Mineral and Petroleum Resources Development Amendment Bill: deliberations

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Mineral Resources and Energy

06 November 2013
Chairperson: Ms F Bikani (ANC)
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Meeting Summary

The Portfolio Committee on Mineral Resources continued its deliberations on the Mineral and Petroleum Resources Development Amendment Bill. Representatives from the State Law Advisers, the Parliamentary Legal Advisers and the Department of Mineral Resources (DMR) were present, but the Chairperson pointed out during the discussions that the decisions on the Bill lay with the Committee, and the DMR was no longer involved in the drafting, but could only comment if asked to do so. The Committee took about 45 minutes break to have copies of the Bill incorporating the new amendments printed. The Committee Chairperson, then the Office of the Chief State Law Adviser, read through the new version of the Bill, up to clause 16, word-for-word. A Member called for clarity on the definition of “national development imperatives”, but was advised that this would be more fully debated during discussions on clause 26, although briefly, this referred to energy security, industrialisation and infrastructure development. The State Law Advisers noted an error and said that paragraphs (j) and (k) of clause 1, dealing with the definitions of ‘differentiated pricing’ and ‘free carried interest’ should have been deleted from the document, because they had been incorporated elsewhere. A Member questioned the new definition, under paragraph (y), on ‘production sharing and State participation’, and it was explained that this wording had been used because the DMR did not see State participation, free carried interest and production sharing as mutually exclusive. The State Law Advisers added that this was covered in clause 62, amending section 86A of the principal Act, and the State would be entitled to a maximum portion of commodities produced.

A DA Member noted that he had recently written to the Minister of Mineral Resources, asking that she attend
a sitting of the Committee to give her views on the amendments. He pointed out that the Minister had not attended any meetings since 2009 and it was particularly important for her to do so since this Bill was conferring substantial powers on her office. Other ANC Members objected to the fact that the letter had been written without referring it through the Committee, pointed out that the Minister’s apologies for her non-attendance had been accepted by the Committee, and her schedule was particularly busy. They felt that the Committee’s work on the Bill should not be held up, and the Committee Chairperson said that the Member should clarify exactly what clauses it wished the Minister to comment upon.

Members were asked to comment on the clauses covered so far, and another DA Member objected to what he felt was a “sloppy” process, and suggested that there were a number of inconsistencies. Although the committee had not yet dealt with the amendments to section 69, they appeared to contradict early clauses on beneficiation. He was concerned that a reference to ‘interested parties’ had been removed from section 16, and handed the Chairperson a copy of a court judgment, but the DMR and State Law Advisers noted that this was deliberate and attempted to limit the interpretation of the section. Members also questioned what the 20% referred to in the definition of ‘free carried interest’ represented, and how it related to legislation on Broad Based Black Economic Empowerment, but were told that this would be discussed under the revised section 86A. The State Law Advisers and Parliamentary Legal Advisers were asked to work on clearer definitions in this regard. Other queries were raised on the definition of ‘historically disadvantaged communities’.

Meeting report

Mineral and Petroleum Resources Development Amendment Bill: deliberations
The Chairperson said that the Committee would need to go through the Mineral and Petroleum Resources Development Amendment Bill (the Bill) and asked the State Law Advisers and Parliamentary Legal Advisers to participate, where needed.

Clause 1: Definitions
Mr J Lorimer (DA) asked for clarity, under the definitions, on the meaning of “National Development Imperatives”. He wanted to know what they were, who decided on them, what happened when they changed and when they would change.

Mr Theodore Hercules, Principal State Law Advisor, Office of the Chief State Law Adviser, responded that this issue was to be dealt with under clause 26, and suggested that the Committee not deal with it in detail at this point. However, he explained shortly that, for the purposes of the Bill, National Development Imperatives referred to energy security, industrialisation and infrastructure development.

Mr H Schmidt (DA) asked for clarity on parts of texts in square brackets.

Mr Hercules explained that those parts of the text in bold and in square brackets were the parts being deleted, the underlined texts were the new insertions and those highlighted in yellow were the latest amendments.

The Chairperson continued reading the Bill out loud, but found that, due to all of the amendments proposed on the Bill, she  was having some difficulty in keeping track. She asked Mr Hercules to take the Committee through the Bill.

