Mining Titles Registration Amendment Bill: workshop

Meeting report

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PORTFOLIO COMMITTEE ON MINERALS AND ENERGY
21 May 2003
MINING TITLES REGISTRATION AMENDMENT BILL: WORKSHOP
Chairperson: Mr M Goniwe (ANC)

Documents handed out:
Mining Titles Registration Amendment Bill (B24-2003)
Mining Titles Registration Amendment Bill: Presentation by the Department of Minerals and Energy
An Independent View: Professor F Cawood
A Legal Perspective: Mr H Scholes

SUMMARY
Discussions drew attention to concerns, in some quarters, about security of tenure in respect of old-order rights following the commencement of the Minerals and Petroleum Resources Development Act of 2002 (MPRDA) to which the provisions of the Bill were related. It was concluded that the Bill made adequate provision for this by allowing two and five years respectively for the transfer of old-order prospecting and mining rights. Active old-order rights could be converted within one year of the commencement of the new legislation.

MINUTES
Department of Minerals and Energy
Ms S Bopape-Dlomo referred members to her presentation on 16 April 2003, when she had provided context to key amendments proposed in the Bill. These sought to bring the Mining Titles Registration Act (MTRA) in line with the Minerals and Petroleum Resources Development Act (MPRDA).

Discussion
Mr J Nash (ANC) asked why so little information was available on the old Mining Lease Board, requesting more detail on its role and composition prior to 1992.

Mr A Blaas (ACDP) asked whether the Bill would empower the Director-General (DG) to amend and change mining titles registration regulations.

Ms Bopape-Dlomo replied that, as far as she had been able to ascertain, the old Board had been responsible for regulating mining titles registration. She was not sure of the Board's composition, although it appeared to have included two members of the public.

The Chair strongly urged the Department to provide the information requested as soon as possible.

Mr H Scholes then explained that the Board had been established in terms of the Mining Rights Act (No. 20 of 1967). It had become defunct following the promulgation of the new Minerals Act of 1992.

Ms Bopape-Dlomo confirmed that Clause 10 of the Bill empowered the DG to alter or change regulations affecting mining titles registration.

The Chair asked how this affected the powers of the Minister.

Ms Bopape-Dlomo replied that, since the Mining Titles Registration Act was administrative and technical in nature, changes to regulations tended not to require a political decision. The DG would assume responsibility for this in order to avoid lengthy bureaucratic processes and concomitant administrative delays.

The Chair expressed concern that this appeared to suggest that the DG would not be held accountable to the public in respect of amendments to mining titles regulations. The Committee would need to revisit this matter before public hearings on the Bill in order to determine what specific powers that DG would receive. The Chair also wondered what structure or entity would replace the Board and how the registration of mining titles had been managed since 1992.

Mr Scholes answered that there had been no need for the Board to be replaced in 1992 because the Minerals Act had privatised transactions between title holders and prospectors. Prior to the promulgation of the Act, the State had reserved the right to mine. In terms of the new Act, however, it had itself become the regulator.

An Independent View: Professor F Cawood (University of the Witwatersrand)
Professor Cawood, appraised members of the historical and legal context to the development of a regulatory framework for mineral rights and mining titles in South Africa through to the current legislation.

In his view, the amended MTRA would complement the MPRDA and related legislation by providing for the registration of new-order rights and any transfer, cession, letting, subletting, alienation and encumbrance by mortgage over mineral and petroleum properties. He argued that such a principle remained an essential requirement for security of tenure.

Professor Cawood then addressed the status of mining titles during the transition period between old-order mineral rights and the new-order mineral rights ushered in by the MPRDA. The objectives of the transitional arrangements were to maintain security of tenure for active properties, encourage holders of old-order rights to comply with the new system and to allow open access to non-active properties. These arrangements required holders of old-order prospecting rights to convert to new-order rights within two years. Holders of old-order mining rights were required to covert within five years. Active old-order rights would remain valid for one year to facilitate conversion.

He recommended that, in view of its links to other Acts and regulations affecting mining and minerals development, the amended Act and all related supportive legislation should become effective at the same time, suggesting that January 2005 might be appropriate for this.

Discussion
Mr Blaas (ACDP) requested an explanation of the term "undivided shares" and its implications for mining rights.

Professor I Mohamed (ANC) asked what would happen if mineral rights owners failed to convert old rights into new rights. He was also curious about the possibility of a challenge in the Constitutional Court by the holders of old-order rights alleging wrongful expropriation of property.

