The Committee went through a document setting out the latest changes to the Mineral and Petroleum Resources Development Amendment Bill, as at 4 March, clarifying and debating further changes to wording, in preparation for a clause-by-clause consideration of the Bill later in the week. In regard to the definitions, the DA suggested a new definition for “beneficiation”, but that was not accepted by the majority. It was noted that beneficiation would no longer be applicable in regard to petroleum resources, but only minerals or mineral products. The DA thought that the referral to “national development imperatives” was too wide and wanted this either defined, or reference made to gazettes, but the majority did not agree, but did conceded that the phrase “as declared by the Minister in the Gazette” could be added. An earlier decision to flag this for further debate was later settled by the decision that no definition was needed. Members questioned the difference between the ex-mine value (which was being deleted) and mine-gate price. The DA expressed the view that the definition and any reference to free carried interest should be taken out. There had been discussion about separating oil and gas from minerals, but although the Committee had not taken a final conclusion, the indicators were that they would not be separated out at this stage, as more research was needed before taking that decision. The DA’s suggestion then to deal only with the parts of the Bill that dealt with minerals, but to exclude all clauses dealing with oil and gas, leaving the Act untouched in that regard, was not accepted. Members agreed to flag, for further discussion, the question of free carried interest. In relation to the definition for mine gate price, Members agreed that “fair value” be removed, because it was not defined, and although the DA suggested that the words “fair market value” be used, the majority wanted to use “price” only. A reference to the processing site was included to distinguish it from a beneficiation process further down the line.
The DA questioned why the process set out in section 9 was being changed by a new clause 5, and suggested that the current system could remain. Other Members vehemently disagreed, and said that the past system was fraught with lack of accountability, impropriety and unfairness. Mr Lorimer felt that this did not relate only to licensing but other Members did not hold the same view. There would be further debate on the new section 9. There was some debate on the wording of clause 14. In respect of clause 22, the ANC suggested that the reference to 60 days be removed to try to align with other legislation, but the DA suggested that this would lead to uncertainty, to which the ANC countered that a person would merely have to refer to other regulations. In relation to clause 30, questions were asked on the closure certificate process, and it was noted that the Minister would take a number of factors into account when setting an appropriate time period. The ANC suggested changes to several of the subclauses of clause 36, to refer to “technical cooperation permit, reconnaissance permit, exploration right, protection right”, to include petroleum rights, and to clarify that section 49 of the Act did apply to both petroleum and mineral resources. The DA cautioned against trying to adopt a “one size fits all approach”, pointing out that issues relevant to the petroleum industry were very different from those in mining. The State Law Advisers were asked to check other sections for consistency. Although there was a suggestion to add a reference to the Minister having to take the recommendation of the Ministerial Advisory Council, the majority disagreed. A slightly different formulation of clause 43 was agreed upon, and it was also agreed that, for the new section 56C, the Council could call on those outside the Council to serve on sub-committees. There was substantial discussion on the new section 86A, with the DA repeating its concerns about the free carried interest, acquisition of 30% and production-sharing agreements. When the ANC proposed that “of up to 30%” be deleted, and that “fair market price” be substituted with “agreed price”, in relation to the acquisition of further interest, the DA objected, and said that this posed the risk of the State acquiring everything, particularly if the Bill still read that the State would be “entitled” to acquire. The ANC pointed out that the phrase “entitled to” merely emphasised the State’s ownership of minerals underground, and that this was still subject to agreement but the DA maintained that there was the risk of unequal bargaining power and did not feel that this would promote investment. When the DA suggested that the deletion of the words at this stage amounted to bad faith, argument became quite heated. The ANC further suggested that somewhere in the Bill there may need to be added in something about historically disadvantaged South Africans being able to be accommodated in the form of discount prices, but this was not pursued. The State Law Advisers suggested that perhaps “may” could replace “entitled to” but it would be up to the Committee to decide on the final wording. The voting rights were questioned, in respect of the new section 86A(5). It was summarised that on the following day, members would again discuss the issues flagged.
The Chairperson asked if the Committee still wished to address a letter to the Speaker for permission to proceed. The State Law Advisers did not think this necessary, for the matters raised were already mentioned in the Bill, and there was nothing new in principle with the latest suggestions. The Parliamentary Law Adviser held a slightly different view as she believed that the new insertions would affect the process. It was noted that there had been no response to the Committee’s earlier letter questioning the tagging. It was decided that two further letters be drafted for discussion on the following day.
The Chairperson noted that the Committee was continuing the clause-by-clause consideration of the Bill. When going through the Bill, Members needed to highlight issues that the Committee would then write to the Speaker.
She checked that Members had the following documents:
- the MPRDA Amendment No 49 of 2008 (not yet in force)
- a document compiled by the State Law Advisers, dated 4 March, setting out the proposed amendments to the Bill
- the MPRDA Act No 28 of 2002
- The MPRD Amendment Bill B15-2013
There were ten points raised for this clause.
Mr J Lorimer (DA) referred to page 3 line 7 of the original Bill. This was additional to the items raised in the document dated 4 March.
In regard to the definition of “beneficiation” (and the DA would be voting against the beneficiation provisions), he noted that he had what he thought was a “cleaner” version, reading: “beneficiation means the transformation of a designated mineral to a higher value product which can either be used locally or exported”.
The Chairperson raised a point of order about the words he had used and asked that all Members confine themselves to the clause by clause process at this stage, and not debate other issues.
Mr Theo Hercules, State Law Adviser, Office of the Chief State Law Adviser, read out that the underlined words were in the Bill (see page 3, at line 22).
Mr S Mohai (ANC) thought that the current formulation in the Bill was preferable.
