Mineral and Petroleum Resources Development Bill: hearings

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Mineral Resources and Energy

10 June 2002
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Meeting report

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The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

MINERALS AND ENERGY Portfolio Committee
10 June 2002

Mr M Goniwe (NA)
Mr M Moosa (NCOP)

Documents handed out:
Public Hearing Bundles A, AA and AAA.
info@pmg.org.za for documents]

The Committee continued with hearings on the Minerals and Petroleum Resources Development Bill. Some of the major mining houses as well as some of its smaller counterparts expressed their concerns over the Bill, as much as they supported the broad objectives of the Bill. Security of tenure and the lack of specific criteria guiding the discretion of the Minister were amongst the most common concerns. The Committee was however presented with a new perspective by Agri-SA on the lack of provision in the Bill on the rights of farmers especially as it relates to their agricultural land.

De Beers
Mr. J. Oppenheimer and Mr G. Turner made the presentation. Mr Oppenheimer stressed the importance of the need for there to be congruence between the objectives of the Bill and the objectives of the Nepad initiative. De Beers supported the objectives and aims of the Bill but nevertheless highlighted some of their concerns over the Bill. It was felt that the provisions on security of tenure could be strengthened and that certain factors that could encourage foreign investment had been omitted from the Bill. Mr Oppenheimer noted that the Bill did not also define the objective criteria for the granting of minerals rights or the extension thereof. The concern was that the decision would lie solely with the Minister. He felt that this would hamper the expansion of opportunities to previously historically disadvantaged persons. He suggested that empowerment concepts like social upliftment programmes for communities, employment equity and ownership opportunities for previously disadvantaged persons, could influence the setting of the criteria. The vertical integration of the mining industry into other industries ie catering and cleaning services was also identified as a means of allowing communities in mining to become more sustainable. Mr Oppenheimer noted that the setting of criteria would allow for meaningful transformation of the industry.

Mr Dlali (ANC) asked what suggestions were offered on the issue of objective criteria.

Mr I Mohamed (ANC) stated given the fact that mining had a limited life, what was being done to assist communities to become sustainable once a mine closes down. He noted that in Britain mining had given rise to other industries and in so doing communities were made sustainable.

Mr B Bell (DP) asked what De Beers was actually suggesting.

Mr G Oliphant said that the provisions on security of tenure were based on international best practice. He asked what was being proposed in this regard.

Mr Turner noted that the issue was one of security. When capital was committed there needs to be assurances that De Beers would be allowed to continue with their activities in the future.

Mr M Moosa (ANC) added that security of tenure would be renewed for further periods of thirty years if criteria had been met. He asked if there was anything specific that needed to be amended in the Bill.
Mr Moosa said that specific criteria could not be set out in the Bill, as it could not be uniformly applied to all companies as business plans differ from company to company. If the objective criteria were specifically set out, the danger would be that it would be too prescriptive.

Mr Turner said that the issue of security of tenure was especially important to mines that were currently in production. He added that given the fact that De Beers envisages investing R 1,5 bn and another R70 m in two separate projects, the issue of security of tenure was ever more so important. Mr Turner stated that the proposals by De Beers do not vary that much from what was in the Bill.
Mr Oppenheimer said that if the criteria were not specified it would make matters difficult.

Ms L Xingwana (ANC) asked how many mine managers and top management positions were filled by blacks. She also noted that Canada had similar legislation to that of the Bill and asked how De Beers had reacted to it.

Mr Oppenheimer said that employment opportunities had been extended to black persons but that the process was difficult, as positions require applicants to have a certain level of qualifications. He said that it was an ongoing process and that black individuals were being empowered.
Mr Oppenheimer stated that the Canadian experience had been a difficult an onerous one.

Mr R Mofokeng asked what was being proposed to make the Ministerial discretion more mandatory.

Mr Turner said that even though there was a positive duty on the Minister to grant a mining right, the problem was that it would only be granted if all requirements were met. He noted that the requirements were far too broad and that objective criteria would have to be set. The discretion that lies with the Minister was far too great.

Mr I Davidson (DP) asked if it would help to remove the provisions on security of tenure from the Bill and to place it in some other form. He also pointed out that De Beers had been quiet on the issue of expropriation and asked what were their views on it.

