Mineral and Petroleum Resources Development Amendment Bill [B15B-2013]: legal opinion on President’s reservation about its constitutionality

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Mineral Resources and Energy

18 February 2015
Chairperson: Mr S Luzipho (ANC)
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Meeting Summary

A parliamentary legal advisor gave a briefing on the four grounds of reservation which had seen the President not appending his signature to the Mineral and Petroleum Resources Development Amendment Bill [B15B-2013]. These grounds in brief were: the potential unconstitutionality of empowering the Minister to amend the codes, charter and standards under section 74 of the Act, which when read with the definition of ‘this act’ would allow them to amend national legislation without adhering to the constitutionally mandated procedure. Secondly, the President was concerned of a potential challenge to the legislation based on a contravention of the General Agreement on Trade and Tariffs or Trade Development Cooperation Agreement, founded on the quantitative restrictions it imposes on exports of certain minerals. The third ground was procedural in nature and was based on the truncated period for public participation in the National Council of Provinces which did not fully comply with the constitutional injunction that the public be given a meaningful opportunity to participate in the legislative process. The final ground, also procedural, was the lack of consultation with the National House of Traditional Leaders, despite the Bill affecting customary law and traditional communities. The legal opinion disagreed with the substantive reservations, because these would not open the Bill to constitutional challenge which is what the President’s power to refer bills back to the National Assembly is limited to. However, the opinion supported the procedural grounds, as public participation is a constitutional imperative which must be complied with.

In the discussion that followed, Members taking differing views on the validity of violating international instruments through national legislation. The EFF strongly supported the bill’s provision for quantitatively restricting exports and the legal opinion that violating international agreements would not lead to a constitutional challenge. While other opposition Members were concerned that the opinion is based on a narrow reading of the relevant constitutional provisions and rendered the ratification of important international agreements a nullity. There was general agreement among Members that the procedural aspects are valid concerns and ought to be remedied. The Chairperson indicated that Members would be given time to study the legal opinion and consult more broadly, returning the following week to make concrete decisions.

It was noted that this is the first time that procedural and substantive issues with a Bill have been subject to reservations. A Member pointed out that this could lead to the NCOP having a free hand to consider the Bill, as a result of public input. With the process for National Assembly approval of NCOP amendments following its consideration of the Bill, this could open up the Bill to considerable re-investigation. The same applies to the comments from the NHTL. This would in effect subvert the rule that the Committee is restricted to the reservations raised by the President.

Meeting report

The Chairperson welcomed Members back and hoped that the Committee would be even more productive than the previous year.

President’s reservations on the Amendment to MPRDA: briefing and legal opinion
The Chairperson said the Committee had received correspondence from the President, via the Office of the Speaker, about the amendment of the Minerals and Petroleum Resources Development Act (MPRDA). The President asked for the Minerals and Petroleum Resources Development Bill [B15B-2013] to be referred back to the Committee, based on four areas of reservation, including the President doubting the constitutionality of some of the Bill’s provisions. Legal advice had thereafter been sought on what course of action needs to be followed in dealing with the reservations about both the substantive provisions and procedural aspects, relating to the NCOP and National House of Traditional Leaders. He handed over to the parliamentary legal advisor to address the Committee on the legal imperatives relating to the reservations.

Ms Desiree Swartz, Parliamentary Legal Advisor, said the legal opinion considers the four grounds of reservations which led to the referral of the Bill back to the House. The President’s powers as per the Constitution, allow for referral back to Parliament where there are concerns about the constitutionality of the Bill. Therefore, the legal opinion dealt not with the validity of the policy choices, but rather gave a constitutional perspective on the relevant aspects of the Bill. She was under the impression that her opinion of 5 February 2015 had been forwarded to the Committee and therefore what follows is a synopsis of the salient points.

Ms Swartz noted the grounds for referral was the possibility of the subversion of constitutionally mandated procedures for amending legislation when the definition of ‘this act’, when read with section 74 of the MPRDA; the restrictions on exports of certain minerals through the amendment of section 26; the limited time given for public participation in the National Council of Provinces and the potential need to refer the Bill to the National House of Traditional Leaders in light of its custodianship over relevant parcels of land. She then dealt with the content and legal context of the grounds, ending with her opinion on each.

