Draft Mineral Development Bill: briefing

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
4 June 2001
DRAFT MINERAL DEVELOPMENT BILL: BRIEFING BY DEPARTMENT

Chairperson: Mr D Nkosi

Documents handed out:
Overview of the Draft Mineral Development Bill (see Appendix)
Draft Mineral Development Bill as of 14/3/01

SUMMARY
Among the crucial points raised in the meeting were issues relating to the concept of mineral rights, security of tenure, transferability of mining rights and ministerial discretion. The Chairperson remarked that the Bill is a bit vague on the issues of security of tenure and transferability and access to mineral rights. He suggested that the drafting team should clarify these and ensure that information and real support is available to ensure that people have access to participate in the industry.

MINUTES
Introduction by the Director-General
Mr Sandile Nogxina stated that the proposed Minerals and Mining dispensation is predicated upon by the universally accepted principle that mineral resources are a national patrimony. Therefore the state should exercise sovereignty over those mineral resources for the benefit of all. The Bill also seeks to redress the imbalances of the past and to normalise the manner in which the administration of the mining industry is being conducted in the country. They wish to realign the mining and mineral regime with what is prevailing globally.

Briefing on Draft Bill
Mr Jacinto Rocha, a member of the drafting team, said the Bill could be divided into four principles:
- the national patrimony,
- the issue of redressing the imbalances of the past,
- development that is socio-economic, job creation and social responsibility.
- there should also be a guarantee of security of tenure and environmental management.
He said once the new legislation is effected, no person will be allowed to prospect or mine without a prospecting or mining right. He explained some of the important chapters in the Bill.

For more details in the presentation please refer to attached document.

Discussion
Chapter one
Mr Davidson (DP) noted the fundamental principle in the Bill of transferring mining rights from individual holders to the custodianship of the state and asked what provision has been made in the Bill for compensation of what can appear to be expropriation.

Mr Rocha said this is a very difficult issue as it touches on the property clause of the Constitution. It is very complex in the sense that it deals with deprivation and expropriation. Within that context if one talks about deprivation, that is, subclause 25 (1) of the Constitution, there is no compensation. If one talks of expropriation, that is subclause 25(2) and (3), then there is compensation. In the Department's view there is no transfer taking place, nevertheless in the Bill there is provision for compensation if expropriation takes place.

Dr Bredell, of the Department, asked to add to Mr Rocha's comments. He said the Committee needs to come to grips with the concept of mineral rights which is being taking away. This Bill is not proposing mineral rights be taken away from individuals and be vested in the state. The Bill is proposing taking away the common law right of mineral rights from South Africa's legal system completely. The system of mineral rights does not exist in most countries in the world except for a few states in the USA. When other countries talk about mineral rights, they are actually talking about prospecting rights and mining rights. He warned the Committee to be very careful in understanding that this Bill is extinguishing that common law concept and not taking away mineral rights and vesting them in the state. This applies to the state too - it will not own any mineral rights. The Bill is not taking away mining rights and prospecting rights. The concept in the fundamental principles of the Bill is that mineral resources are owned collectively by the state and that is the position in almost every country in the world. Once a portion of the resource is allocated to a private individual that becomes real property, a mining right and no one - not the state - will touch it. That is formal property. The reason why they are aligning themselves with the rest of the world is to become competitive. The current system has put South Africa at a disadvantage from an investor point of view.

Mr Oliphant (ANC) asked if the issues that had been brought up in previous briefings on the draft Bill would be considered in the revised version of the Bill.

In terms of process, the DG said they would incorporate into the legislation some of the proposals in submissions that they had received from the public. Once that is done they will resubmit the draft to Cabinet and thereafter the Bill will be formally introduced to Parliament.

Mr Mongwaketse (ANC) said the question of mineral rights means that a person can own minerals in many places at the same time. He appeared not to be in favour of mineral rights.

Mr Davidson said the point is that under the present circumstances a person has paid for the piece of land and its mineral rights, what happens if those mineral rights that the person has paid for are taken away.

Dr Bredell said it is true that mineral rights have been paid for and they are regarded as property. But what is not clear is whether it is property in terms of Section 25 of the Constitution. However, the Clause 15 of the Bill does provide for compensation to be paid in cases of expropriation.