Mr Hercules agreed to this. He then pointed out that under Clause 1 paragraphs (j) and (k) dealing with the definitions of “differentiated pricing” and “free carried interest” should have been deleted from the document because they now discussed in another clause. He apologised to the Committee for this mistake.

Ms N Ngele (ANC) was not happy about this, and said that their inclusion made it difficult to go through the Bill. She reprimanded the State Law Advisers for not having deleted them.

Mr Schmidt asked for what the purpose of the day’s meeting was, as the Committee had already deliberated on the amendments to the Bill.

The Chairperson responded that the purpose of the meeting was to go through the whole Bill and ensure that Members were happy with the final version.

Mr Schmidt was concerned about this, pointing out that this document contained close to 50 pages and that it could take a very long time to read it out loud, line-by-line.

The Chairperson responded that that was a procedure that needed to be followed.

Ms B Tinto (ANC) asked when the document would be voted on and finalised if Parliament was to be closing in the following week.

The Chairperson noted that another meeting had already been scheduled for the Committee to deliberate,  and that Parliament had added another week for Committee Meetings. She then asked Mr Hercules to continue on the reading of the bill.

Mr Hercules then explained that an A-List had also been circulated which indicated all the phrases or clauses that were removed and inserted. The draft B-version of the Bill was compiled in order for the Committee to have a better understanding of how the final document would look. He also explained that in the A-List, the words shown in red were the amendments that were discussed at the previous meeting. The text marked in blue indicated changes made since the last meeting

The Chairperson noted this and directed Mr Hercules to continue with the reading of the document.

Mr Hercules continued to read up to paragraph (y), a new insertion under Clause 1.

Mr Lorimer asked for clarity on the new definitions inserted at paragraph (y) on “production sharing and State participation”.

Mr Hercules said that both of these topics were discussed in detail under clause 26 and new section 87A respectively but felt that it may be wise for the Department of Mineral Resources (DMR) to explain the reasons behind these new insertions.

Mr S Mohai (ANC) commented that the Committee had discussed many of the issues in the document at previous meetings, and that Members should not try to disguise the expression of their views as questions of clarity.

The Chairperson acknowledged this comment and said that that was why she was about to ask Mr Musa Mabuza, Director General of the DMR, to keep his explanation as short as possible.

Mr Mabuza explained that these changes were made as the Department did not want readers of the Document to see State participation, free carried interest and production sharing as mutually exclusive. That was the reason why free carried interest and production sharing were to be included under State participation.

Mr Lorimer said that he was still unsure about what a production sharing agreement was.

Mr Hercules explained that clause 62, which amended Section 86A of the Minerals and Petroleum Resources Development Act (MPRDA) explained the concept of production sharing, free carried interest and state participation. He outlined that, from a legal perspective, production sharing meant a person or entity was entitled to a certain portion of the production of a mining company

Mr Lorimer then asked whether this meant that the State was entitle to receive a proportion of every commodity that a company produced; if, for instance, 100 barrels of oil were produced, the State would then receive 30 barrels.

Mr Hercules then said that there was a provision in the new section 86A that specified the maximum amount of production the State was entitled to, which was 50% for petroleum products.

Mr Hercules continued reading the document to the house (see attached A-list and version of the Bill for details). No further questions were asked during this reading.

After a short break, the Chairperson requested that in preparation for the next meeting, the State Law Advisors should compile all of the different amendments into one document, for ease of reference.

Mr Lorimer asked the Chairperson whether it was her intention to finalise the Bill by the end of the following week.

The Chairperson replied that it may not be possible to finalise the Bill as soon as the end of this term of Parliament, as there was still much work to be been done on the document.

Mr Schmidt agreed with the Chairperson on that point. He said that he had recently addressed a letter to the Minister, a copy of which was also handed to the Committee Secretary, requesting that the Minister attend a sitting of the Committee to solicit her views on the amendments.

The Chairperson read out the letter to the Committee. The letter focused on the fact that the Minister of Mineral Resources, Ms Susan Shabangu, had not visited any mines since the beginning of the year and that the Democratic Alliance saw this as neglect of her duties. In addition, the letter also requested the presence of the Minister at a Committee meeting.

