The Department of Mineral Resources (DMR) presented the Department’s proposed amendments to the draft Mineral and Petroleum Resources Development (MPRD) Amendment Bill, based on the input of stakeholders, for deliberation by the Committee. While many of the proposed amendments were merely technical in nature, others provoked extended debate between Members and the DMR delegation.
On the issue of Free Carried Interest (FCI), the DMR said the definition introduced the interest that the state would take, from exploration through to production. The Department was suggesting that FCI should be introduced at the prospecting stage, which was a common strategy internationally in respect of petroleum exploration. This meant that the state would have representation on the joint project committee, which makes decisions about the development of the project, and would participate in key decision making. FCI was an international practice, and in countries such as the United States and Nigeria, the percentage held by the state was a high as 60 to 70%. The percentage proposed for South Africa was minimal, by comparison.
Applications for mining rights also came under scrutiny, covering such aspects as the involvement of regional offices in the application process, and the impact of allowing application only by Ministerial invitation. It was argued that this would inhibit companies from being proactive in the application process. Why would they want to divulge their geo-scientific information if the process was then being opened up to everyone? A consequence of the proposed change could be that only the state would be involved in prospecting in South Africa in future. Companies would not want to risk their money if they were not assured of receiving mining rights. The DMR said it was important to correct this impression. If a company invested its money in prospecting, security of tenure was automatically provided. The change “opened the window” for applications, but did not jeopardise security of tenure when one shifted from prospecting to mining operations.
Measures to monitor the ownership of companies applying for rights, to eliminate BEE “fronting”, were discussed, as well as the imposition of sanctions. The DMR said applications could be granted on the basis that they were BEE-compliant, or had women-controlled companies as partners. However, those conditions might be altered later in terms of control – the BEE and women could just be a front to secure the right. The amendment sought to correct this. The DMR would like to believe that applicants would seek to be compliant, and not have to go back later to correct an act of non-compliance. The stock exchange had confirmed that the onus was on owners to ensure they were compliant with legislation. Rights holders had to bear an element of responsibility. They had to be part of the transformation process.
Clause 16 dealt with the application for a prospecting right. The amendments made to this clause raised much discussion as a clause had been added with regards to the use of water that made application for such a licence not necessary in all cases. This raised concerns about from where such a mine would be acquiring its water and how this would affect local communities. Another concern about this clause was that the consideration of contributions to the applications from interested parties was removed from the clause.
Clause 17 dealt with the granting of a prospecting right by the Minister. Here again made reference to the water-use licence and the fact that it was not always necessary to apply for one and also the deletion of a clause relating to the concentration of mining rights as this was already made reference to in other clauses. Clause 18 dealt with the application for the renewal of a prospecting right. The amendment made was with regards to the right being considered for renewal subject to the submission of environmental authorisation. Clause 19 dealt with the granting and renewing of a prospecting right. In this clause a clause was removed that compelled the Minister to grant the renewing of a prospecting right regardless of whether an applicant met the requirements of application or not, thus giving the Minister more power to consider the application and whether it had met the requirements. This also caused some discussion as to fears that it may raise with applicants and whether this would affect enquiries made by applicants. Clause 20 dealt with the removal of bulk samples for the purpose of determining feasibility during prospecting. Amendments made to this clause provided more control to the Department in regulating the removal of bulk samples, its purpose and how much of it were to be removed. Clauses 21 and 22 were browsed over as its contents had already been referred to in previous amendments, such as its reference to water-use licences. Clause 23 dealt with the involvement of mining companies in community development programmes and their role in socioeconomic development of the communities in whose proximity they were working in. This raised discussion regarding the role of mining companies in the National Development Plan. Clause 24 and 25 were also only browsed over as they also contained many repetitions of amendments in clauses which were already discussed, such as the granting of a prospecting right. The rest of the bill was to be discussed in an ensuing meeting.
The Budgetary Review and Recommendations Report on the Department of Mineral Resources (DMR) was discussed. The Report was presented by the Chairperson and Members of the Committee made contributions in terms of amendments. However, as the DMR was present at the meeting, it was questioned on certain matters in the report. One major concern was that although there was a drop in fatalities, there was an increase in 'dangerous occurrences'. The Committee requested a breakdown of these different occurrences and whether they were work or human-related incidents. Another concern was the percentages of the budget referenced in the BRRR and what these were used for. The Director General was asked to make immediate enquires to ascertain these figures. Other concerns included the filling of vacant posts, reviewing the implementation of the Mining Charter, how DMR was ensuring the retention of staff, the exact number of operating mines as well as the timeframes for DMR to heed the recommendations in the BRRR.
Chairperson's opening remarks
The Chairperson welcomed delegates from the Department of Mineral Resources (DMR), representatives from the mining and petroleum industries, and the media, and said that although no Members of the Committee were yet present – they were involved in other commitments in the House – the meeting should start, as they would arrive in due course. She said the Mineral and Petroleum Resources Development (MPRD) Amendment Bill would be deliberated, clause by clause.
Mr Nhlanhla Jali, Acting Director: Mineral Policy Development, DMR, presented the Department’s proposed amendments to the draft Bill, based on the input of stakeholders, for deliberation by the Committee.