Mr Lorimer said that he had tried to take out the words “in relation to any mineral resource” and other phrases, and adding “used” instead of “consumed”. He thought that it was less open to confusion.
Mr J Moepeng (ANC) thought that Mr Lorimer’s definition was not much different to what was in the Bill. He would prefer to retain the definition in the Bill
Mr C Gololo (ANC) agreed. He noted that beneficiation would be conversion of raw material by adding value, and he would like to leave it.
The Chairperson was worried that the shortening of the definition could exclude oils and petroleum. The Committee had to accommodate downstream mining and beneficiation.
The majority of Members accepted the definition as in the Bill.
Mr Hercules noted two changes to the definition of “beneficiation”- in page 3 at line 23, where “and petroleum resource” was being omitted, and “or mineral product” was being added.
Members noted that.
Mr H Schmidt (DA) said that Mr Hercules had indicated how quickly matters might slip through and he though more circumspection was needed.
Mr Mohai asked what “mineral product” meant.
Mr Hercules said that beneficiation would no longer be applicable in regard to petroleum resources, but only minerals or mineral products.
The Chairperson noted that beneficiation was linked to trading, as the end product of what was being mined.
Dr Thibedi Ramontja, Director General, Department of Mineral Resources, said that “mineral resource” was a resource in the ground, but the “product” referred to the first phase of processing in the mine.
Mr Lorimer referred to paragraph 7 on page 2 of the document of 4 March. He thought this definition was very wide and it referred to input into local beneficiation programmes in line with national development imperatives. This was too wide – firstly, it raised the question as to who would set the development imperatives. He suggested that the designated minerals should have to be designated by the Minister. He wanted to take out all words from “constitute input” to the end, and substitute “which are declared as such in a Notice in the Gazette in accordance with section 26”.
Mr Mohai thought that there was a need to include the reference to the development imperatives, which would allow the Minister to make rulings. He would propose that this definition remain.
Mr Lorimer said that there was too much room for uncertainty at the moment. He did not think anyone could say what national development imperatives were – and they could change which did not bring certainty.
The Chairperson asked what ‘national development imperatives meant.
Mr Hercules responded that it could mean a number of issues, including food security, beneficiation, industrial development. The introduced version of the Bill had a provision that the Minister would do this by notice in the Gazette.
MR Lorimer thought that it was still too wide – for instance, because food security did not affect mining.
Mr Moepeng said that he thought the definition was clear and there was not a need to go further into the issues. He thought that the definition as it stood sufficed. Everything that Mr Lorimer had raised was covered.
Mr Schmidt said that “national development imperatives” should surely have been defined, perhaps as imperatives “as described in he National Development Plan” or something to that effect.
The Chairperson asked if there was a definition but thought that they were standard as they were part of the NDP.
Mr Hercules said that it was very difficult to draw a list. In order to address that, the Minister would designate. He suggested that it might be possible to retain the current words but add the words, to the definition, after “national development imperatives” of the phrase “as declared by the Minister in the Gazette”.
Mr Moepeng and other Members agreed with that change.
Mr Schmidt said that he had another issue with the definition of “mine value” under paragraph 9 on page 2. He noted that he wanted to know the difference between the ex mine value and the mine gate price.
Mr Hercules noted that the first definition should be taken out, as set out in paragraph 9.
Mr Lorimer wanted to raise a query on point 10, the definition of “free carried interest” He did not believe this should be in the Bill and should be struck out. Previously, there had been discussion about separating oil and gas from minerals. However, he asked what the decision was on that.
The Chairperson noted that the discussions had taken note of what had been said in the public hearings but the Committee had not taken a conclusion on that yet. However, now that the Committee was discussing clause by clause, it might be able to deal with it. There was no time to do the research needed to separate it at this sage. The Committee needed to decide on the format of the Bill. Members could make changes to the original Act.
Mr Lorimer then wanted to propose that given the fact that the oil and gas industry was so new, and it was very complex, it sat uncomfortably in the Bill. He suggested that the Bill could be sent forward with all the mining parts dealt with but all the parts in relation to oil and gas remain unchanged, so that they sat as they were in the current Act. That would allow the Department to then draw up separate, more appropriate and better thought out legislation, perhaps later in the year. An oil and gas set of rules was in place, but this Bill proposed changing those for rules that he did not think were quite right. The Department could then separate them out.
The Chairperson asked how he would deal with the fact that the water and environmental changes had been made and passed.
Mr Lorimer thought that when dealing with the clause dealing with “free carried interest” for instance, or any other clauses dealing with oil and gas, they should be excluded from the Bill, and to avoid changing those rules now, especially if they were to be changed again. He reiterated that this Committee should not disturb the oil and gas rules at all.
Mr Moepeng said that he was initially tempted to agree, but he was not sure that it made sense. He suggested that the free carried interest should not be excluded from the definition on the basis of South Africa being new entrants into the arena. He thought that this should be defined unless there was another compelling argument. He suggested that it should be left in the Bill.
He continued that when Members made inputs into other clauses, he thought that it would be correct with the State Law Advisers as to why the definitions would be needed.
Mr Mohai said South Africa could not afford to be spectators and he could not support the separation of the matters at this stage.
Mr Schmidt asked if the possibility of the Bill being split was still being considered. He thought that other members were also saying that free carried interest might be a temporary measure until the Bill was split.
The Chairperson noted that, going back to the MPRDA of 2002, this covered minerals and petroleum. Any changes being inserted by the Bill did not necessarily affect the future functioning of that Act. The Committee had been presented with reasons to split the two. However, at this stage, the Committee could not merely determine that, without having done the necessary research work. If the Act still needed to improve, there seemed to be no objection to making these changes now. If the free carried interest must remain, Members could still decide that at the end of the discussions. She was trying to avoid a pre-emption now that would necessarily exclude oil and gas. If that was done, the question was still raised how to avoid not having any regulation over certain areas.
