental Monitoring Group and the Vaal Environmental Justice Alliance
Ms Tracey Davis, attorney: Centre for Environmental Rights (CER), said that her particular project involved serving communities affected by mining. The focal point of her submission was that the Bill did not make adequate provision for consultation with parties interested in, and affected by, mining activities; or make adequate provision for access to information by those parties. It therefore failed to give effect to the Constitutional rights to fair administrative action and access to information.
She told the story of an emerging farmer in Mpumalanga, Mr Samson Sibande, who had purchased a piece of land in 2008 to start his life-long dream of farming and providing for his family. He was aware that there had been some coal mining on the property, but was unaware that the mine had been completely abandoned and had not been rehabilitated. He realised the extent of the problem when his animals started to die from drinking polluted water from the abandoned coal mine (full story on audio). The CER had made enquiries on behalf of Mr Sibandeto try to locate the company that had owned the mine and claim for rehabilitation of the land. During the process, CER had been told by the DMR that the same company had reapplied for another prospecting right to the land and had been granted it a month earlier. The same company that had caused the damage and failed to rehabilitate it was free to come back on to the land, do what they wanted to, and leave again without ever rehabilitating the property.
The Constitutional Court had realised the impact of mining in the landmark Bengwenyama case in, where the court had held that the granting and execution of a prospecting right represented a grave and considerable invasion of the use and enjoyment of the land on which the prospecting was to happen. The Court had recognized that in order to mitigate the impact on communities, there had to be consultations in good faith and that mining-affected communities should be provided with all the necessary information about everything to be done.
The CER stated that the MPRDA and the MPRDA Bill did not give effect to these principles of administrative justice, because they failed to provide adequate notice to and consultations with those affected by mining activities, by working in adequate time frames for consultation, notice not seen by interested parties – failing to make provision for access to information by interested parties, rendering ineffective even those consultation opportunities that were provided for. It was a ‘boxed-in” arrangement.
The CER had made detailed submission on the MPRDA clause by clause (see attached).
The CER asked the Committee that as a bare minimum, the Bill should make provision for an obligation on all applicants’ rights under the MPRDA, and make available the full application to interested and affected communities. All rights granted by DMR should be made publicly available through an online DMR public data base, and it should be an obligation by the DMR that all delegations of powers designated to the Minister be made publicly and automatically available.
The MPRDA’s failure to give effect to these principles of administrative justice perpetuated the legacy of unequal access to and distribution of South Africa’s mineral wealth. Despite the fact that the MPRDA recognised the need to promote local and rural development and the social upliftment of communities affected by mining, very few South Africans benefited from mining. The marginalisation of communities affected by the DMR and mining companies was caused by the failure to give effect to these communities’ right to implement administrative action, and by a culture of secrecy and denial.
The MPRDA’s failure to give effect to these principles of administrative justice exposed decisions under the MPRDA to increased legal challenges, with the associated costs to the state. It should be borne in mind that poor communities did not have the resources to challenge the decisions in court.
It also meant that conditions in mining-affected communities were conducive to the generation of social conflict. Mining and social conflict were closely associated in South Africa. Stakeholder engagement should at the very least constitute meaningful consultation and provision of all information relating to mining applications.
There was also the problem of mining companies engaging exclusively with traditional leaders, to the exclusion of the communities. The Act must make clear that all members of the community were entitled to stakeholder engagement. The DMR had failed to consult with communities during the legislative reform process on the Bill, in order to make the legal terms comprehensible to communities.
Ms Davis said that the CER had made DVDs available to each of the Committee Members on mining-affected communities in South Africa.
Ms Khunou asked whether the DMR could give licences to anyone who wished to mine on owned land.
Ms Davis replied that the MPRDA had changed the law. “What was beneath your land no longer belonged to you, it belonged to the state”.
Mr Schmidt said that the Constitutional Court had given clear guidelines on the Bengwenyama matter. The DMR had then stated that it had amended the provisions accordingly, by virtue of amendment of section 16 (4)(d) ‘to consult with any interested or affected party’. Mr Schmidt asked if he was no longer an ‘interested’ party because he was no longer an ‘affected’ party.
Mr Schmidt added, secondly, as stated by Mr Moosa during the public hearings the previous day, it should read ‘may be in the prescribed manner in the regulations still to follow’. The provision in the amendment itself did not seem to reflect the Bengwenyama shift. Consultation could take different forms, depending on the prefix: in, after, with…eventually it should be ‘in consultation with’. Mr Schmidt said that he was asking in general terms whether he was correct in that regard.
Ms Davis replied that it was of great concern to the CER that the word “interested” had been taken out, as this would mean that parties such as the CER would no longer be able to be involved in such issues, which was not good for environmental justice. She agreed that the principles in the Bengwenyama case had not been given effect in the Act. The consultation provisions were too short, there were no provisions for information about the consultation and no time frames, or notice to communities -- this was the problem throughout the Act.
Mr Schmidt added that although there may be a clear legal interpretation of what was required, the substantive shift from the Bengwenyama case was for the landowner to be informed, in real terms, not in legal terms. It was unlikely an individual would check the regional office, magistrate’s court, or the government gazette.
The Chairperson said that in terms of reaching out to people, these were important issues for consideration. The language in which the notice was posted was also a consideration.
Mr Schmidt asked if the CER could give the name of the mining company mentioned during the presentation.
Ms Davis replied that the name of the company was Cousins Coal (Pty) Ltd.