Clause 1: Definitions
The first proposed amendments dealt with definitions in Section 1 of the Bill. These included:
• beneficiation, where “mineral product” was substituted for “mineral” in respect of transformation, value addition or downstream beneficiation.
• The term “community”, altered to “a coherent, social group of persons within a district
municipality as defined in the Local Government: Municipal Structures Act, 1998 (Act N0. 117 of 1998) with interests or rights in a particular area of land which the members have• or exercise communally in terms of an agreement, custom or law.
• “Differentiated pricing,” defined to mean the discounted price that mining companies will sell minerals to domestic mineral beneficiating entities. The level of discount will be determined on a value chain by value chain basis.
• The definition of “free carried interest” (FCI) should be substituted with: “’free carried interest’ means the interest derived from holding shares of which the holder enjoys all the rights of a shareholder but has no obligation to subscribe or contribute equity capital for the shares.”
The Chairperson asked for this definition to be clarified.
Mr Mosa Mabuza, Deputy Director General: Mineral Policy and Promotion, DMR, said the definition introduced the interest that the state would take, from exploration through to production, and sought to define the extent of free carried interest that the state would take. The Department was suggesting that FCI should be introduced at the prospecting stage, which was a common strategy internationally in respect of petroleum exploration. This meant that the state would have representation on the joint project committee, which makes decisions about the development of the project, and would participate in key decision making.
Mr Andre Andreas, Chief Director: DMR, added that FCI was an international practice, and in countries such as the United States and Nigeria, the percentage held by the state was a high as 60 to 70%. The percentage proposed for South Africa was minimal, by comparison.
Mr J Lorimer (DA) asked for clarification on whether the US had FCI.
Mr Andreas said in the US there were tax incentives and government stakes. In states such as Colorado, where oil and gas were actively mined, the stakes were as high as 70%. South Africa was proposing an FCI of 20%, with an option to increase to 30%, which would be the maximum.
Mr Lorimer argued that two separate issues were being discussed – total tax take, and free carried interest. One could not talk about FCI in isolation, because on top of the 30%, one had to take account of 26% for BEE. One had to look at the whole picture.
Mr H Schmidt (DA) said international best practice had been referred to, and asked if the DMR could advised the Committee on what the FCI was for different countries.
The Chairperson said the FCI issues could be clarified later on in the meeting.
A new definition of “historic residues or stockpiles” was accepted, without comment. All reference to “reclamation permit” was deleted from the Bill, as this was covered by “mining rights” and “mining permits.” Other proposed amendments to Section 1 were technical in nature.
New Clause: Invitation for Applications
The next issue for discussion related to Section 9, dealing with “Invitation for applications,” where the DMR proposed a new clause, stating that:
“The Minister may by notice in the Gazette, invite applications (including in respect of land relinquished or abandoned or which was previously subject to any right, permit or permission in terms of this Act, which has been cancelled or relinquished or which has been abandoned, or which has lapsed) for reconnaissance permissions, reconnaissance permit, prospecting rights, exploration rights, mining rights, technical co-operation permit, production rights and mining permits, in respect of any area of land, block or blocks, and may prescribe in such notice the period within which any application may be lodged with the Regional Manager and the procedures which shall apply in respect of such lodgement.
“Any person may, after identifying an area of land, block or blocks and the type of mineral, mineral product or form of petroleum in or on such area of land, request the Minister to invite applications in such area of land, block or blocks, in terms of subsection (1).
“Applications received in terms of subsection (1) shall be processed in accordance with the provisions of the Act, including the terms and conditions upon which applications may be accepted, rejected, granted or refused.
“Any invitation referred to in subsection (1) must not include any mineral, mineral product or form of petroleum and land in respect of which another person holds a right or permit (excluding a reconnaissance permit or reconnaissance permission and an application made in terms of section 11 (2A), or an application for a right or permit which has already been lodged prior to such invitation, and which remains to be granted or refused.”
Mr Lorimer said there was a question of timing – how long should the Minister be allowed to process a request.
Mr Andreas said the time scale would be prescribed in the regulations.
Mr J Moepeng (ANC) suggested the wording, “the Minister may…invite applications”, should be changed to “must…invite applications,” because the regulations would specify what the Minister could or could not do.
Mr Schmidt expressed concern over the first part of the amendment, which stated that “the Minister … may prescribe in such notice the period within which any application may be lodged with the Regional Manager and the procedures which shall apply in respect of such lodgement.” He wanted to know if the rules governing the notice period and the procedures could be different from the Act or the regulations, because of the use of the word “may.”
Mr Andreas said the Minister would be bound by the provisions of the Act.
Clause 6: Consultation with interested and affected parties
Mr Jali said that the DMR had decided, after consultation, to remove all time frames – which would then be aligned in the regulations. This had resulted in the proposal in Clause 6, to omit “within 30 days from the date of notice” and substitute it with “to the Regional Manager within the prescribed period.”
Mr Schmidt raised the prospect of comments and objections regarding applications would have to be addressed to two different regional managers – one for the west coast, and one for the east coast. As this issue related solely to applications for petroleum licences, he would have liked to have seen the Petroleum Agency of South Africa (PASA), as an entity of the DMR, dealing with applications in their entirety. It seemed like PASA was being split in two.