Ms E Ngaleka (ANC) referred to reports in the media that De Beers had not been paying their taxes to municipalities in the Kimberly area. She asked for a response.

Mr Turner reacted that the municipality was considering whether De Beers should pay rates and taxes on mine dumps. The reason for the confusion was that in terms of South African law a mine dump was regarded as moveable property and not immoveable property. If it were the latter it would be taxable.

Mr Moosa felt that De Beers had not taken the fundamental objectives of the Bill into account as far as their stance on security of tenure was concerned.

Mr Oppenheimer noted that De Beers do support the objectives of the Bill but nevertheless felt that it was difficult to make investment decisions where there was uncertainty.
Mr Turner noted that in De Beers' proposals no reference was made to objective criteria in the conversion process from old order rights to new order rights. He felt that De Beers and other companies should not be required to meet the objective criteria each time an obligation was made. Each company should be evaluate on their past track records.

Mr M Goniwe noted that not all companies perform uniformly. He said that if criteria were set, South Africa would be placed in a position of good faith. Mr Goniwe echoed previous sentiments that the issue of security of tenure should not be a major concern, as the Minister would not abuse her discretionary powers.

Mr Oppenheimer reacted that all De Beers was asking for was that the discretionary environment of the Minister be defined in the Bill.

Anglo- Platinum
The presentation was made in two parts. Mr B Davidson firstly provided the Committee with an overview of the dynamics and market outlook of the industry. He also set out Anglo-Platinum's efforts on Black Economic Empowerment (BEE) and social upliftment and noted that projects had been initiated well ahead of the proposed legislative requirements.
Mr L Bekker continued with issues pertaining to the Bill itself. He pointed out that security of tenure was guaranteed only insofar as existing operations was concerned. There was no guarantee of security of tenure for operations that were envisaged to take place in the future ie planned extensions. Mr Bekker noted that given this fact, Anglo-Platinum's shareholders would be sceptical about investing in further projects and this would consequently have a detrimental effect on the economy of South Africa as a whole. He said that the overall objectives of the Bill were supported and that all that was needed was for minor adjustments to be made to the security of tenure provisions.

Mr Moosa asked how many of Anglo-Platinums mines fall under planned extensions.

Mr Bekker noted that there were six mines in all that were affected.

Mr S Mongwaketse asked what percentage of minerals deposits were held by Anglo-Platinum in South Africa. He asked why had Anglo-Platinum released twelve farms to farmers when they would in any event not be able to afford to mine them.

Mr Davidson said that he had no idea of the actual percentage held by Anglo-Platinum. He referred to a statement made by the Minister that Anglo-Platinum held 63% of PGM reserves. Mr Davidson said that the farms had been released to farmers as per an agreement with government. It had not been released as part of a BEE initiative.

Mr Davidson (DP) asked if Anglo-Platinum would be adequately protected in the event that some other company discovered a reef just below their own reef.

Mr Bekker said that similar concerns had been raised in the petroleum industry but he felt it not to be too serious a concern for Anglo-Platinum.

Ms Ngaleka (ANC) asked how would BEE be ensured and but what means would the entry of historically previously disadvantaged persons into the industry be guaranteed.

Mr Davidson said that their record on BEE and social upliftment programmes speaks for itself. He pointed out that Anglo-Platinum would be furthering their training and upliftment of skills programmes.

Ms Xingwana asked if it was correct that Anglo-Platinum was not in favour of the "use it or lose it, use it and keep it" principle. She felt that Anglo-Platinum was in favour of hoarding and in so doing maintaining the status quo.
Ms Xingwana acknowledged the BEE initiatives of Anglo-Platinum with African Rainbow and Mvelapanda but asked how would local communities benefit.
She asked what contribution Anglo-Platinum was making towards beneficiation especially on projects aimed at the youth.
Ms Xingwana asked if Anglo-Platinum had any black managers on their mines and whether there were any black women on management.

Mr Davidson emphatically stated that they were not in favour of hoarding and noted that their production figures were well on par with their reserves.
He said that the improvement of infrastructure ie building of roads, schools and creation of employment were definitely positive a spin off from BEE initiatives.
Mr Davidson noted that the activities of Anglo-Platinum have until now not included the manufacture of jewelry but that they had an organization called Platinum Gold International that promotes platinum jewelry all over the world. They were however now engaged in promoting jewelry beneficiation in South Africa.
He noted that Anglo-Platinum do not as yet have black managers but they do head departments. Mr Davidson conceded that black women unfortunately had not yet evolved to management level. He made the point that Anglo-Platinum was in the process of transformation.