Definition of ‘this Act’ and Amendment of Section 74 of the Act
Ms Swartz said this ground centres on the potential unconstitutionality created by defining ‘this act’ as “including the Code, Standard or Charter”, which the Minister is empowered to repeal or amend under section 74 of the Act. This would allow a member of the executive to alter national legislation, contrary to the constitutionally mandated procedure for amending national legislation through Parliament.

Ms Swartz said the legal context was that Parliament is vested with national legislative authority and the Constitution indicates that national legislation includes subordinate legislation made in terms of an Act of Parliament. Further, the Constitutional Court has held that Parliament is permitted to delegate its legislative function to other bodies, in the interest of running an efficient modern state.

Her opinion was therefore that while the Bill gives the Minister the power to amend national legislation in light of the definition of ‘this act’; the Codes, Standards or Charter remain subordinate legislation the amendment of which Parliament is within its rights to delegate through an Act. Also, definitions such as the one in question exist in several other pieces of legislation. Therefore, the definition read with section 74 would endure a constitutional challenge.

Amendment of Section 26(2) and 26(3)
Ms Swart said the President was concerned that the imposition of quantitative restrictions on the levels of certain exports would open South Africa to challenges in international fora, as these are inconsistent with its obligations under the General Agreement on Trade and Tariffs (GATT) and Trade Development Cooperation Agreement (TDCA).

Ms Swart said the legal context was that South Africa was a founding signatory to the World Trade Organisation and party to the TDCA since 1999. Articles in both of these conventions prohibit quantity restrictions on exports. The Supreme Court of Appeal has held that the ratification of the WTO agreement by Parliament has made it binding on South Africa in international law. However, the President’s power to refer Bills back to the National Assembly turns on the potential for unconstitutionality, according to section 79(1) of the Constitution. The Constitutional Court in the Glenister case has held that the ratification of an international agreement does not give rise to constitutional rights or obligations.

Ms Swartz said the President’s concern is valid and the quantitative restrictions on exports arising from the Bill could be challenged in international fora. However, this does not equate to a potential constitutional challenge and therefore her opinion was that sections 26(2) and 26(3) would withstand a constitutional challenge.

Public Participation Processes in the NCOP and Provincial Legislatures
Ms Swartz said here the President was concerned that NCOP and Provincial Legislatures did not afford sufficient opportunity for public participation, as required by sections 72 and 118 of the Constitution. This is because the consultation period at this level was highly compressed and there appears to have been insufficient notice of public hearings at Provincial Legislatures.

Ms Swartz said the Constitutional Court has pronounced on the nature and extent of public involvement required in the legislative process. Essentially Parliament has a significant measure of discretion to determine the public participation necessary, however what is required is that Parliament acts reasonably. Reasonableness in this context is dependent on several factors, including: the nature and extent of public impact brought about by the legislation, particularities which affect the efficiency of the legislative process such as time and expense, any rules adopted by Parliament regulating public participation, and the urgency of the legislation.

Ms Swartz then applied these factors to this case. In her view the content of the Bill broadly dealt with:
- the processing of applications under the Act,
- consultation with interested or affected parties,
- the dissolution of the Petroleum Agency of South Africa and establishment of Regional Development Environmental Agencies,
- mineral beneficiation,
- state participation in all new exploration rights
- appeal process prior to the exercising of the above rights,
- sanctions in respect of offences under the Act, and
- the regulation of exploration of associated minerals.

Further, the Portfolio Committee on Mineral Resources had extensive deliberations on the Bill and had effected several amendments to the introduced Bill, including the introduction of new provisions. These amendments were a reaction to contentious issues raised through public submissions. Ms Swartz therefore submitted that the Bill dealt with by the NCOP and Provincial Legislatures was substantially different from the introduced Bill.

Ms Swartz said the Bill envisages significant changes to the regulation of the petroleum and mineral industries, which are major contributors to the gross domestic product. Those activities impact on communities, and it would be reasonable to expect there to be considerable public interest in the Bill. The Bill which was passed by the National Assembly differed substantially from the introduced Bill and was processed by the NCOP in 15 days, without any indication of urgency. Therefore, she was of the opinion that no meaningful opportunity had been given for public participation at the NCOP level.

Referral to the National House of Traditional Leaders
Ms Swartz said the President’s reservation on this ground were twofold. The first is that section 50 of the Act will allow a person to enter upon and conduct an investigation on land merely after notification and consultation with the landowner; ignoring the consent principle in customary law. Therefore, the Bill should have been referred to the National House of Traditional Leaders (NHTL) for comment.