The Chairperson said the intention had been to streamline the process, with PASA being part of the regional office. However, it seemed as if applicants would first have to go through PASA, then get environmental and water licences, before getting DMR approval.
Mr Mabuza said there was a single “offshore” region. This meant one did not need to have separate regional managers for the Atlantic and Indian Oceans, and this would help streamline the whole process.
The Chairperson asked whether an application for a licence at the DMR would be a “one-stop-shop.”
Mr Mabuza said the first step would be to come to the regional office, and submit the application. This would automatically trigger that the applicant must submit an application for a water use licence within a particular time, and this aspect was administered by the Department of Water Affairs. Environmental authorisation would be processed through the regional office.
The Chairperson asked if this meant a separate application had to be made for a water use licence.
Mr Mabuza replied that it was not possible for the DMR to administer the requirements of the Water Affairs Act, so it was a case of “virtual integration” of the process. There was now agreement within the three affected departments, that within a certain period, the applicant would have to obtain a water use licence.
Mr Andreas added that during the application process, the applicant would have to provide proof that he had applied for a water use licence.
Mr Mabuza said the whole process, including the environmental authorisation, had to be completed within 300 days. He described this as a “quantum leap” from where the DMR had been before.
After discussion, it was agreed that issues related to the referral of objections, and the need to clarify time lines, should be dealt with by the DMR’s technical committee.
Clause 8 amending Section 11 of the Act: Transferability and encumbrance of prospecting or mining rights
A proposed amendment to Clause 8 gave rise to extensive discussion. This dealt with the right of listed and unlisted companies holding a prospecting or mining right, to transfer control of the company without the prior written consent of the Minister, as prescribed.
Mr Schmidt asked how this provision would change the way matters were currently handled, through such entities as the stock exchange.
Mr Mabuza said there were various Acts that imposed the requirement of “prior consent.” However, the Companies Act regulated the change of control at the company level, whereas the DMR was looking at the change of ownership at the rights holding level.
Mr Lorimer asked if the guidance for the Minister – whether to approve a change of ownership or not – would be subject to the regulations. If this was so, why was it not put “up front” in the Act?
The Chairperson asked which came first – the Act or the regulations?
Mr Mabuza said the regulations had to provide clarity on the time it would take to process applications involving change of ownership. The requirements were contained in the law – one had to show that one was compliant.
Mr Lorimer asked under what circumstances the Minister would not give consent to a change of ownership.
Mr Mabuza said applications could be granted on the basis that they were BEE-compliant, or had women-controlled companies as partners. However, those conditions could be altered in terms of control – the BEE and women could just be a front to secure the right. The amendment sought to correct this. He would like to believe that applicants would seek to be compliant, and not have to go back later to correct an act of non-compliance.
Ms K Khunou (ANC) asked whether the DMR had taken the requirements of the new BEE Act, passed recently, into account when drafting the amendments.
The Chairperson said the new Act would supersede all prior ones.
Mr Mabuza said BEE was contained in the Mining Charter, and the review of the Charter next year would seek to align all the relevant Acts and codes.
Adv Desiree Swartz, legal advisor, said where conflicts with the Act arose, a period of one year was allowed to align with BEE.
Mr Schmidt said he was concerned that because the shares of listed companies were freely traded on the stock exchange, a change in ownership – over which they would not have control – could change their BEE status. How would this situation be dealt with?
Mr Mabuza said transformation was a national imperative. If one was in a true partnership, one would not expect to wake up and find one’s partner in the next village! There was unlimited capacity in South Africa to support transformation, and the issue raised by the Member spoke to the extent to which commitment to transformation was genuine. The stock exchange had confirmed that the onus was on owners to ensure they were compliant with legislation. Rights holders had to bear an element of responsibility. They had to be part of the transformation process.
Ms Khunou said fronting was a criminal offence, and asked if the Bill included measures to monitor company ownership and impose sanctions for non-compliance.
Mr C Gololo (ANC) said companies seeking to “front” for BEE would list names of members who were not active in the running of the company. Their documents would include the ID numbers of these members. Were these verified, to ensure compliance?
The Chairperson said this raised the question of how one implemented the processes to check on “fronting,” and how sanctions would be applied through the MPRDA.
Mr Mabuza said the Minister was empowered to impose relevant sanctions, based on the severity of the non-compliance. The principle of “the penalty fits the crime” applied. The ultimate penalty was the suspension of the right.
The Chairperson said it might be necessary to add a section to the Bill to deal specifically with “fronting.”
Ms Khunou suggested that it might be appropriate to take a clause from the new BEE Act, which dealt with “fronting.”
Members then debated the implications of the Minister being able to invite applications for licences.
Mr Schmidt asked if it was possible for the Minister to invite applications for a mining right, for which an application had already been accepted. Did this mean that the application process was being done away with, and one could apply only when invited?
The Chairperson responded that one could apply only when invited to do so.
Mr Andreas outlined the process, as set out in Section 9 of the Bill. The Minister would identify an area of land, and invite applications. This would lead to a three-stage approval process.
The Chairperson commented that this was the “bottom line” – the process of the Minister inviting applications had to be followed.
Mr Schmidt argued that this would inhibit companies from being proactive in the application process. Why would they want to divulge their geo-scientific information if the process was then being opened up to everyone?