Prof Mohamed could not understand why there was a problem with the Minister's discretion in granting a retention right.

Mr Davidson noted that given the sensitivity of the market and the great capital investment involved, the period for the retention right was not long enough.

Mr Oliphant asked if Anglo-Platinum was involved with communities to whom royalties were being paid. He was concerned that Anglo-Platinum would not be continuing with investments in projects ie building of roads and water supply initiatives if their future mining rights were not guaranteed.

Mr Davidson said that Anglo-Platinum had been involved with communities to the extent of paying royalties. He noted that Anglo-Platinum was needed certainty as to the security of their future mining rights given the large capital investments that were made. Mr Davidson said that Anglo-Platinum was not threatening not to go ahead with their projects. Projects would continue but the shareholders require certainty that security of tenure would be guaranteed. He asked the Committee to assist them in coming up with a solution.

Mr R.Mofokeng (ANC) asked what the differences in definitions for security of tenure were internationally and in the South African context.

Mr Bekker said that security of tenure was a perception that a person would be guaranteed retention of their investments. He noted that Anglo-Platinum was in a unique position but that other stakeholders would also be accommodated if its concerns were met.

Mr Bell (DP) asked how would Anglo-Platinum define the concepts of BEE and social upliftment.

Mr Davidson said that it was difficult to come up with prescriptive definitions.

Mr Moosa got the sense that maybe the Committee should look at some areas of the Bill from a business perspective.

Mr Davidson said that Anglo-Platinum felt that one hundred percent satisfaction had been reached on security of tenure. He noted that their concern was mainly that technical issues in the drafting needed to be cleaned up.

Mr R. Linnell did the presentation but was assisted by Mr C. Stevens from Deneys-Reitz Attorneys. Mr Linnell noted that the Bill had evolved well over time. He was however mainly concerned about the issue of security of tenure and the lack of specified criteria that would be used in the evaluation of applications. Mr Linnell noted that the discretion of the Minister was respected but that the industry needed clarity and certainty over the protection of their rights. Mr Linnell also felt that there was a need to strengthen the judicial appeal provisions in the Bill.

Mr Davidson asked what was being suggested on security of tenure as it relates to temporary authorizations and alienated state land.

Mr Stevens said that temporary authorizations and alienated state land were not provided for in transitional arrangements. He noted that the issues had been extensively discussed but no agreement had been reached on them.

Ms Xingwana asked why mining companies were so concerned about security of tenure. She asked what was being suggested.

Mr Linnell said that mines were owned by big business and not by individuals. There were investors and shareholders to satisfy. It was for this very reason that certainty over security of tenure was required.

Mr Oliphant suggested that proposals should be submitted on what the proposed criteria that the Minister would have to consider in making her decisions should be.
He also asked what was being proposed on judicial appeal.
Mr Oliphant felt that the period of thirty years was sufficient for security of tenure and that it would be renewed if companies fulfilled their obligations.

Mr Mofokeng asked what the difference between judicial review and judicial appeal was.

Mr Stevens said that the grounds for review were prescribed in law whereas the grounds for appeal were factual. In the Bill no provision had been made for judicial appeal. Mr Stevens felt that there ought to be provision in the Bill for judicial appeal in the courts in the event that the Minister made a wrong decision. The basis for the appeal would be on the merits of the case.

Mr Moosa reacted that if judicial appeal were to be allowed, the courts would be flooded with cases against decisions made by the Minister.

Mr Stevens disagreed. He said that there would be only one valid application for the conversion of rights. Mr Stevens noted that the Minister was not infallible and therefore judicial appeal should be an option.

Mr Mongwaketse could not understand why there was so much negativity about the discretionary power of the Minister.

The presentation comprised of Mr L. Bosman, Ms A. Crosby and Adv Grobler.