Ms Khunou asked if the DMR could respond to the issues around consultation.
The Chairperson said that the DMR would be called to Parliament. The purpose of the meeting was to receive public hearings.
Western Cape Department of Environmental Affairs & Development Planning
Mr Paul Hardcastle, Director: Planning & Policy, Western Cape Department of Environmental Affairs & Development Planning (WCDEAP), presented on decision-making competency, in terms of environmental management.
As South Africa was a developing country, WCDEAP acknowledged the strategic important of mineral development, the National Growth Plan, and the National Development Plan (NDP). However, consistent with that, one had to acknowledge the importance of environmental management, which was about intra- and inter-generational equity, and nowhere else was this better illustrated than by acid mine drainage. Matters of sustainability were not about the privileged few.
The NDP strategic documents were well-written, but the implementation and detailed analysis thereafter was where things fell apart. WCDEAP considered the notion of cooperation, integration, coordination and decision-making between the DEA, DWA and DMR.
There was a difference in how sustainable development was viewed in terms of the MRPDA and NEMA. They were virtually the same, except that the MPRDA called for ensuring sustainable mineral development and NEMA called for ensuring sustainable development. NEMA called for all land use to be considered equitably before considering what constituted sustainability, while the MPRDA focused on the mineral development mandate. The WCDEAP had thus persistently maintained that the decision-making mandate should not be transferred to the DMR as there were two conflicting mandates, the inherent conflict would inevitably result in bias, and this did not constitute good governance. While WCDEAP supported working together, it did not support transfer of the decision-making mandate.
WCDEAP believed that the current dispensation proposed, in terms of the transfer of decision-making competencies, would result in a significant increase in environmental challenges and appeals, on both substantive and procedural matters. It was impossible to differentiate between substantive issues of appeal and procedural issues of appeal, and a procedural void was inevitably linked to substantive issues not having been addressed. There would be significant concerns on how to deal with this differentiation.
WCDEAP was aware that a number of posts that had been advertised at the DMR to fulfil this function, but this would simply duplicate decision-making competencies. Capacitating local, provincial and national environmental authorities was a much better way of spending money and dealing with the challenge. A total new dispensation was not necessary.
In the 2008, after lengthy negotiations, it had been agreed that the decision-making competency would return to the national DEA, although there would also be provincial competencies. It was not appropriate to terminate the agreement and to bring in a new dispensation.
Finally, it was not possible to have a one-stop-shop in a developing country. It never worked. There could be a one-stop process where application procedures of different mandates were acknowledged, as allocated in terms of the Constitution.
Mr Mohai said that while inter-governmental forums shaped policy and built capacity, government had to take decisions that were long term, sustainable and beneficial. He believed that it was the intention of the Bill to address issues of indecision and indecisiveness on how governance was articulated. The presentation did not highlight what would change, should the inter-governmental forums move in concert on the green areas.
Mr Schmidt said that with the notion and points of departure all being different, there would be more arguments (than would be the case within the same department), which would lead to more appeals and the possibility of more success of appeals. The end forum would be the DEA, but in the end, the decision lay with the DMR and the Portfolio Committee on Mineral Resources. Likewise, he was not sure that the DEA should be the end for all decisions.
Mr C Gololo (ANC) said that the WCDEAP did not support the transfer of environmental decision-making to the DMR. He asked which entity should hold the decision-making competency. `
Mr Hardcastle replied that he was not insinuating that the DEA should make all the decisions. In terms of environmental decision-making competency, because of the two mandates, the one that considered land use in its decision-making should make the decision, because the environmental competencies lay with the environmental departments. The outcome, after negotiations, should be that the national DEA should be the decision-making body, although there would still be provincial competencies.
Mr Gololo asked for clarification on the slide which stated: “All of the above can be achieved through other means”.
Mr Hardcastle replied that coordination between different decision-making policies was achievable with existing tools, and there was room for improvement on that. It would not solve all problems, but would solve the nightmare of dealing with court cases. There were already ways of working together and streamlining decision-making, as they were currently doing without transferring the mandate, although the exclusion of provinces was of concern. The proposal was ‘ the DMR in the short-term or the DEA in the long term’.
The Chairperson commented that the provincial competency had the branches of the environmental inspectorate and the mining inspectorate.
Mr Schmidt added that they had all worked together ten years earlier, but this arrangement had been short-circuited by the national DMR. It was unfortunate that it had not been brought forward.
The meeting was adjourned.
- Western Cape Government submission
- South African Maritime Safety Authority (SAMSA) Proposed Amendments
- South African Maritime Safety Authority (SAMSA) presentation
- South African Maritime Safety Authority (SAMSA) submission
- Standard Bank Commodities Special Report
- Shell submissiom
- South African Maritime Safety Authority submission
- Federation for Sustainable Environmental Affairs presentation
- Federation for Sustainable Environmental Affairs submission
- Shell SA presentation
- Department of Environmental Affairs and Development Planning, Western Cape
- Standard Bank submission
- Joint presentation
- Consultation and Access to Information
- Centre for Environmental Rights submission
- Centre for Environmental Rights comments
- Centre for Environmental Rights joint
- Mineral Resources on the MPRDA Amendment Bill
- Mining and Environmental Justice Community Network of South Africa submission
- World Wide Fund for Nature Report
- Sasol presentation
- Sasol submission
- Sasol Final submission
- We don't have attendance info for this committee meeting
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