Mr Mabuza responded that the DMR had looked intensively at countries which had substantially increased their share of world prospecting activity, and had found that the one thing they had in common was that the state invested heavily in the “pre-competitive” stage. It was therefore important to accelerate the acquisition of geo-scientific information. Once this information was available, the involvement of the state greatly reduced the risk to companies involved in exploration. There was a greater chance of success, and investors liked this. In the past 20 years, exploration had not happened in South Africa, despite all its knowledge.
Mr Lorimer commented that a consequence of the proposed change would be that only the state would be involved in prospecting in South Africa in future. Companies would not want to risk their money if they were not assured of receiving mining rights.
Mr Mabuza said it was important to correct this impression. If a company invested its money in prospecting, security of tenure was automatically provided. The change “opened the window” for applications, but did not jeopardise security of tenure when one shifted from prospecting to mining operations.
Mr Lorimer said the Minister “may” invite applications, not “must” – what if the Minister did not invite applications?
Mr Mabuza said “must” gave the Minister no options, and could lead to a situation where applications had to be invited where an excess of supply already existed for the mineral involved. There were also many other economic considerations. The balance of supply and demand could be tilted.
Mr Lorimer said this meant the Minister would be able to make decisions about what mining should be permitted. This could affect the value of mines. For instance, the Minister could drive up the price of platinum by not issuing licences for platinum mining.
Mr Schmidt said that in relation to the previous “free enterprise” policy – where one could make an application, meet the compliance requirements, and then receive the right – the discretionary clauses were disturbing. When policy issues were market-related, the whole nature of the Bill started to change.
Mr Mabuza said that in the past ten years, South Africa had received close to 40 000 applications, mostly for prospecting. Other countries were happy when they received nine or ten a year, yet South Africa’s share of prospecting activity was growing smaller. The Bill sought to turn this around and induce greater exploration in this country. While “greenfields” investment had increased substantially, “brownfields’ investment had not. The DMR believed the proposed framework would help to reverse this.
Mr Schmidt asked whether the Council for Geosciences had the information necessary for the Minister to issue invitations for applications.
Mr Mabuza said that companies were required to provide information to the Council, and its resources had also been substantially increased. The information would be used to trigger the application mechanism.
Mineral and Petroleum Resources Development Amendment Bill
The MPRDA was presented by Mr Nhlanhla Jali, Acting Director of Mineral Policy Development, the Department of Mineral Resources (DMR), and was assisted by Mr Mabuza and Mr Andreas.
This regulated the application for a prospecting right. An amendment was made to clause (16)(4)(a) was the addition of a 60 day period which was to be prescribed to an applicant, after their application was accepted, I which the applicant was to apply for environmental authorisation.
The next amendment was made to clause (16)(4)(c) which related to the individual’s application for a licence for the use of water. The words ‘where necessary’ was added as stakeholder had advised the department that not all new applications required an additional application for a licence for water use.
The Chairperson was concerned with the amendment to subclause (4)(c) as she stated that she was not aware of any mine that did not use water and therefore felt that the ‘where necessary’ clause was obsolete. She asked Mr Jali to explain the reasoning behind this.
Mr Jali said that that depended on the operation being undertaken at the time and that, because clause 16 dealt with prospecting, the use of water was not always required.
The Chairperson asked for clarity as to whether this clause would not take be necessary when an individual applied for a mining right.
Mr Jali confirmed that a water right would need to be applied for together with a mining right.
Mr Mabuza elaborated on this, saying that a water use licence was only required when a mine was making use of an underground water supply, but that in some cases mining companies made agreements with local municipalities to use their processed water supplies and that in these instances water use licences were also not required.
The Chairperson asked whether two different clauses would be needed to differentiate between water-use licences during prospecting and during mining.
Mr Mabuza reiterated that the same clause could refer to both instances.
The Chairperson asked how this clause could be used as a control measure, ensuring that a mine uses processed water.
Ms N Ngele (ANC) asked that Mr Mabuza present the house with an example of a mine that did not require water as she stated the Committee was under the impression that all mines used water.
The Chairperson highlighted her concerns by drawing on an example of a coal mining company that pumped water from a dam that was used by the local community and that this water was simply used to sprinkle the road leading up to the mine in order to settle the dust. In addition, she highlighted that if pipes led from the water supply of the municipality to the mine, these may pass through rivers and villages, increasing the risk of contamination.
Mr Mabuza then, to drive his point home, drew on an example of a diamond mine that used a dry-treatment facility that did not require water. He noted the concerns of the Chairperson and admitted that the examples she used showed a clear breach of law and that they would need to be investigated further by the Department. He further emphasised that the provision in subclause (4)(c) catered for prospecting, which did not necessarily require the use of water, and certain instances of dry mining. He did, however, point out that loopholes in the clause may have to be focused on.
The Chairperson responded to this, saying that her main concern was the protection of the environment. She asked how the clause ensured the safety of the environment. In addition, she asked what steps would be taken in cases where a licence had already been issued and the water was still used incorrectly.
Mr Mabuza responded that water use was not governed by the MPRDA but by the National Water Act (NWA) as administered by the Department of Water Affairs (DWA) and that the licence contained all provisions stipulated by it.