Mr Mohai said that he felt the letter was very opportunistic and, since Mr Schmidt was a Member of the Committee, he should have discussed his concerns with the Committee before writing to the Minister. He was aware of the fact that the Minister was part of a larger team, which included the Deputy President, who collectively were involved in resolving issues around the mining crisis.

Ms Tinto said that she felt that the letter did not need to be considered. The Committee had also accepted the apology of the Minister for not attending its meetings, as the Committee understood the busy schedule of the Minister.

Mr Lorimer pointed out the fact the Committee was discussing a piece of legislation that would confer unprecedented power on the Minister, and that he found it strange that the Committee had not heard the opinions of the Minister in this regard.

Ms Ngele pleaded with the DA not to pursue the issue of this letter for the moment, as the Committee already had much work to cover on the Bill.

Mr Schmidt said that the Committee did not have to discuss the letter in detail. Instead, the Committee merely needed to take a decision on when would be an appropriate date for the Minister to attend a meeting. He pointed out that she had not attended any Committee meetings since 2009. He also highlighted the fact that the amendments being made to the MPRDA by way of this Bill were, in his opinion, the most important since 2002.

Mr Mohai asked that the DA not use scapegoats, nor cite the absence of the Minister from meetings as an excuse for lengthy debates and arguments. He stated that the Committee acted under the political leadership of the Minister and that meetings were a platform for members to express their views, whether the Minister was present or not. The legislature allowed for this, and the Minister was not neglecting her duties by not attending meetings.

Ms Ngele said that it was wrong of the DA to expect the meetings to be held up because of a letter to the Minister. She reiterated that the Committee was in the middle of a lengthy process of deliberations and had enough to deal with already, apart from this letter.

The Chairperson echoed the sentiments of the ANC Members, and agreed that the first priority at the moment was the Bill. Parliament was in any event about to rise, and a letter would in any event first need to be drafted by the Committee, to invite the Minister to a meeting. This call from the DA came at a rather bad time.

Mr Schmidt said that the DA did not expect the Minister to be summoned now, but that even early in the following year would be acceptable, as long as she was called to express her views before the Bill was concluded.

The Chairperson responded that the DA would have to specify what clauses of the Bill it wanted to have spoken to by the Minister. The Chairperson said that discussion on the letter was now closed.

The Chairperson asked Members to focus now on the amendments read out to the meeting earlier. She suggested that Members should comment now on the clauses read by Mr Hercules.

Mr Lorimer felt that some of the amendments to the Bill were being done in haste, and the whole process had followed a “sloppy” procedure. His first specific concern was that reference to oil and gas were removed from the section on beneficiation, but the revised section 69 appeared to contradict this, as it noted that oil and gas were said to exist under the same conditions as other minerals, therefore effectively inserting them back into the earlier provisions.

Mr Lorimer was also concerned with the changes to section 16. Mr Mabuza had said that the reference to ‘interested and affected parties’ was removed because the Department felt that this may cause unnecessary objections from the public if interested parties who were not directly affected by section 16 wanted to intervene in the processes. Mr Lorimer believed that this may, in fact, have the opposite effect. He suggested that shutting out environmental groups would cause legislative and social problems. Furthermore, the definition of ‘interested and affected parties’ was open to interpretation.

The Chairperson interrupted Mr Lorimer at this point, saying that the Bill was now before the Committee, and the DMR was not involved in the process other than clarifying matters for the Committee. She further asked Mr Lorimer to be specific about what he felt needed to be changed in the Bill and reiterated that those points needed to be debated by the Committee, without involving the DMR. She further asked him to only comment on those clauses which had already been read out by Mr Hercules.

Mr Lorimer defended himself in regard to his comments on Section 69, saying that he was merely making a general statement regarding the inconsistencies in the document. However, referring to the clauses already read out, he noted that he had a problem with clause (11)(d), which amended section (16)(4)(b), and reiterated that he was concerned at the deletion of the reference to ‘any interested parties’. He believed that this needed to be reintroduced, as the clause, as it currently read, could be in contravention of the Constitution, which allowed any citizen to comment on environmental issues.

The Chairperson said that this topic had already been discussed and that, in the absence of sufficient objection at that time, the Committee had already agreed to remove that phrase. She said that keeping it would give rise to unintended consequences; for instance, a businessman living in the city centre and who was not affected by mining operations to the same extent as people living in the proximity of the mine, could cause delays in processes by simply voicing his opinion on how he felt about the mining issues. This would open the doors and cause unnecessary complications.