Ms Swartz said section 18(1) (a) of the Traditional Leadership and Governance Framework Act (TLGFA) requires any parliamentary bill pertaining to customary law or customs of traditional communities to be referred to the NHTL for comment, before it is passed. Further, the Interim Protection of Informal Land Rights Act provides that no person may be deprived of an informal right to land without their consent. Informal rights to land include use, occupation and access to land under tribal, customary or indigenous law or practice.

Ms Swartz said section 50 empowers the Minister to grant access for the purposes of investigating whether any mineral or geological formation exists in or under land, after notifying and consulting with the owner, occupier or person in control of that land. The section does not require the Minister to obtain the consent of said person. She was therefore of the opinion that such an investigation would disturb informal land rights under customary law and therefore the consent principle would be applicable and the Bill ought to have been referred to the NHTL for comment.

Ms Swartz said the second aspect of this ground is that the Bill generally impacts upon customary law or the customs of traditional communities and therefore should have been referred to the NHTL. The Bill provides that a community exercises its rights or interest in land communally in terms of an agreement, custom or law. This redefinition of community is wide enough to encompass ‘traditional community’ as envisaged in the TLGFA. She was therefore of the view that it ought to have been referred to the NHTL for comment and that the Committee should consider the comments received.

Adv H Schmidt (DA) said there seems to be a bit of a dispute between the Parliamentary Law Advisor and the President’s legal advisors. He agreed that the provisions which form the basis for the second two grounds of reservation should be read widely and felt the opinion to be correct. On the Standards, Codes and Charters, he said although this is subordinate legislation these must be published in some form of official statutory notification to the public, such as the Government Gazette. If this were not the case, then these will not carry the weight of subordinate legislation. He recalled that the Charter was published in a government gazette, but he asked Ms Swartz whether the Committee can truly accept that all of the above are published in a government gazette. Further, whether these can be accepted as subordinate legislation if they are not. His second issue was that a narrow interpretation has been taken of the contravention of an international instrument, specifically that it is not a constitutional violation. He therefore asked whether on a wider reading of the Constitution, the Act being contrary to GATT and TADC would result in the Act being in conflict with the Constitution.

Ms Swartz replied that she had been informed by the Department of Mineral Affairs that the Code, Standards and Charter have all been gazetted. She noted that delegated or subordinate legislation, is legislation that Parliament authorises another regulatory body to create, through primary national legislation. It is also her view that in the process of creating subordinate legislation, that the public participatory requirements are adhered to, although this is not as extensive as Parliament.

On the international agreements aspect, she responded that her opinion was limited to the constitutionality of the provisions and the question of whether or not to abide by international instruments is a policy decision, which South Africa as a sovereign state is free to take. There will be the potential for challenges in international fora, and the particular instrument will dictate where this challenge is brought. Where international instruments become important is where legislation is interpreted and this is a constitutional issue, because legislation must be interpreted in line with international agreements. However, the country is free to abide by international agreements or not, as no constitutional obligation is created when the country becomes party to an international agreement. She added that this should address Mr F Shivambu’s concerns (below).

Mr F Shivambu (EFF) said it is important to understand the principle behind restricting the amount of natural resources exported. The reality is that South Africa remains a colonial economy which exports natural resources. Virtually all mining corporations do this and there is insufficient local beneficiation of these mineral resources. The role players in the area of beneficiation and industrialisation made a valid point in saying that the prices of natural resources are higher here where they are produced, than elsewhere in the world. Meaning that it is cheaper to buy the resources abroad and beneficiate it there. There was no legislative guideline controlling the exportation of minerals, with the current section 26 merely requiring the export of minerals to be reported to the Minister. He was unsure whether this was even being complied with. It is therefore the correct intervention to have restrictions on the amount of mineral resources leaving the country, to create space for local beneficiation and industrialisation. Arguments that these restrictions must not be put in place because of GATT, is incorrect because it undermines the sovereignty of South Africa. Being a signatory to a process in 1995, which was part of an elite pact during the transition to democracy, cannot undermine the sovereignty of South Africa or its control over its mineral resources. He therefore felt that the legal opinion was correct. If it was incorrect, Parliament and the South African state may as well be dissolved, leaving the WTO and United Nations to give instructions. He also did not want it to be forgotten that the objection to restrictions on the export of mineral resources is not a constitutional issue, but rather the manifestation of narrow private interests, specifically mining capital. The Chamber of Mines is in support of the status quo and the exportation of minerals since the discovery of diamonds and gold in Kimberly and Johannesburg respectively. The Chamber of Mines is happy to continue the status quo and rob South Africa of the wealth which could come from beneficiated mineral resources. He added on the procedural aspects, that if there was insufficient participation, that this should be done. However, the principle must remain that mineral resources exportation must be restricted. He was aware that the majority of the Members of the Committee agreed with this principle - although there are others that see the need for the state to have strategic control in this sector - initially with a 20% stake, gradually growing to controlling ownership. This is crucial to the industrialisation of South Africa, because it will never happen without state control.