Mr Andreas added that the intention of the provision on water use was not to usurp the power of the NWA or any other environmental act but rather to align the MPRDA with these other acts.
Mr Schmidt also commented that he assumed the intention of subclause (4)(c) was to make provision for delays with the DWA in issuing water-use licences, allowing the prospectors to mine while awaiting them.
Mr Mabuza also advised the Chairperson that the regulations which were developed in respect to the sharing of resources were to arrive at a later stage and be presented to the Committee and once these were presented, the Committee would have a better understanding of the logic behind the new provisions made.
The Chairperson raised a concern regarding the fact that the MPRDA was going to be passed without the regulations being looked at and how this would be accommodative to all in the industry.
Mr Schmidt echoed these concerns saying that it would have been best if he the regulations were presented with the Bill. He also said that the regulations should also have made provision for approval by Parliament.
Mr J Lorimer concurred Mr Schmidt’s and the Chairperson’s sentiments, saying that a bill was being passed without the regulations being fully understood. He said that this was very concerning.
A representative from the State Law Advisors (SLA) said that a legislative committee within Parliament dealt with the passing of regulations and that an amendment could be made to the regulations clause allowing the regulations to come back to Parliament to be approved before it became effective.
Mr Schmidt stated that a delegated legislative sub-committee dealt with legislation such as the MPRDA and its regulations and that he believed it was advisable to heed the recommendations of the State Law Advisors in amending a clause that allowed approval from both the legislative sub-committee and the Committee on Mineral Resources.
Another representative from the SLA pointed out that it was entirely within the discretion of the Committee to consider whether regulations needed to be presented to Parliament before it submitted.
The Chairperson made an example concerning ordinary citizens who share the same sources of water with mines. She asked whether the DMR issued licences simply to fulfil the requirements of the clause without taking into consideration the environment or the communities in the vicinities of the mines.
Mr Mabuza stated, citing Mr Schmidt’s earlier statements, that it was not the DMR’s intention, nor was it possible for it, to issue water-use licences to applicants and that the purpose of the clause was to merely streamline the process of acquiring compliance for mining applicants. He further emphasised that it was the duty of the DWA to carry out inspections of whether holders of licences were following the regulations as set out by the water-use licence and that this inevitably took into consideration the environment and the local community.
Mr Schmidt cited that his main concern was with subclause (4)(b) which stated that an applicant needed to consult the landowner, the lawful occupier and any affected party but that it deleted ‘any interested.’ He said that his concern with this deletion was that NGO’s or individuals may have an interest in the application in terms of how it would affect others. He says that he does not understand why these parties needed to be excluded.
The Chairperson also said that communities may also be interested in these applications due to the way it was affecting other communities, such as, for example, if the mining operation had caused water contamination. Once again, this was not an affected party, but an interested one.
Mr Mabuza responded to both the Chairperson and Mr Schmidt saying that the clause was not to be read in isolation but needed to be understood together with Clause 10 which allowed for interested parties to register their grievances with the DMR.
Mr Schmidt asked that if this was the case, why ‘any interested’ was still excluded, because ‘affected parties’ was also covered by Clause 10.
Mr Mabuza stated that these clauses were changed because they were sufficiently covered by Clauses 10, 16, 22 and other clauses.
The Chairperson said that that was irrelevant because the removal thereof had changed the meaning of the clause. She further emphasised the importance of being very specific in a clause as the absence of certain terms could be taken for granted to mean that Act did not cover those points.
Mr Andreas stated that Clause 10 broadly covered all parties affected by mining processes whereas Clause 16 focused mainly on parties that were directly affected by prospecting and that it was irrelevant to repetitively refer to all the parties in every clause.
Mr Schmidt was concerned about NGO’s and heritage sites that may have been interested in the activities of the mine, having drawn on the example of Mapungubwe Heritage Society, but would have been excluded from the initial consultation process because they were interested parties and not affected parties.
Mr Andreas replied to this, saying that Mr Schmidt was concerned with the initial consultation process, which was covered by Clause 10, while Clause 16 focused on stakeholders that were being affected during the prospecting process.
Mr Schmidt raised a very important point, saying that in many cases, such as the case of Mapungubwe Heritage Society who was an interested party in its instance, the interested party, because of its experiences, would have more knowledge relating to decisions affecting the environment than the landowner or the affected parties and was in a better position to make decisions. He said that all parties needed to be consulted throughout the process because the use of land for mining should, in fact, be treated as a national concern.
The Chairperson stated that there has been a concern from communities about whether they were being excluded from proceedings relating to the mining procedures being undertaken in their vicinities and if they were being excluded as ‘interested parties.’
Mr Lorimer said that he was concerned about whether there was now less chance for NGOs to get involved in decisions relating to mining than there was before and whether this was going to limit their scope of action.
Mr Schmidt said that that was in fact the case as Clause (16)(4)(b) excluded them. He said that interested parties must be taken into consideration as he felt that Parliament would not approve of the fact that they were excluded either.
The Chairperson concurred with this as there had been a deep outcry because of the fact that communities were excluded from proceedings.
Mr Mohai commented that he felt that that it was very important that the Bill be set out very clearly as leaving legislation open to interpretation only complicated legal proceedings.