Mr Lorimer repeated that the current Act had provisions already governing oil and gas and if the Bill excluded those clauses, the current laws would continue.
Mr M Sonto (ANC) thought that this was taking the Committee back. Mr Schmidt had been trying to understand whether the Bill would be separated. The answer to that was that it would not.
Mr Moepeng suggested that the issue be closed. The Committee could not decide what would happen in the future. At a time when circumstances changed, then it might be that the Act split. He thought that he current situation be considered.
Mr Lorimer then asked a question on the process, and whether the Members would still do the clause-by-clause agreement, with a vote if necessary.
The Chairperson confirmed that this would be done. She asked that the issue be flagged for dealing with later on.
Mr Hercules said that the definition of free carried interest was being dealt with under the new section and so it was important to have the definition.
The Chairperson accepted that but asked that the issue be flagged.
Mr Lorimer wanted to raise a point on paragraph 11 – the omission of “South African citizens” from the definition of “historically disadvantaged persons” on page 4, line 41 of the Bill.
A Departmental representative said that Mr Schmidt had asked the State Law Advisers should go back and re-look at this definition.
Mr Moepeng said that this was a suggestion put forward by Mr Schmidt – that when speaking of “South African citizens” this did not accommodate juristic persons like companies. That was why he had suggested that the definition should include a juristic person.
Mr Schmidt said that he could not recall that as relating to this particular point. He said that there was another Act dealing with historically disadvantaged South Africans (HDSAs) and he was worried that there might be conflict.
The Chairperson noted that the whole definition was drawn to take care of the particular South African situation – as indicated by the “SA” part of the definition.
Mr Schmidt said that he still found himself at odds – a “person” was then referring to an individual, and he wondered if “a person” here might be correct.
Mr Lorimer could not recall what Mr Schmidt had said before. However, he said that if “a person” was used, a person from Ghana or Jamaica, who would also have been disadvantaged by the previous regime, but they were not South Africans.
The Chairperson said that previously, Indian people may have wanted to participate in business, but would not have been able to do so without going through processes to allow them to do so. She cited the example of a mine worker from Ghana, who would have had certain conditions applied to how they might benefit out of the Republic. If that person had decided to apply for citizenship, and was accepted, that person would become an HDSA. She had made the point that people might have suffered as South Africans, but if due processes were followed by those from outside the country, hey could still also be included.
Mr Moepeng summarised that the long and short of what all people were saying was that the most appropriate wording was “south African citizen” and he therefore thought that paragraph 11 should not be substituted.
Mr Sonto quipped that the two DA members seemed to be contradicting themselves. He thought that the HDSA acronym was understood, and had been coined to accommodate people who were never previously accommodated, because of their colour.
Mr Schmidt said that it was merely necessary to ensure that the definitions of HDSA across the legislation should not be contradictory.
Ms B Tinto (ANC) supported the retention of “South African citizens” in this definition.
Page 3 of document 4 March: point 13
Mr Moepeng said that earlier on it was decided to delete the definition of “ex mine value” which would be replaced by “mine gate price” as set out in point 13. However, he wanted to omit the words “fair value” and he read out the definition as it would read without that phrase.
Mr Schmidt said that he agreed that “fair value” be removed, because it was not defined. But in regard to section 86A and the additional 30% shareholding that a district government could obtain, was against “fair market value”. The two terms denoted something different which was why he supported that deletion. His suggestion was to remove “fair value price” but to replace it with “free market value” because that was what the mine gate price actually meant.
Mr Sonto said that the price would be determined by negotiations and influenced by circumstances prevailing. He believed that “price” should be referred to. He was not sure what the formulation would be that took Members to “free market value”.
Mr Schmidt said that “fair value price” was not well known, but “fair market value” was a well-known legal concept. In order to ensure continuity in the Bill, and the same terminology being used to describe the mine-gate price, he would therefore suggest that phrase.
Mr Hercules said that whatever term was used, it must be consistent. The Department clearly wanted to reflect the intention. He said that intended value must be incorporated and it was then important to be consistent.
The Chairperson said that if “mine gate price means the price…” was used, this was imprecise.
Mr Gololo said that he preferred Mr Moepeng’s suggestion because “price” was then qualified by what it was including or excluding. He thought that “fair value” being included would defeat the object of the beneficiation provisions.
Mr Sonto said that the essence of the sentence was not repeating anything, as suggested by the Chairperson.
Mr Schmidt said that the new section 86A(1) was reflecting the intention of a free market value, so that was not a principle unknown, but “fair value” had been unknown.
Mr Mohai understood the point but thought that at long as the intention was achieved, the wording did not really matter.
Mr Hercules said that “mine gate price” was also in terms of the clause relating to beneficiation, not the clause relating to state participation.
Members agreed that the new definition would begin: ”mine gate price means the price (excluding VAT).. “
Mr Hercules added that it must also related to the processing site, and the Department of Mineral Resources (DMR or the Department) had suggested that the words “or processing site” must be added to the definition after the words “leaves the mine”
The Chairperson said that the Department had had plenty of time to suggest this in the past.
Dr Ramontja said that there were instances where a product could be mined on one side, and it was still in the form of ore, but a few kilometers away there would be a processing site.
Mr Schmidt thought that “ or the mine processing site” must be used, to distinguish it from a site that was involved in beneficiation further down the line.
Members discussed whether “mine processing”, “mineral processing” or “mine’s processing” should be used.