Mr J Esterhuizen (IFP) said the legal opinion stated that the Bill had been processed by the NCOP in 15 days, with any indication of urgency. He did not see how the absence of a second round of public participation at NCOP level would render the Bill unconstitutional. He did agree that there was need for the NHTL to be consulted, as there have been too many instances where mining licences have been issued randomly with the land being left looking like ‘a nuclear bomb had gone off’. He was aware of rumours that the Department of Energy wants to separate the Bill into two. He wanted to know whether the Bill can be separated into separate mineral and energy bills. At this stage the Committee can only deal with the President’s grounds for reservations, but this does not stop the Minister of Energy removing the gas and energy aspects from the Bill by introducing a new Bill. This would again lengthen the process. He was also concerned about the development pricing, specifically the mine gate prices which are the prices before transport costs. He wanted to know if this was not essentially the mines agreeing to not charge import parities and therefore contravening competition law. Lastly, he questioned whether it is efficient or affordable for mining to subsidise downstream industries such as engineering.

Ms Swartz commented on whether the Bill could be separated into two Bills by the Department of Energy, saying that when the Bill is referred back to Parliament this is guided by the rules of Parliament. At present the Joint Rules of Parliament limit the Committee to attend to the reservations raised by the President. Depending on what the Committee decides, it will be difficult for the mineral provisions to be separated from the energy provisions. Ideally, such legislation should come from the Department, because it will take a meticulous process to sift through the Bill to determine which provisions are energy and which are minerals. It would not be possible for the Committee to do this, based on the grounds of reservation voiced by the President. On the mine gate price and violating competition law, she was not sure of the context and she offered to come back to the Member on the issue.

Mr J Lorimer (DA) said he had not received the legal opinion dated 5 February 2015 and it would have been helpful to have received that prior to the meeting. It would be unhelpful to begin to talk about issues of substance within the Bill and the Committee should rather focus on issues of procedure. The Parliamentary Law Advisor has indicated that she feels the Presidential Law Advisors are correct on two of the grounds and incorrect on the other two, however none of these opinions are definitive. What should be discussed is the procedure, specifically what is discussed by whom and when it should happen. He wanted to know if there was a planned way forward in dealing with this.

Ms Swartz spoke to a flow chart on the process, which she said would be made available to the committee. Essentially there are two phases: firstly, the Committee considers the substantive and procedural reservations. She noted that there is no precedent of having a Bill sent back both on procedural and substantive aspects. The Rules at present do not cater for the process for consideration of the amended Bill and guidance will be required from the House. From the Rule she gathered that the Committee must, after consideration of both the substantive and procedural reservations, report back to the National Assembly. The Committee can either agree with the President’s reservations in part or as a whole, or disagree in part or as a whole. If it disagrees the Committee simply reports this to the National Assembly and if the National Assembly ratifies this decision, the Bill will be returned to the President for assent. If the Committee agrees with the reservations, then on the procedural defect the Committee’s report will have to indicate how the referral is to take place and the National Assembly will then have to approve the report. She recommended that if this is the case, that it is referred to the NHTL first, as there may be issues which arise at that forum which the Committee needs to consider. Following this, the Committee will reconsider the Bill in light of the comments of the NHTL. If the Committee agrees with the President’s reservations and feels that the defects cannot be remedied, then it can ask the National Assembly to rescind its decision to pass the Bill. This will result in the Bill being referred back to the Department to remedy the defects. The second phase would be the adoption of the Committee’s report on the substantive defects, the changes effected and again a report to the house either requesting a rejection of the Bill or passing of an amended Bill, which will then proceed to the NCOP. From there, in her view, as the reservation deals with public participation the NCOP, the NCOP will be free to look at the entire Bill, not restricted by the President’s reservations.