The Chairperson said that Mr Mabuza and the DMR could reabsorb what the members suggested and they consider what was said and return to the Committee when they felt ready to respond.
Mr Mabuza said that he would respond immediately saying that the DMR would take into consideration the proposals put forward by the Members but he also emphasised that the decisions taken by the DMR on the amendments to the Clause 16 were made because it realized that unending consultation caused processes in the industry to slow down and that the Committee needed to heed the fact that the too much of it would cause catatonic growth. He said that consultation was done but that balance was necessary to ensure growth.
The Chairperson noted this and asked that the issue be shelved for further deliberation at a later stage.
This clause dealt with the granting of the prospecting right by the Minister of Mineral Resources.
Mr Jali presented the first proposal to Clause (17)(1) in which the words ‘where necessary’ was again inserted in relation to the water-use license.
Mr Andreas added that the previous wording of Clause (17) stated that a prospecting right would only be granted to an applicant if the applicant was able to comply with the provisions of the NWA but that this needed to be reworked because it was not within the department’s mandate to ensure compliance with the NWA. The MPRDA merely required proof that the applicant had applied for a water-use license
The Chairperson asked whether, if proof was not submitted, the DMR would still continue processing the application.
Mr Andreas responded in the negative saying that the submission of proof of application for a water licence was a requirement.
Mr Jali continued with the next amendment made which was to subclause (2)(b) which related to the concentration of mineral rights under the control of the applicant. All reference to this was removed in this subclause as reference was already made to it in other clauses.
This clause dealt with the renewing of a prospecting right.
The amendment made was the insertion of subclause (2)(cA) which stated that proof of application for an amended environmental authorisation be submitted when applying for the renewing of a prospecting right.
This clause dealt with the granting of the renewal of the prospecting right.
Mr Jali stated that the previous provisions compelled the Minister to grant the renewal of the prospecting right to the applicant whether all the requirements were met or not. He said that the new amendments were seeking to correct that. The steps taken to correct this was the removal of the clause ‘and be granted’ in subclauses (1)(a) and (1)(b).
Mr Schmidt asked why ‘and be granted’ was being removed.
Mr Jali stated that the words ‘and be granted’ compelled the Minister to grant the prospecting right to an applicant whether applicant had met all the requirements or not. Removing these words gave the Minister the power to consider the application and reject it if it did not meet the stipulated requirements.
Mr Mabuza added to this by saying that the intention of the provision was not to undermine the security of tenure and that for the prospecting right to be upgraded to a mining right, a certain level of exclusivity was required by the DMR. Keeping the words ‘and be granted’ ignored the fact that the applicant needed to meet the requirements for the renewing of the prospecting right as well as for that licence to graduate to a mining right.
Mr Andreas added that keeping the words ‘and be granted’ simply encouraged non-compliance as mining right could be granted irrespective of the level of compliance by the applicant.
Mr Lorimer asked whether the removal of the ‘and be granted’ may added a level of insecurity to the provision as prospective applicants may be nervous about not being granted a mining right. He suggested that a clause that stated that a right would be grant ‘subject to’ certain provisions being met.
Mr Mabuza stated that Clause 18 did make provision for a prospecting right to be granted ‘subject to’ the applicant meeting certain provisions and that that exclusivity is still provided for and ensured a certain level of security when making a transition to a mining right.
Mr Schmidt said that this as not relating to a transition but to the renewing of a prospecting right.
Mr Mabuza responded that Clause 11 was spoken about at length during the morning session and that this covered all of the provisions allowing the renewal of a prospecting right based on the meeting of requirements as well as that of a mining right. He also stated that leaving Clause 19 as is, with the word ‘and be granted’ ignored the fact that the applicant would need to meet certain requirements before being granted a right and that all of these measures were being taken to protect the integrity of the mining industry.
Mr Andreas added the Clause (19)(1)(a) referred to the renewal of a prospecting right while Clause (19)(1)(b) referred to the transition to a mining right.
This clause related to the removal of bulk samples during prospecting.
Mr Jali presented the amendment which was made to subclause (2), showing that the previous provision stated that the holder of a prospecting licence may not remove bulk samples ‘subject to such conditions as the Minister may determine’ and that this was replaced with ‘as prescribed.’
The Chairperson asked why the diamonds were specifically referred to in the clause.
Mr Jali pointed out that the part relating to diamonds was also being removed.
The Chairperson asked why diamonds were there in the first place.
Mr Mabuza responded that historically, the diamond industry was notorious for its habit of depleting the resources of a particular area under the guise of ‘bulk sampling’ however this occurs now in other fields of mining as well, such as chrome mining.
The Chairperson asked whether the prospecting right was unlimited in terms of the activities it allowed the holders.
Mr Mabuza responded that in advanced stages of exploration, bulk sampling is required to determine feasibility and pre-feasibility, and that previously prospecting to determine this did have a limit, but that this was not determined any particular measure, causing holders to continuously renew their prospecting rights and their bulk sampling rights, claiming further exploration but removing large amounts of mineral resources and profiting from this. The new provision was aimed at curbing this and allowing a certain amount of samples to be taken subject to a prospector stating the purposes for which the samples were needed.
The Chairperson asked whether inspections for these rights were appropriately done or whether this was an area in which the DMR had no capacity.