The Chairperson noted that the definition referred to the mineral leaving an area.
Mr Moepeng thought that as long as the processing site was related to the mine, it really did not matter.
Members agreed to accept the addition of “mine processing site”.
Page 4: definition of “production sharing agreement”
Mr Schmidt thought this definition was tautologous and wondered if there was not another way to word it.
The Chairperson thought it was acceptable.
Under item 19, Mr Schmidt noted another reference to national development imperatives. He thought that the same discussion might apply as previously.
Mr Hercules said that the State Law Advisers advised against actually having a definition of national development imperatives, because they could change from time to time. He would prefer to keep it as it was, to reflect the policy formulation.
Mr Schmidt noted that earlier it was qualified with a reference to the Minister’s determination in the Gazette and he thought it should be qualified similarly here.
Mr Moepeng said that earlier on, this was said, but this was not a definition, but he would not have a problem with adding “as determined by the Minister” and that might be sufficient.
Mr Mohai said that he wanted to hear from the State Law Advisers. It was necessary to bear in mind that there would be regulations. He would prefer to have constant references to the Gazette. The lawmakers must accept that national development imperatives were fundamental to the social development objectives and transformation.
Mr Hercules said that the other definition had referred to “designated minerals” and it was not the same context as this.
The Chairperson suggested that consideration must be raised to including it either as a definition or in another way. She asked that the State Law Advisers flag the issue. Certain objectives of the government had to be reached, and that was done through certain instruments like the Integrated Development Plans, National Development Plan and so forth. Some might fall under regulations, and that was where the detail would be found.
Members had nothing to add on clauses 2 and 3. Clause 5 had been rejected and was being replaced with a new clause 5, amending section 9 of the 2002 Act.
Mr Lorimer said that the new procedure was quite complex and had changed. He wondered if the DMR could take Members through the process, as it was changing the way that people would apply for a licence. Firstly, he would like to put the proposal that section 9 not be removed and substituted. He said that the current system was clear and had worked for the last twenty years and he had not found the explanation satisfying. He said that this did not deal with the environment, but how one got a licence.
The Chairperson asked if this did not talk to the colour table presented earlier.
Mr Lorimer said that this was marginal, but it was to do with who got the licence.
Mr Sonto said that the past system had been a “nightmare” with lack of accountability, which was so fraught with errors that people used to complain to this Committee about various acts of impropriety, especially by regional managers. Anything that changed that was a step in the right direction. He could not agree with the statement that it had worked well in the past as there had been endless complaints from different parts of the country.
Mr Moepeng said that it must be recognised that HDSAs’ applications had been overlooked, not processed, and that regional managers had promoted the applications of those whom they had known. He did not want to harp on the past, but look into the future, and ensure that whatever was done would address the imbalances of the past. He believed that replacement of section 9 made perfect sense. He suggested that without wasting further time, Mr Lorimer should merely vote against that clause if he wished.
The Chairperson said that she was closing the matter. The licensing process was changed.
Mr Lorimer repeated that this was not primarily about the licensing aspects.
The Chairperson said that there were marginal links and she said that Members must move on.
Mr Schmidt said that page 7, setting out the new 9(2), dealt with what would happen when a person identified land. He asked if there had been a section at any time that indicated that there was preferential treatment, and was pointed to subsection (5).
The Chairperson asked that the matter be left aside for the moment and returned to later.
Mr Mohai proposed that clauses 6 and 8 be accepted.
Page 9: Clause 12
Members agreed to this clause.
Mr Schmidt asked for clarity on the grammar.
Mr Hercules noted that the preceding words were “subject to subsection (4) the Minister may grant a prospecting right if…”
Page 10: Clause 13
This clause had no issues raised on it.
Page 11: Clause 14
Mr Lorimer questioned whether “and be granted” was to removed from paragraph (b). He asked why.
The Chairperson said that when a person applied for a right, there would be consideration given as to whether the person qualified to mine in that areas. It should not be taken for granted that the right would be issued as the conditions would be investigated.
Mr Lorimer asked whether “and be granted, providing all relevant conditions are met” might not be better.
The Chairperson reminded him that the phrase “and be granted” should be taken out. The point was that there was not automatic granting of the right.
Mr Sonto heard the argument but did not agree.
Members did not raise any issues.
Clauses 17, 18, 19,
Members did not raise any issues with these clauses.
Clause 21, page 15
Mr Schmidt noted his earlier statement about including some form of reference to what “national development imperatives” were.
The Chairperson noted that the DMR had been asked to look into this and report back.
Mr Mohai did not agree with this being narrowed into one definition. There were several policies and principles that would apply. Industrialisation was linked to job creation.
Ms F Mathibela (ANC) agreed with Mr Mohai.
Clause 22: page 16-17
Mr Moepeng suggested that under paragraph (6A) on page 17, the reference of 60 days be removed, and instead to refer to “the time frames” to try to align with the environmental and NEMA legislation.
Mr Lorimer disagreed. Firstly, this was not certain up front and if it was left to regulation it could change. This would be another instance where certainty would be diminished if this was changed.
Mr Mohai said that he supported Mr Moepeng because he was seeking to align the legislation and there were in fact no substantive changes being effected.
The Chairperson said that using the phrase “prescribed period” said that this was set elsewhere.
Mr Lorimer thought that it should be in the Act, and not the regulations.
Mr Hercules said that the reference to specific time periods had been deleted throughout the Bill to try to align the processes and time frames across all the legislation.
The Chairperson said that it would not be possible to prescribe anything without going through the process set out in the table anyway.
Mr Schmidt asked what the difference was between the Bill and what was now set out in the document of 4 March.
