Precious Metals Bill: Department briefing

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
13 October 2005
PRECIOUS METALS BILL: DEPARTMENT BRIEFING

Chairperson: Mr E Mthethwa (ANC)

Documents handed out:
Department of Minerals and Energy presentation on the Precious Metals Bill

SUMMARY
The Department briefed the Committee on the Precious Metals Bill (B30-2005). Concerns raised during an informal briefing on 22 June were addressed as well as changes that had since then been made to the Bill.

Members asked questions about monitoring of licensees; the difference between types of licenses; fines and jail terms for offences; the nature of precious metals and minted precious metals bars.

MINUTES
Department briefing

Mr. A Mngomezulu, Deputy Director-General referred to a previous informal briefing to the Committee on 22 June 2005 and that he would today respond to issues raised during that meeting, provide the rationale for the Bill and would list the major changes to the Bill.

Previously, the Bill had not referred to the fact that the SA Diamonds and Precious Metals Regulator, established by the soon to be enacted new Diamonds Act, would also regulate precious metals. A cross-reference to the new Act had been inserted to clear up this oversight.

Other issues from the 22 June meeting included that the gold register continued to exist for license holders dealing with unwrought precious metal; silver was being deregulated because it was no longer a high-value metal; penalties and fines for offences had been re-aligned and the Department had not administered Chapter 16 of the Mining Rights Act in the past, because it dealt with currency trading and was therefore the purview of National Treasury and the South African Reserve Bank.

The main aim of the Bill was to eliminate barriers to local beneficiation of precious metals and to grow the beneficiation industry in South Africa so that jobs could be created. This would be done by ensuring equitable access, increasing participation throughout the value chain, making South Africa a major international mineral beneficiation center and to rationalize the regulation of downstream development of precious metals.

A major change was that administrative functions would be centralized within the Department of Minerals and Energy (DME). In the past, administration had been dealt with by Treasury, the South African Revenue Services (SARS) and the South African Police Services (SAPS). The other major change was that the industry would be regulated by the South African Diamond and Precious Metals Regulator (SADPMR). The regulator had to consider promotion of equitable access, orderly local beneficiation and broad-based socio-economic empowerment in the industry.

The other major changes were the amendment of the definitions of unwrought precious metals and semi-fabricated precious metals. The former definition now excluded minted gold bars which would improve access to precious metals. In addition, a precious metal beneficiation license was being introduced. This was a new type of license that would be available to manufacturing industries like the IT industry or the automobile industry. It excluded the jewellery manufacturing industry as the jewellers’ permit would be retained. The beneficiation license would be valid for ten years. Holders could only possess semi-fabricated precious metals and not unwrought material. The onerous provisions of keeping registers had been removed and only statements reflecting the precious metals received and sold were to be submitted annually.

The jewellers’ permit would allow the holder to possess only semi-fabricated precious metals. It would be issued for a shorter term, five years, and would be subject to renewal. No register would be required but proper books of account had to be kept and submitted annually to the issuing authority.

The Bill also provided for transitional measures, meaning that certificates, permits or licenses issued under the Mining Rights Act would therefore be valid for the period for which it had been issued or for up to two years after commencement of the new act. Processing of new applications would be done in terms of the new legislation while re-application by current permit or license holders would be allowed in this transitional period.

In conclusion, the Bill attempted to partially deregulate the precious metals sector in order to increase the level of beneficiation and to allow greater access to precious metals in South Africa.

Discussion

Mr S Louw (ANC ) asked whether the DME would put a proper system in place to monitor those licensed manufacturers that did not submit their annual reports. He also wanted to know the difference between a normal cutting and polishing permit and a manufacturers’ permit. Finally, he asked if the exclusion of minted bars from the Bill would not deny access to small entrepreneurs who wanted to enter the market.

Mr. Mngomezulu responded that there would be a system established by the Regulator which would follow up submission of reports. The exclusion of minted bars from the requirements of unwrought precious metals would make access easier than in the past.

The Chairperson asked about the adjustment of the fines and penalties as per the advice of the State Law Advisers. Did the fines match the proposed jail terms?

Mr. Cullinan, Mintek, responded that there was a difference between the jewellery manufacturing business and the diamond cutting and polishing industry. The jewellers’ permit was required for jewellery manufacturing and the beneficiation license for the cutting and polishing of diamonds.

Mr Mngomezulu stated that the original fines in monetary terms were not comparable to the number of years the offender would spend in jail. This had been corrected during consultation with the State Law Advisor and was contained in Clause 18 of the Bill.

Ms. Tinto (ANC) wanted to know more about minted bars.

Mr Louw wanted to know under what category chrome, steel and copper fell.

Mr Cullinan stated that chrome, steel and copper were base minerals and did not fall under the precious metals group.

The Chairperson asked for clarification on the nature of precious metals and exactly what they were.

Mr Cullinan replied that precious metals were, basically, gold and platinum group metals which included platinum, palladium, ruthenium, iridium and rhodium. Minted bars were available in two types of bars: a cast bar and a minted bar. The cast bar was formed by pouring molten gold into a mould, while the minted bar was actually a value-added product and was made by stamping a strip of precious metal. The resulting bar was polished and an inscription or trademark was put on similar to a Kruger Rand. It was usually 99.99% pure.

The meeting was adjourned.