Mr Mabuza responded that this was one of the reasons the DMR had requested of the Committee augmentation of enforcement capacity as the DMR did lack resources in this area.
Mr Jali presented the next amendment to subclause (3) which stated that before applying for a bulk sampling right, the applicant should have qualified for a prospecting right in terms of Clause (16)(4)(a) which related to environmental authorisation.
Ms Khunou requested for the full application process for a personal understanding of the process.
The Chairperson asked Mr Mabuza to forward this process to Ms Khunou as well as other members who needed to catch up.
Clause 21 and 22
Mr Jali brushed over these clauses as they contained mostly repetitions of what was discussed in previous amendments, such as the granting of a water-use license, etc.
This clause dealt with the participation of a mining rights holder in the socioeconomic activities of the communities they would be working in close proximity with.
Mr Jali showed that at first it was suggested that the mining right include conditions requiring the participation of the community but that this was subsequently removed.
Mr Mabuza stated that this was removed as the DMR was very conscious of preventing enclave development of mining expertise in small pockets of community member. It was decided that it would be better if many mines within a particular area collaborated with the municipalities and instead contribute to large projects and make significant contributions to communities.
Mr Mohai commended Mr Mabuza on this explanation as he felt the institutionalisation of development was what was needed in the mining industry.
The Chairperson asked whether any integration with the Independent Development Plan was taken into consideration when getting mines involved in community development.
Mr Mabuza responded that it was important to remember that mining companies were not responsible for development but only made contributions to development and that it was local government that was responsible for development. He further stated that a certain level of integration was necessary but that it was municipalities that were responsible for development.
The Chairperson asked whether contributions could be used in reviewing the mining charter. Mr Mabuza stated that this was in fact a commitment being made by the DMR and therefore would be proposed for implementation into the mining charter.
The Chairperson than asked a balance in terms of affordability would be reached between mining companies of different sizes.
Mr Mabuza stated that the contributions of the mines would be determined depending on the results of evaluations done by the DMR. For this reason it was decided that mining companies make collective contributions so that small mines who make small contributions could still have a big impact on communities.
Clause 24 and 25
These clauses were brushed over as they were also issues that were previously discussed, such as the removal of the phrase ‘and be granted’ with regards to the application for prospecting and mining rights.
Budgetary Review and Recommendations Report on the Department of Mineral Resources
The Chairperson proceeded to present the Budgetary Review and Recommendations Report (BRRR) on the Department of Mineral Resources (DMR), suggesting that they go through the Report page by page and consider any amendments suggested by Members.
Mr J Moepeng (ANC) suggested the first amendment, which was made on page 1, saying that instead of referring to the ‘Aims’ of the Department, this word should be changed to ‘Mandate.’
Mr H Schmidt (DA) suggested the next amendment on page 8. On this page it stated that the Mining Charter would be reviewed, however he pointed out that this had already happened in 2010 and would only have been due to happen again in 2015. He therefore asked whether the intention of this point instead was to refer to the implementation of the Mining Charter, as that would have needed to be reviewed.
The Chairperson agreed with this and the amendment was made.
Mr Schmidt commented on the percentages stated on page 11 and was seeking clarity as to whether those figures were accurate. He noted that the compensation of employees made up 31% of the budget and he was under the impression that it was higher.
The Chairperson directed this query to the Mr Musa Mabuza, the Director General of the DMR. She also asked him to clarify the other figures which were: Goods and Services at 22% and Travel and Subsistence at 5%. She suggested that Mr Mabuza call his staff to ascertain whether these amounts were correct.
The Chairperson diverged from the report to ask a question on an assessment process that was supposed to have been done on the DMR. She stated that a letter was written by the Committee and sent to the DMR but that they had not received a response. She directed her question to Mr Andre Andreas, Chief Director of Mining and Mineral Policy at the DMR.
Mr Andreas stated that he was aware of this process and that the DMR did request a letter from the Committee but that he was not certain about how far the process had been followed up on.
The Chairperson stated that a note would have to be made in the Report as to where the process had ended as it was imperative for this process to have been finalised.
Ms K Khunou (ANC) noted a point on Human Resource Management on page 22 which stated that budget constraints had impeded the filling of vacant posts. She asked that this be explained by the DMR.
The Chairperson suggested to Ms Khunou that her comment be reserved for the section on Observations, Responses and Recommendations later in the Report.
Mr Schmidt commented on the reference to the Mineral and Petroleum Resources Development Amendment Bill (MPRDA), but he was mistakenly referencing an earlier draft of the BRRR.
The Chairperson advised that the point Mr Schmidt was referring to was removed from the BRRR's earlier draft. It had been decided that all MPRDA issues would be discussed only once the Bill was finalised.
Mr S Mohai (ANC) asked for clarity on the difference between the fact that, as stated on page 25, fatalities had decreased while dangerous occurrences had increased.
The Chairperson explained that fatalities referred only to mortalities while dangerous occurrences referred to work-related accidents that had not resulted in death. The Chairperson also pointed out that other issues which should also be looked at was the occurrence of crime related incidents, a point in particular that she raised was that of a woman who was raped in one of the mines. She was unsure about whether the statement pertaining to dangerous occurrences was meant to refer to these criminal offences as well.