The Chairperson reminded him that the Committee had made its own input. If the wording was the same, then the Committee agreed with what the DMR had recommended, but the colour coding reflected what the Committee had wanted.
Members had no comment
New clause: Amendment of section 38B
Members did not raise any queries
Members did not raise any comments
New Clause: Insertion of section 42A
Members did not raise any comments
Page 23 clause 30
Mr Schmidt thought that at some stage there had been discussion about issuing a closure certificate and then saying that, notwithstanding that, there seemed to be an environmental liability for a period. He asked whether there had been any legal opinions sought on whether closures could be issued and companies being held liable for resolving the consequences of their mining operations.
Mr Hercules said that clause 25 on page 5 omitted the specified period of 20 years and it was substituted with “such period as the Minister may determine” with a qualification of referring also to circumstances, which might be residual liabilities or latent damage, and that would allow the Minister to determine an appropriate period. There would be accountability in regard to the damages to occur at a later stage.
Mr Schmidt said that presumably they would still be held liable for a period with agreement, but he questioned whether the chronology was correct. A deposit was withheld, and he asked if, in addition to that, they may be held liable.
The Chairperson pointed out that it might not be possible to identify the owner.
Mr Hercules said that perhaps the DMR could explain how this would be effected once the closure certificate was secured. From a regulatory perspective, however, there was a need to decide who was to be responsible after the closure certificate had been issued. In order to address a specific time period, the Minister would have to look at the specific circumstances, and in the prescribe manner determine the time period in relation to the damage.
Page 24, clause 34
No issues were raised
No issues were raised
Mr Moepeng indicated that he supported the omission of “nature of the” in line 1 , clause 36, on page 23 of the Bill.
However, he also wanted to add, after “mineral“ on line 17 of page 23 of the Bill, to insert “technical cooperation permit, reconnaissance permit, exploration right, protection right” after “reconnaissance permit” on line 17.
Mr Schmidt said that this was now including the petroleum rights that had been excluded.
Mr Moepeng said that this would clarify that section 49 of the Act applied to both petroleum and mineral resources.
Mr Hercules said that if there was inclusion in line 16, then all of those rights would have to be included.
Mr Moepeng also wanted to include, after “permit” on line 22, the phrase “technical cooperation permit, exploration right, protection right”.
Mr Hercules thought that the reconnaissance permit also be included.
Mr Moepeng said that this was not his intention in this particular instance.
On line 24 he wanted to insert “or petroleum”.
The Chairperson wanted the State Law Advisers to check all the areas for consistency. The Member was referring only to section 49, and she wanted to ensure consistency.
The same references to the other permits should also be inserted in line 30, to read ““technical cooperation permit, exploration right, protection right”.
Members agreed with the principle. The Chairperson asked again that the drafters and State Law Advisers must check the issue finally.
Mr Lorimer said that he wanted to raise a different issue. He suggested that, in line 11, after “the Minister may” the words should be added “on the recommendation of the Ministerial Advisory Council established under section 56A of this Act”.
Mr Mohai said that the amendments about the Ministerial Advisory Council were contained elsewhere and he was not sure that it was necessary to have this included.
The Chairperson reminded Members that there were two different departments included. She was wondering about the relevance of this advisory Council to the other department and if it was sufficiently clear where decisions would have to be made.
Mr Schmidt said that this Council must aid the Minister of Mineral Resources – at that top level. He thought that there would not be problems even if there was another department involved.
Mr Schmidt also wanted to speak to another issue. He thought that a “one size fits all” was being created by the introduction of petroleum rights and reminded Members that different rights applied – covering land rights, land restitution and all matters that applied to mineral and land rights. The issues relevant to the petroleum industry were quite different to those of the mining industry.
Mr Moepeng thought that it was necessary to establish an understanding. The Minister would be establishing an advisory Council. That insertion by Mr Lorimer would subject the Minister to the authority of the Advisory Council and that was incorrect in principle – the Minister should not be hindered in what s/he decided to do. The Minister might, for instance, decide, on the basis of operations in the Department, that certain actions were necessary and should not be fettered. The other point was that this spoke to the responsibility or the power of the Minister to declare certain minerals as strategic. There were loopholes that needed to be closed. The manner to do that was through the insertion of the part dealing with petroleum. He thought that this alone needed to be dealt with. Alternatively the State Law Adviser’s views should be sought.
Mr Lorimer said that this begged the question of why the Advisory Council would be set up. It was supposed to be a consultative mechanism for the Minister to consult with the industry. This seemed to accept the principle that the Minister would function better if advised by ah Council and this was one place where it made sense to consult with the industry and other stakeholders.
Mr Hercules said that he could understand the intention to align with petroleum, because this linked to section 69 of the principal Act. However, in regard to the role of the Ministerial Advisory Council, its function would need to be looked at. The purpose of section 49 granted the Minister the power to limit or restrict mining rights. The functions of the Council would have to be looked at. The Minister would establish this Council after consulting with the relevant line Minister on the strategic aspects.
The Chairperson asked if it was possible that some decisions may not to have to go through the Advisory Council and if there could be merely a departmental decision. On the mining side, there was no necessity to go through a board for the processes.
Mr Hercules agreed that currently here was no role for the Board under section 49 and that was why it was not included. The Board was being replaced by the Council.
Mr Lorimer noted that the new section 56B said that the Council must advise the Minister on sustainable development of the nation’s resources. The decision whether to declare something a strategic mineral went directly to sustainable development of resources, which seemed to support the Council having a role in those processes. The reason for including it was to have as wide representation as possible.
Mr Mohai said that he would prefer no discussion at this stage about when the Council was consulted. The Council would operate to reinforce the Minister and he could not see why the Minister must have to consult it. The Council was being established to undertake certain responsibilities and its functions were being dealt with elsewhere.