Mr Z Mandela (ANC) said he appreciated the recognition of the need to consult the NHTL, as custodians of potentially affected land. He felt the same about the need to have enough space for public participation in the NCOP and that it was important to have the voice of South Africans at large, heard. On the other two points, he was in support of the President’s views. He disagreed with Mr Shivambu in that it would not lead to a dissolution of Parliament or South Africa if international instruments were adhered to, because it is the duty of Parliament to take the best decisions for South Africa first.

The Chairperson asked Mr Lorimer whether he had been making a request that Members are given time to consider the legal opinion of 5 February, mindful of the fact that the Committee is empowered to accept, reject or balance the legal opinion.

Mr Lorimer replied that it would be wise to give the Committee time for consideration, but it was also a gentle admonition as he felt it would have been better to get the document earlier.

The Chairperson accepted the request, but did not wish to get into chastisements.

Mr Schmidt requested a copy of the process flow diagram Ms Swartz spoke to. Secondly, he agreed that this is the first time that procedural and substantive issues have been subject to reservations. This could lead to the NCOP having a free hand to consider the Bill, as a result of public input. With the process for approval of NCOP amendments following its consideration of the Bill, would this not open up the Bill to considerable re-investigation. The same applies to the comments from the NHTL and this would in effect subvert the rule that the Committee is restricted to the reservations by the President. His question therefore was having heard that the Minister of Energy wanted to split the Bill, what powers would the Minister have, outside of introducing a completely new Bill.

The Chairperson said the Committee should not venture into that field, because at present the Committee is restricted to the reservations from the President. If the Minister does act in the manner suggested, then the Committee will deal with those at that stage.

Mr Esterhuizen said in his opinion it would be against the Constitution to change everything without a new bill and Parliament can only deal with the issues presented by the reservations. On the international agreements issue, he agreed that South Africa is within its rights to act contrary to GATT and TADC, but what is the point of being a founding signatory to treaties if there is a blatant act against its provisions. This would undo the product of a lengthy process to get the provisions to be effective.

The Chairperson clarified that the President was concerned about the constitutionality about the two substantive issues. The Parliamentary Law Advisor’s opinion says there may be litigation, but the provisions are not unconstitutional. He would ensure that Members have copies of the full legal opinion dated 5 February 2015 and the process flow diagram Ms Swartz had used it to explain the procedure to be followed. He wanted Members to be prepared to consult with their constituencies or principals, before decisions are made. The Members are free to agree or disagree with the legal opinion. However, it would be risky for the Committee to venture beyond the reservations at present and should be dealt with when the Committee meets following the decisions of the National Assembly. If Members feel that something should be done, then this could potentially be dealt with at the level of the NCOP or afterwards, if new issues come up during the public participation process. He said this issue will be re-opened at the following week’s committee meeting.

Committee Business
The minutes of 19 November 2014 meeting were considered and adopted. Arising from the minutes, the Chairperson referred to an outstanding matter with the State Diamond Trader and correspondence with the Minister of Mineral Resources. He noted the Committee had wanted legal advice on whether it should write to the executive or to Parliament, because it was wary of making appeals to a body which had to account to the Committee. As a parliamentary legal advisor was present, he felt the Committee could receive guidance from her after the meeting and proceed on that advice. If the legal advice ratifies the decision taken by the Committee there will be no changes, but if it differs then the Committee will follow the legal advice. He said a report on the course of action taken will be given at the next sitting of the Committee.

The Chairperson reminded the Committee that other relevant Portfolio Committees such as Trade and Industry are being brought in on the matters discussed as it had been agreed that these other Portfolio Committees must be involved. Therefore, this was still a work in progress.

The Chairperson said the Committee Report on its Oversight Visit to the North West had been drafted, however recommendations have not been included, as a discussion within the Committee would have to be completed. He asked the Committee whether it would prefer to raise issues presently or to have time to ensure the report was a true reflection and discuss the recommendations thereafter.

Mr J Lorimer (DA) agreed that the Committee should have time to study the report and have it inserted into the agenda of a future meeting.

The Chairperson said he did not want the matter to disappear and that it should be a matter arising in the next meeting, with recommendations being put forward then.

The Chairperson informed the Committee that the Norwegian parliamentary committee on mineral resources has requested a meeting with the Committee and this will be done between 12 and 1pm on the next day the Committee sits. Lastly, he welcomed Ms H Nyambi  (ANC) as a new Member of the Committee.

The Chairperson declared the meeting adjourned.

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