Mr Nel (NNP) used the example of a person owning some land and later discovering that the area has minerals. Did that mean the person will be deprived of that right because of this Act?

Dr Bredell said they want to deal with the fictitious common law right that does not exist anywhere else. Of course there are such cases because it is not known where and when a new discovery will be made in future. The logical thing for such a holder of rights will be to get someone who will prospect for him/her. That person will look at whether there are indeed valuable minerals on this property. That holder will be given an opportunity to apply for prospecting rights and that should be published and will be made known.

Chapter three
On the issue of royalties, Mr Bell asked to whom are royalties going to be paid?

Mr Rocha replied that what the Bill says is that mineral resources belong to the state, and this means that royalties will be paid to the state.

Chapter four
Mr Davidson said security of tenure is one of the main obstacles in the Bill. The main criticisms of the Bill are that it has not provided for the security of tenure, the Bill has not addressed the question of transferability of rights, the Bill does not provide an opportunity for potential prospectors.

Another criticism by Davidson was on ministerial discretion. He said the whole Bill is papered with huge discretion on the part of the Minister. He said such discretion is uncalled for.

The DG said that there are few pieces of legislation in this country where the Minister does not have discretion. In all legislation the Minister has to exercise discretion and that is not unfettered discretion. The Minister's discretion is subject to the Constitution, the Promotion of Administrative Justice Act and other pieces of legislation. If one compares the current legislation with the draft Bill, the Minister's discretion is wider in the current legislation than it is in the draft Bill.

Adv Mononela (Department) pointed out that if there is no provision for approval by the Minister, the Department would be unable to keep records.

Ms Bopape (Department) added that in the current legislation it is not possible to transfer certain rights without the approval of the Minister and that is done for record purposes.

Mr Oliphant commented that the Department does not need to be defensive about this Bill. This is a very progressive piece of legislation. There is an anti-transformation sentiment against this Bill but it does not mean that the louder a person shouts, that he talks sense. Nobody is talking about the deprivation against the disadvantaged people of this country that went with the history of the mining industry. The Department must not worry, they are on track.

Mr Davidson replied that the DA's view is clear as far as the issue of transformation is concerned. They do not believe that the present system is equitable. They recognise that the whole process needs to be reviewed and the industry needs to be transformed. But what is important is the way it is done and that is what the DA is questioning. He said Mr Oliphant must not imply that the DA is anti-transformation. On the contrary, they have indicated that there should be transformation in the industry. He maintained that the powers given to the Minister are excessive.

Mr Taljard (Department) said the whole concept of security of tenure and the issue of transferability is the fundamental principle of this Bill. It is not about taking away security of tenure. The Department is trying to change the concept of mineral rights. The concept has created imbalances and the draft Bill is trying to address that.

He continued that security of tenure is very important in the mining industry and the Department has given a lot of attention to that. If a company wants to transfer mining rights to another company which wants to continue exploiting minerals in the area, it would be allowed to do so. At no stage would the Minister refuse to grant such a right if all the necessary procedures are followed.

Mr Davidson asked if it is as simple and clear cut as Mr Taljard puts it. Why are many local and international prospectors and investors up in arms against this Bill?

Mr Taljard replied that the current South African law is based on common law and everything in terms of mineral rights has been registered in the deed office. If one goes to the deed office, it is very difficult to find out how mineral rights are registered as there are so many irregularities. The Bill proposes that all the rights should be registered in the Mining Titles Office (MTO) and would be given by the state. From the industry's point of view they see it as a deregistration of their rights in the deeds office where their property is normally registered, into a registration in the MTO.

The Chairperson suggested to the drafting team that issues like the security of tenure and transferability and access to mineral rights should be made clearer. From the Bill, it does not look convincing that there would be an assurance for people who want to enter and participate in the industry. Issues such as how the government, through DME, could ensure that information and data is available and there is real support to make sure that people have access to participate in the industry.