The Chairperson added that the Advisory Council would have to establish its roles and functions after it was established.
Mr Schmidt said that councillors were appointed by the Minister, but the important point was that in designation of minerals, there should be an indication that the Minister needed to consult. The benefits of having that consultation, given the impact on the mining industry and economy, required that there be balance in the approach.
Mr Moepeng did not quite understand what the problem was. He repeated that the insertion, to his mind, was not necessary. The Advisory Council had to advise the Minister, but it was not necessary to insist that something could only be done after the Council had done something. If Mr Lorimer was insisting on this inclusion then he suggested that the matter be flagged.
The Chairperson said she was not sure that every piece of work done by the Minister had to be subject to the Advisory Council. It might not even be a permanent body, and may meet only when it had to carry out a function. It was suggesting that the Council might have powers above the Board and she also did not agree on that point.
Mr Moepeng suggested that under item 4, on page 25, after line 37, the new subsection (3) be substituted with “the Council must elect one of its members as deputy Chairperson”. This was merely a different formulation.
New insertion section 56C(1), detailed on page 26 of document of 4 March
Mr Moepeng thought that the wording “of its members” could be deleted from the new section 56C(1). He noted that this would recognise that there were other people outside the Council who could also be of assistance. This would allow members of the Council to consider using people outside the Council with particular expertise on sub-committees.
Mr Lorimer agreed.
Mr Moepeng asked for a check on subsections (2)(a) to (c). He did not think these were necessary as they were already addressed by the amendments to section 107. It was not necessary to single out any subcommittees here.
Mr Hercules said that it would not be necessary to have (2) because of the amendments suggested earlier. There would also be regulations to cover the matters covered in (2). The Council would be able to appoint sub-committees to assist with its functions. The new clause was intended to broaden the powers of the Council to appoint sub-committees.
Page 27, clause 45
Members did not raise any issues.
Page 27, clause 49
Members did not note any issues on this clause.
Page 28, clauses 50, 53
Members did not raise any issues.
Page 29, clause 54
The Chairperson noted that Members did not raise concerns apart from a question of clarity.
Page 30, clauses 55, 58
Members did not raise any issues with these clauses.
Page 31, clause 59
Members raised no problems with this clause.
Page 32: New clause to insert section 86A to the MPRDA
Mr Lorimer asked that this be flagged for the moment. Members still had problems around the free carried interest, acquisition of the 30% and production sharing agreements.
Mr Moepeng said that in relation to 30% he wished to proposed the omission of the phrase “ of up to 30%”, and then proceed directly to (i) and (ii).
He then proposed that in (i) the words “fair market value” be substituted with “acquisition at an agreed price and /or (ii) production sharing agreement.
Mr Lorimer said that this was one of the key failings of the Bill because the State was taking too much of an interest in resources which may not even be there. Companies were being asked to take a huge risk of billions of rand. They would have to give away 20% and it was not even known if there would still be an additional 26% to BEE.
Mr Schmidt said that it epitomized bad faith to delete these words at this stage. He thought that there was 20% free carried interest, leaving 80% remaining. In addition to that, the State would be entitled to a further participation interest and this could be anything from 1% to 79%.
The Chairperson asked if Members were prepared to accept the new section 86A(1).
Mr Lorimer noted that the DA opposed it. The entire free carried interest should not be incorporated in the Bill.
The Chairperson noted that point. She then moved on to (2) and said that the State should be entitled to purchase.
Mr Schmidt agreed, but his concern was not “may enter into agreements” but it said it was entitled to a further participation interest, and that may take a form. The word “entitled” could be up to the 80%.
The Chairperson said that it would be purchased.
Mr Moepeng said that in any event the DA had said that they did not want free carried interest and he believed it was a waste of time to engage in further discussions on the point. He requested that for those who did want it included, their points should be heard.
The point was – even if the State was entitled to a further participation, it should not be capped at 30%, but rather define the manner in which it could be acquired and this could then be either in the form of an acquisition at an agreed price. That could mean engagement in deliberations or negotiations between parties, leading to an agreement on price. The “and / or“ was being inserted. He saw no problem in the ANC proposing these points.
He added that there should be something in the Act at in order to accommodate the earlier argument about HDSAs, to the effect that they would be accommodated in the form of a discounted price. He was not sure where would be the appropriate place to put it. This particular clause dealt with state participation.
Mr Schmidt said that he was really speaking to two issues – the word “entitled”(in other words, a one-way negotiation) and secondly, the deletion of “up to 30%” This could lead to a form of indigenization as in Zimbabwe or 100% nationalization as in some South America countries. If that was what Mr Moepeng was trying to indicate, then he was very concerned about it. That outshone any other form of uncertainty on the Bill.
Mr Lorimer asked the question if a company wanted to drill offshore and spend R1 billion doing so, and then develop a gas field, they would have to give 20% of that in the first place in free carried interest to the State. According to the formulation then the State would be able to demand the rest of the 80%>
Mr Mohai thought that the proposal by Mr Moepeng should be read in context. He agreed with the proposal. Everyone agreed on the need for transformation but this was not “big bang” but may happen over ten to twenty years and the State may not even have acquired 50%. When talking of acquisition, it was important to remember that assets were purchased in a capital market, with regulatory frameworks. The issue concerned natural resources and the state had to participate. He noted that there were two clauses on which the State Law Advisers had commented earlier. Firstly, the State would not suddenly demand 80%. Exploration could take a long time. The Committee should not be alarmist or communicate any message not intended by this legislation. The reasoning must be understood. It could have said that the State could get a maximum, and there was no mention of nationalization or even of bold participation of the State.