Mr Lorimer stated that there was provision, in all other sections of the MPRDA, for interested parties to be included. Even the Constitution and the National Environmental Management Act (NEMA) allowed ‘interested parties’ to take part in decisions regarding mining operations that seemed arbitrary to them. He felt that the removal of this phrase was unnecessary.

The Chairperson repeated her point that she felt the inclusion of ‘interested parties’ made the section too loose and open to interpretation. Mr Lorimer’s points appeared to her to be reducing the specificity of the section. She then asked the State Law Advisor, Mr Hercules, for his opinion.

Mr Hercules said that there was indeed a difference between ‘interested’ and ‘affected’ parties. This particular section 16 aimed to eliminate the openness of interpretation, and focus specifically on the landowners.

Mr Schmidt said that his main concern was that environmental interest groups were being excluded, despite the fact that they often had more knowledge than affected parties.

Mr Moepeng elaborated on the points made, and said that section 16 focused on affected parties in relation to the application, but that interested and affected parties had already been taken into consideration, by way of other sections of the legislation.

The Chairperson said she therefore maintained that the reference to ‘interested parties’ was not required specifically in the revised section 16.

Mr Lorimer asked the Chairperson whether it she would accept a copy of the Court’s judgment which he was referencing to defend his argument.

The Chairperson accepted this, but said that it would not be discussed at the time.

Mr Lorimer than said that his broader argument revolved around the inconsistency of the Bill as a whole. He then returned to his previous concern regarding the definition of ‘free carried interest’ under clause 1. He wanted to know what the 20% referred to, and whether this was 20% of profits, dividends, or turnover.

The Chairperson said that clause 1 referred merely to the definition, explaining the meaning of the words in the context of the Bill, and they did not need to be quantified at that point.

Mr Mohai reminded the Chairperson and Mr Lorimer that a broader description of ‘free carried interest’ was presented in the revised section 86A and therefore the narrower definition under clause 1 should be acceptable for the time being.

Mr Lorimer said that he was merely pointing out that there were problems with the drafting of the bill.

Mr Schmidt said that the argument was irrelevant because the actual definition of ‘free carried interest’ had been deleted from clause 1. However, it had been reintroduced in the new section 86A and that this may cause an even bigger argument.

Mr Hercules explained that the definition of ‘free-carried interest’ had been removed from clause 1 because it was then incorporated into the definition of ‘state participation.’ This was indeed then further explained in the new section 86A. He suggested that if the Committee felt these definitions were not clear enough, the Department and State Law Advisers could work on revising them.

The Chairperson welcomed this reworking of the definitions and asked that new definitions be presented to the Committee at its next meeting.

Ms K Khunou (ANC) asked that the Committee also look at the definition of ‘historically disadvantaged communities’ under clause (1)(l)(c)(2), as this definition had previously been changed by Parliament. She was not sure exactly how the new definition related to the previous one.

Mr Hercules responded that the new definition did in fact take into consideration the new conditions under the Broad Based Black Economic Empowerment Amendment (BBBEE) Bill. The previous one had made provisions for individuals being unfairly discriminated against, before the Constitution came into effect.

Mr Schmidt referred back to discussions in previous meetings, where it was said that mining companies were required to adhere to 20% free carried interest, 30% fair market value and 26% Black Economic Empowerment (BEE). He wanted to know whether these standards met the requirements of the BBBEE legislation.

Mr Hercules responded that a definition of BBBEE was available under clause 1, and this explained that the 26% referred to the sum total of BEE equity over all levels of employment. However, he wanted to note that he had discussed this also with the Parliamentary Law Advisers and had decided that a more structured outline needed to be drawn to give greater clarity to this.

The Chairperson asked that this be done as soon as possible and forwarded to the Committee.

Mr Schmidt asked for further clarity on free carried interest, and whether 20% referred to production sharing or whether it referred the percentage of shareholding in the company to which the State was entitled.

Mr Hercules said that the 20% referred to a production sharing agreement between the State and the mining company.

The Chairperson noted that there was not further time to continue and therefore the meeting next week would proceed from clause 17, revising section 22 of the MPRDA.

The meeting was adjourned.


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