Ms Khunou stated that she too was confused by the statement as she had previously been informed that the occurrences of both fatalities as well as dangerous incidents had decreased.
The Chairperson decided that it may be a good idea for the DMR to specify the different dangerous occurrences that had transpired, breaking them down in, for example, the number of machine-related accident, the number of human-related accidents, homicide, etc. She also suggested that the numbers from previous financial years be compared to the financial year under review.
The Chairperson also picked up on a point on page 25 that claimed sluggish growth in the mining industry due to non-compliance by companies. She said that this statement should made be more specific, indicating numbers as well as procedures that were followed which led the DMR to determine this.
Mr Andreas said that he was not able to comment on this but that it was possible to make the necessary enquiries.
The Chairperson asked what the time frames were that the Committee required for regular feedback from the DMR.
Mr Mohai stated that the agreed upon time frame was that the DMR was to interact with the Committee on a quarterly basis.
Ms Khunou asked why page 25 stated a record of ‘over 1500 operating mines’ while the DMR had previously confirmed a number of 1600.
The Chairperson said that this seemed to be accurate enough as they had stated ‘over’ 1500.
Ms Khunou asked why did they not simply state 1600 in the report.
The Chairperson said that due to licensing processes at the time, they were unable to confirm an exact number but that 1500 was a definite number of licensed mines and that there were definitely more than that which were still undergoing the licensing process.
Mr Moepeng suggested that an extra column be added to page 26 which stated the timeframes by which the department was to report back to the Committee on each recommendation it had made.
The Chairperson said that setting timeframes in the BRRR was obsolete as the meeting of recommendations by the DMR would need to form the basis of quarterly reports.
Mr Mohai made a recommendation saying that the DMR was to draft a report outlining what strategies the department was taking to retain staff. He said that staff turnover due to competition from the private sector was very concerning and therefore it was imperative that the DMR finalise this report.
The Chairperson said that there had been a due date for the draft to have been presented to the Committee about strategies being put into place for retaining staff. She suggested that an extension be granted to the DMR to present its case to the Committee in the New Year. However she asked the Committee when the exact due date was set for and asked for suggestions based on that due date.
Mr Schmidt said that he had assumed that the due date was set for November 2013 but that delays were expected because the correct documentation from Parliament was not procured in time.
The Chairperson said that once the due date was confirmed, an appropriate alternative due date would be finalised.
Mr Moepeng repeated his suggestion on adding a column for timeframes in the recommendations, saying that due dates for the submission of quarterly reports should be inserted. He also suggested that certain special tasks should be given timeframes to be met before the next quarterly reports were due, such as the filling of vacant posts, so that money allocate to the department be used in time and no rollovers occurred.
The Chairperson this time noted his suggestion.
Mr Schmidt said that although requests could be made to the DMR to meet certain goals by a given timeframe, instructions could not simply be given to the Department as the Committee’s duty was that of oversight and not of control.
Mr Moepeng replied that the fact that the Committee played an oversight role should mean that stringent recommendations be developed by the Committee on the basis of the weaknesses of the Department. He felt it was the responsibility to hold the Department to the goals that it had set for itself. He also suggested that the structure of the recommendations be rearranged for the sake of coherence.
The Chairperson once again noted these recommendations, agreed that timeframes should be put into place and that the incomplete tasks which had repeated themselves between the previous fiscal year and the one under review should be a concern to the Committee. She did not, however, comment on giving stringent instruction to the Department. She also said that the restructuring of the recommendations was a point already raised by Mr Schmidt and that it had already been noted.
Ms Khunou agreed with Mr Moepeng, saying that she did not feel as though the Committee was giving instruction to the Department, but by putting timeframes in place it was merely holding the DMR to what was expected of it anyway. She also agreed on the restructuring of the recommendations.
The Chairperson agreed and also commented on the use of the word ‘should’ in the recommendations as certain recommendations should not be seen as optional and therefore the word ‘must’ would have been better suited.
Mr Mabuza returned with confirmation of the percentages which was requested for page 11. The figures were as follows: Compensation of Employees was at 33.6%, Goods and services was at 19.39% and Travel and Subsistence was at 5.26%. However, the Department generally made no differentiation between Goods and Services and Travel and Subsistence and therefore the 19.39% included the 5.26%.
Ms Khunou stated that one additional point which could be raised in the recommendations was the lack of communications between the DMR and its entities as this was a concern that was highlighted by the Financial and Fiscal Commission (FFC) as well as the Auditor General (AG).
The Chairperson suggested that Ms Khunou’s point could be added in the report, saying that the DMR would need to improve communication with its entities.
Mr Mohai suggested that Ms Khunou’s point would be better emphasised if the recommendation stated that the DMR should conduct oversight of its entities as communication was an obligation.
The Chairperson said that it was very concerning that an entity of the DMR received a good audit report while other its other entities, including the DMR itself, did not. She stated that it was clear from this observation that a lack of communication existed between the DMR and its entities. She also suggested that in its next oversight duty, the Committee would need to ensure visits to the DMR in order the gain a hands-on understanding of the challenges affecting the Department, especially with regards to its licensing issues.
Ms Khunou move the vote for the adoption of the Report
Mr Mohai seconded the vote
The meeting was adjourned
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