The meeting was adjourned

Appendix:
OVERVIEW of Draft Mineral Development Bill

Introduction
· The mischief the Bill wishes to address
· The concept of mineral rights?
- common law
- mineral rights in world
- is it property or not?
· Paradigm shift

Structure
· Preamble
· Definitions
· Fundamental Principles
· Administration
· Mineral Resources Management
· Mineral Regulation
· Advisory Board
· Transitional Arrangements
· Trade in Diamonds
· Petroleum Exploration and Production General and Miscellaneous

Fundamental Principles
· National patrimony
- Mineral Resources belongs to South Africa
- State custody
- Permanent sovereignty
· Redress
- Equitable access;
- Results of past discrimination
- Sustainable socio-economic development
· Developmental
- socio-economic development
- Job creation social responsibility
· Security of tenure
· Environmental management
· No prospecting or mining without a prospec4ino right or mining right and an approved EMP

Administration
· DG to administer Act - Minister controls
· Appointment of DMDs
· Division into region
· DG can designate senior official to assist him/her to perform functions and exercise powers i.t.o. of the Act

Mineral Resources Management
· Enforcement of terms and conditions and provisions of Act
· Use-it-and-keep-it
· Assistance
· Access to information
· Downscaling
· Promotion of beneficiation

Mineral Regulation
· Two rights and one permit
Prospecting rights, mining rights and retention permits

· Decisions based on criteria
· Consultation
· Minister approves the granting right
· Environmental Management
· DMDs grants the rights

Advisory Board
· Appointed by Minister
· To advise the Minister on policy matters relating to the Act
· Composition
- Government,
- Labour,
Business
Civil society

Transitional Arrangement
(Object)
· Security of tenure for active operations
· Opportunity to apply
· Ensure equitable access to mineral resources
· Advance historically disadvantaged persons;
· Abolish all old order rights
· Active operations
- rights linked prospecting operations - 2yrs
- rights linked to mining operations - 5 yrs
- holders must apply for new rights
· granting of rights is guaranteed
· No prospecting or mining
- General notification
· apply for prospecting or mining rights;
· substantiate opposition against granting rights to 3rd parties
- Rights may be grant to 3rd parties
· De-registration of old-order rights
· Registration of new rights at MTO
· Payment of royalties
- rural & local economic development
- impact on livelihood of person any other issues
· Continuation of EMP

Trade in Diamonds
· Abolish Diamond Board
· Regulates trade in diamonds
- Curb trade in conflict diamonds
- promote local jewelry industry
Transfer functions to DML and SARS

Petroleum Exploration and Production
· Current dispensation
different regulatory instruments
treats petroleum like other minerals
· Fundamental principles apply
· Administration by Petroleum Agency
· Caters for petroleum specific regulatory
regime

General and Miscellaneous
· Matters of general and administrative nature
- Investigating powers
- Delegations
- Appeals (Administrative)
- Offences and penalties
· Legislation repealed
· Name of Act
· Commencement

Constitution
· .... the Constitution is not simply some kind of statutory codification of an acceptable or legitimate past. It retains from the past only what is defensible and represents a radical and decisive break from that part of the past which is unacceptable." (Shabalala & others V The Attorney General & Another, 1996 (CC))

The Common law
· "The common law is not trapped within the limitations of the past. It needs to be revisited and revitalised with the spirit of the constitutional values of the defined in Chapter 3 (Bill of Rights) of the Constitution ad with due regard to the object and purport of that Chapter." (due Plessis V de Klerk, 1996)
· "The Bill of rights does not deny the existence of any other rights... that are recognised or conferred by common law, customary law or legislation to the extent that they are consistent with the Bill" (s39(3)).
· "Customary international law is law in the Republic unless it is
inconsistent with the Constitution or an Act of Parliament" (s 232)

Property Clause
· Very complex
- Deprivation v. expropriation
· "Public interest includes the nation's commitment to... .reforms to bring about equitable access to all South Africa's natural resources" (s 25(4)(a)

No criteria & discretion (30)
· The Minister MUST approve PR provided
he/she satisfied with
- prospecting method
- applicant has or has provided for technical ability and financial resources to conduct prospecting or rehabilitate
- expenditure commitment commensurate with prospecting work programme

Security of Tenure
· Preamble commits State to guarantee security of tenure
· Holder of PR entitled to MR (5(3))
· Holder of PR has exclusive right to apply for MR (37(a))
· Security of tenure to existing operations
· Approved EMP continue in force (101)