Professor Cawood explained how the evolution of mining titles had begun with combined land and mineral rights, in terms of which mineral rights holders had passed down these rights to their heirs in undivided shares. This process had resulted in the problem of common ownership by numerous parties of the rights to different types of minerals lying beneath one portion of land.

Mr Blaas asked how mining houses had managed to acquire these mineral rights in the first place.

Professor Cawood replied that mining companies had gone to great lengths to find the legally titled mineral rights owners and had purchased the rights from them.

He the advised the Committee that the MPRDA required holders of unused old-order prospecting rights and mining rights to convert these rights within two years and five years respectively or lose them. Holders of active rights had one year in which to convert them.

He posited that there was no way to predict the results of a challenge in the Constitutional Court on the issues surrounding the conversion of mineral rights. He also suggested that the Government allow mineral rights owners to deduct up-front exploration costs from profits generated before paying royalties to the State in terms of the proposed Royalties Bill.

Ms Bopape-Dlomo explained that the Department had conceived and included the idea of rights conversion as an incentive to compliance. She added that, once old-order rights had been converted into new-order ones, the rights holder would be required to register those rights under the new system within ninety days of the conversion. New applicants for rights under the new regime would have only thirty days in which to register once their rights had been granted.

Mr Scholes noted that the question of deprivation of property had not yet come before the Constitutional Court. Should it do so, it would be based on an interpretation of Section 25 of the Constitution.

Mr E Lucas (IFP) wondered what would happen under the new mineral rights system to people owning mineral rights without their knowledge, as opposed to speculators who actively sought and purchased land with mineral deposits for the purpose of mining.

Mr Scholes observed that, under the new system, such owners would fall into the category of holders of unused rights. The proposed new regime did not distinguish between owners who did not exploit their mineral rights because they did not know about them and owners who intentionally purchased the rights but never used them.

A Legal Perspective: Mr H Scholes
Mr Scholes focused his presentation on the potential for the language of the Bill (or noticeable omissions) to create confusion, leaving the proposed new Act open to misinterpretation.

In his view, sections of the Bill appeared to suggest that old-order registrations could not continue after the date of commencement of the MPRDA. He recommended that the Bill be amended to perpetuate transferability and the ability to encumber old-order rights.

Mr J Nash (ANC), in his capacity as Acting Chair, suggested that these recommendations would have been more appropriately voiced during public hearings.

Mr Scholes replied that the Committee had given him a mandate to offer various interpretations of the Bill and was then invited to proceed.

He advised members of the potentially negative impact of provisions of the Bill on black economic empowerment (BEE) transactions during the transitional period. Noting that many BEE initiatives are joint ventures, he suggested that members called for the legal recognition of joint mining authorisations for commercial partnerships. He also suggested that provision should be made allowing for transactions after the commencement date of the MPRDA in order to limit claims for compensation on the grounds of expropriation. Challenges of this nature would fuel controversy and could impact negatively on investment in mining.

Discussion
Professor Mohamed thanked Mr Scholes for a thought-provoking perspective.

Mr Nash asked about the consequences of failing to transfer old-order rights.

Mr Scholes explained that, in his view, in the event of old-order rights not having been transferred or converted prior to the commencement date of the new legislation, it would not be possible to complete many transactions already in process in respect of those rights. Provision for the transferability of old-order rights post-implementation of the MPRDA and related legislation would result in significantly fewer expropriation suits alleging wrongful deprivation of property.

Ms Bopape-Dlomo voiced concern over Mr Scholes interpretation of the Bill. Security of tenure and the ability to continue mining was one of Government's top priorities. The five-year transition period sough to provide old-order rights holders every opportunity to convert or transfer their rights.

She also commented that the new legislative framework sought to facilitate opportunities for legal BEE entities rather than joint ventures. There had been a tendency for more established mining concerns to use BEE partnerships as a mechanism for fronting and retaining control of the operations concerned.

Mr Scholes explained that he was merely presenting a legal viewpoint. Nevertheless, there was, in his view, a need for clarity in the Bill regarding the issue of transferability of old-order rights.

Ms Bopape-Dlomo again confirmed that ongoing transactions in respect of old-order mineral rights could definitely continue for one year after the commencement date of the legislation, provided that the holders proceeded with the conversion of those rights in keeping with the requirements of the new Act. Her colleague, Mr A Richter, suggested that recipients of transferred old-order rights obtain written consent from their former owners to ensure security of tenure under the new system.

The meeting was adjourned.