Members started to engage on the point of nationalisation, and the Chairperson said that the ANC was not suggesting this.
Mr Moepeng said that “there is no Malema here”. He wanted to put this very simply. The entry point of the State was 20%. Any other attempt to suggest that the omission of “up to 30%” should be read as 80% was incorrect. He urged Members to take into consideration the fact that 20% was free carried interest, but it was more important that the acquiring of additional interest would be done through the two points indicated earlier: acquisition at an agree price. There was fear of the unknown and people did not understand what would happen at the time of negotiations. The State may propose 1% of 5%, and there was fear that the State may demand more. He was asking for flexibility for the State and the role players to negotiate, in the best interests of the country and how this should be run. This was different from a cap of 30%. He believed that this was in the interest of all parties.
Mr M Sonto (Acting Chairperson at this stage) said that the argument was based on the notion that a person can own a house above the ground but what was below the soil belonged to the State. No South Africa could ever suggest that the State should be dictated to, in the administration of its mineral resources, by outside forces. The State should be able to override a participating company. However, that was to be taken incrementally. Companies invested in mineral exploration and when Mr Moepeng had said that there should not be fear of the unknown, this was really saying that the State would be able to accommodate investors, but this must not undermine the developmental intentions of the country.
Mr Schmidt noted that there was now a suggestion that the State “may opt to acquire”. That was much better than “entitled to..”- as this would negate the whole value of the property. This was more Constitutionally acceptable. However, he still had a concern that the private sector, in the view of the DA, should be leading development and extraction and development, and obtain mineral rights, not the state. Even then, if it was accepted that the State may in some circumstances want to raise the stakes as a company, this should be on the basis of an agreement. He said that there was no discussion at the moment – the statement was that the Minister may, in the prescribed manner, do something, so it was not entirely a matter of negotiation.
Mr Sonto asked what he meant by “in the prescribed manner” He asked if the developmental imperatives.
Mr Schmidt said that he read this as the prescribed manner r in which the state must go about following the process to get an option or whatever – it may be developmental progression of rights, but he rather thought it meant the way in which mining companies would approach the mining companies.
Mr Mohai said that the proposal now to put in “may” instead of “entitled to” needed to be discussed. He asked why this had been suggested.
Mr Sonto said that as Members were arguing, the State Law Advisers were really attempting to suggest other work. He said that the State was entitled because of its custodianship of mineral resources. Whatever formulation was put in the Bill should not remove that, because the State represented the citizens of the country.
He asked the State Law Advisers to speak to possibilities.
Mr Hercules said that the State Law Advisers were trying to be creative and emphasise that the State’s entitlement to a further participation interest and the “may” empowered the State, should it want to exercise that option to acquire further interest, but it was up to the Committee to decide on the final wording.
Mr Lorimer felt that Mr Sonto was not correct in his assessment of the argument. He was not disputing the right of the state to say how the minerals were used. However, this Committee had to decide how the State could get maximum resources out. Unless there was investment in the first place, nothing would result. No company would be wiling to spend R1 billion offshore if there was a danger of their company being taken over.
He heard Mr Moepeng’s remarks about the gradual moves – but a company investing would not know that. However, the law did not say that. If this Bill was passed in this form, there would be no offshore gas industry, and he suspected that there would also not be onshore shale gas industry under these conditions. This was a very important clause.
The Chairperson said that the company would be acquiring”.
Mr Mohai said that he believed that the phrase “entitled to” was correct. He emphasised that it would happen within a regulatory framework. There was a high degree of governance and investor confidence was being protected. If this did not do any harm, then he thought that “entitled to” should remain.
Mr Hercules said that and / or would be very ambiguous and he thought that “or” alone should link paragraphs (i) and (ii).
The ANC members agreed to that.
Mr Schmidt understood that all minerals were vested in the State. The “up to 30%” was an indication that government would be entitled to that, in addition to 20% shareholding. IT was not preferable at all but at least it capped it, should it be taken. By removing that, anything was possible. He was very concerned about “agreed price” because this indicated, subtly, that this could be something less than “fair market value”. There might be no meeting of the minds of the debate as the combination of ‘” entitled to” and “agreed price” (what government offered).
The Chairperson stressed that “agreed price” surely must be agreed after negotiation with the parties, or production sharing agreements”.
Mr Schmidt said that “agreed” implied two parties with the same level of influence, informed prior knowledge and the ability to compromise. However, when there was entitlement, there was actually very little bargaining room.
Mr Sonto said that the Committee needed not to read anything into the minds of those who would be investing, or the minds of the ruling party at the time. That would be making some dangerous assumptions. Agreements would be informed by all sorts of researched information, not imposed. He said that market value prices had been tricky, because people had believed that there was mining potential. There would be researched information on the deposits in the mine, what was being sold, what was being acquired. However, he stressed again that the notion of custodianship of the state should never be undermined. NO country had equal shareholdings – some had 70/30, some had 59/49 and South Africa did not necessarily want to follow models that were not tested in the context. The State needed investors, and the question of driving them away was not being considered. The State wanted to partner with investors to explore.
The Chairperson said that the issue was “entitled”. Had it been “entitled to a participation interest” might have implied the State demanding but the words “in the form of…” implied that there would be negotiation, based on points (a) and (b). There would be trading taking place. It would be based on affordability of the State and the production. The important point was that there would be a trade. The State would have to buy.
Mr Moepeng said this was an ideological issue. The Committee was essentially arguing market or state regulation and he felt that it had gone too far. The entry point was free carried interest of 20%. Nothing beyond that was being determined. However, some Members were raising fears but what they feared was not happening. ANC Members had indicated that “entitled” was not so much the issue as how state participation could be ensured. There was no suggestion that the State would be forcing people to be giving over their shares. A process would have to be followed. The DA had already indicated that it was not in favour of free carried interest. He suggested that the issue be closed at this point and the Committee must move on.