Mr Bosman gave the Committee a brief overview of the farming industry and stated that Agri-SA represented 40 000 commercial and 45 000 small-scale farmers. AgriSA's main concern was that the Bill focused too narrowly on the mining industry and neglected the farmers on whose land the mining was to take place.
Adv Grobler presented a legal perspective to the farmers' rights and said that previous legislation had adequately protected the rights of farmers. In the past if mining companies destroyed farms, companies were obliged to buy them from the farmers. The current Bill does not contain similar provisions. Adv Grobler noted that when the state grants mineral rights to a mining company, the farmer was in the process being expropriated of his land. He said that if expropriation was taking place the farmer should be entitled to compensation. Adv Grobler however felt that it was not government's duty to pay the compensation but rather the obligation should rest with the mining company.

Ms Xingwana was not too sure whether companies would be willing to pay the compensation.

Mr Mongwaketse said that the Bill does address environmental management and that the companies would be required to take care of the land on which they were mining.

Mr Bosman said that the Environmental Management Plan was all good and well but noted that once agricultural land was destroyed it could not be remedied.

Mr Moosa reiterated his sentiments as expressed in previous meetings that the actions of the state would not amount to expropriation. Given this fact there was no need for compensation.

Adv Grobler reacted that where the Minister issued a mining right a mining company, the mining company would be vested with a limited real right. He said that the state does not have the right to grant this right to the mining company. Adv Grobler emphasized that it amounted to direct expropriation from the landowner.

The committee agreed not to engage in a discussion on expropriation once gain.

Ms Crosby concluded by stating that all that was being proposed was that the rights of farmers were to be taken into account in the drafting of the Bill.

The Chair proposed that discussions be held to a minimum given the time constraints that the Committee was experiencing. He proposed that presenters be given the opportunity to present their submissions without being sidetracked with questions.

Richards Bay Minerals
Mr J. Deyzel and Mr M. King represented Richards Bay Minerals. The committee was presented with a brief overview of Richards Bay Mineral's history and their activities.
Mr Deyzel said that the underlying principles of the Bill were supported but that concerns had arisen over the clarification of old order rights and the social plan.
He felt that mining companies should be given the opportunities to retain mining rights that they were not currently using if good justifications were presented.
Mr Deyzel noted that clearer definitions should be provided for beneficiation, mining operations and optimum mining. He also noted the provisions on the Social Plan did not have clear enough guidelines.

Mr K. Rumble stated that they fully support the objectives and principles underlying the Bill. Concerns were however raised over the lack of certainty and clarity over the provisions relating to the discretion of the Minister in making decisions, the prescribed royalties and their inclusion in the money Bill and the provisions on the Social Plan to be left to the regulations. It was also felt that uncertainties of security of tenure needed to be addressed and that the right to judicial appeal should be provided for in the Bill. Mr Rumble additionally highlighted concerns over the practical implementation of the Bill given its overlap with other pieces of legislation and the fact that there were still pieces of legislation that were outstanding that would directly impact on the Bill ie regulations and the money Bill.

Asia Minerals
The delegation comprised of Mr E. De Atouguia and Mr D. Koton. Asia Minerals' main business was the sale, marketing and distribution of manganese ore and related products. The objects and principles of the Bill were broadly supported but concerns were raised that there were certain aspects of the Bill that would impact upon the business plan of Asia Minerals. It was felt that mineral beneficiation and what it entailed required greater clarity in the Bill. The Bill also does not provide for guidelines as to what would comprise empowerment and social upliftment.

Chamber of Mines
Mr B. Godsell and Ms Z. Diliza made the presentation. The Chamber of Mines, its member mines and its mining groups extended its firm support for the objectives of the Bill. It however did have certain reservations on some of the provisions of the Bill. One of the concerns was that the Bill tended to separate BEE considerations from that of investment and investor confidence, when the two should be inextricably linked. Concern was also expressed over the fact that the Minister had too much discretionary power. Even though the Bill had made provision for judicial review it should also provide for the judicial appeal against the decisions of the Minister where appropriate. The issue of security of tenure was once again raised as a concern given the huge capital investments that were made in the industry. It was brought to the intention to the Committee that even though the current security of tenure provisions were in line with those overseas, the mining regimes differed considerably from those in the South African context. As currently worded the Bill unintentionally discourages very large capital-intensive projects with huge job creation potential. The legal certainty of the Bill was also called into question given the fact that many issues would be covered in the regulations. The Chamber additionally proposed that enhancements be made to the transitional arrangements in order to facilitate the transition from the old regime to the new.

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