Mr Schmidt said that he was worried about “or production sharing agreements” and said that there was no indication as to how that would be done.
Mr Sonto thought that both must a ruled by an agreement.
Mr Schmidt said that he still had the problem of the State being “entitled to”.
The Chairperson closed the argument at this point and asked if Members wanted to return to the issue.
Mr Mohai thought it was not necessary to do that. He supported the clause, with the latest amendments.
Mr Hercules said that to assist the Committee, there was a definition of a production sharing agreements, and this specified what must be covered in that agreement.
Mr Sonto wanted to check, in respect of subclause 86A(5) that the Minister was appointing two representatives to the joint project committee and he asked if they had equal voting rights as other representatives in the entity.
Mr Hercules clarified that the key provision was (4), which said that the State was entitled to corresponding percentage of voting rights to the interest held”.
Page 33: clause 66, 67, 68
Members did not raise any issues with these clause. Mr Moepeng raised a technical punctuation point. aid that there should be a comma inserted on page 36, in line 13.
Page 34, clause 69
There were no issues raised
Page 37, clauses 72 and 74
Members did not raise any issues on these clauses
Page 38: New clause: Amendment of item 9 of Schedule 11 of Act 28 of 2002.
MR Hercules said that there was an amendment to the Long Title. Page 1 of the Bill, in line 5, indicated that after relating : “regulation of the mining industry through”. Then on page 2, in the fifth line the phrase “or mineral products” would be inserted after the reference to beneficiation of minerals
The Chairperson noted that there were four main areas that the Committee still had to discuss on the following day:
- free carried interest
- national development imperatives. ON this point, Mr Hercules said that this was similar to national policy or national interest and would rather refer to it merely in that way rather than to try to put in a narrower definition.
Mr Lorimer did not agree, because it was far too vague. He thought that the Committee would be voting on the difficult areas on the following day and asked that it be considered on the following day.
- state participation, which had been discussed today.
The Chairperson summarized that these areas would be dealt with on the following day, which meant that the rest of the clauses were ready to be processed.
Mr Mohai asked for clarity. He was not sure that consensus had been reached on all of the issues. On the following day, he asked if there would be proposals for amendments. For instance, there were views for and against state participation, and the issue of the definition of free carried interest was another matter. He did not want the discussions to be re-hashed.
Mr Moepeng said that the arguments had been presented yet there were no counter-arguments in the sense of proposed insertions. The Committee would need to vote on the amendments.
The Chairperson asked if Members still wanted to write a letter to the Speaker if there were issues impacting substantially on the principal Act. He thought that the issues were identified and there was no reason to follow this process.
Mr Moepeng agreed but would like to hear from the State Law Adviser.
Mr Sonto agreed that there was nothing that needed to be addressed to the Speaker.
Mr Hercules said that Parliamentary Law Adviser, Ms Swartz had indicated that certain things should be referred to the Speaker for permission to proceed. They related to the appeal, and the alignment of the environmental provisions. The appeal procedure was in the Bill, and he thought that any other amendments were incidental to what was already in the Bill. The environmental matters were not anything new. He did not think it necessary to review this.
The Chairperson said that the Parliamentary Law Advisers also dealt with the tagging. She asked for comment.
Ms Swartz said that she had been applying he rules. There was nothing in the Rules to refer to incidental matters. However, the Rule did refer to amendments to other parts of the Act.
There was something about affecting another part of the principal Act. It was up to the Committee to decide.
The Chairperson wanted to know what the consequences would e.
Mr Moepeng asked what it was in the principal Act which had been affected.
Mr Mohai said that the Committee had discussed writing to the Speaker – but asked whether this was asking for permission to go ahead, or to notify the Speaker.
Ms Swartz said that the Committee had gone through the list. Part of the list contained new sections and insertions, as part of the Committee insertions. Having decided that they wanted them, the Committee would need to write to the Speaker to get permission to insert those provisions.
The Chairperson thought that the Committee should write a letter to be on the safe side. She asked which clauses were referred to.
Mr Swartz said that the letter going to the Speaker did not need to state the clauses, but merely needed to say that the Bill wanted to touch on sections of the principal Act.
Mr Mohai did not necessarily support the writing of a letter, because there was no tampering with the principal Act, but he asked what would be the impact of that for the processes and whether it would cause any delay. If there was no impact on the processes then he thought that the letter could do any harm.
Mr Moepeng asked what parts were affected by the deliberations held. That could not be done now. The Committee had reflected on this on the previous day and had felt that the changes were not affecting the principal Act. He suggested that the State Law Adviser and Parliamentary Law Adviser should meet and reach agreement on the issues, and then, on the following morning, present again to the Committee.
In respect of the tagging, he noted that the Bill had been tagged as a section 76 Bill, which essentially dealt with concurrent functions. He pointed out that mining was a national matter, and the other Acts had already been passed, which also dealt with national competencies. He asked why the Bill was tagged as a section 76 Bill.
The Chairperson noted that this had been challenged to the Joint Tagging Mechanisms and she asked if the Committee wanted to challenge that again.
Mr Moepeng thought that the Committee should be writing to the Speaker setting out its requests that the Bill be re-tagged.
The Chairperson noted that there had not been a response to that request on the re-tagging. She asked that the two letters be drafted, so that the Committee could finally decide whether to submit it.
The Chairperson asked that an updated version of the Bill be produced.
The meeting was at 2pm in E249.
The meeting was adjourned.
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