Mining’s legal woes

September 2014

    Mining in South Africa plays an important role in the development and history of our country. Gold mining alone accounts for over 10% of the World’s Gold Production. The industry has contributed to the establishment of the Johannesburg Stock Exchange and still accounts for a third of its market capitalisation.

    With these few facts in mind, it only makes sense that the laws protecting and overseeing this industry are tight and for the most part make sense to all the players involved. According to Hulme Scholes, attorney at Malan Scholes, this is not the case.

    Magna Carta recently hosted a client and media presentation at our Johannesburg offices where Scholes unpacked the amendments and proposed amendments to the Minerals and Petroleum Resources Development Act (MPRDA) and the MPRDA Amendment Bill, which was released for public comment in June last year.

    According to Scholes the current state of the legal framework is confusing and not consistent, making it hard to advise clients and investors.

    One of the points he focused on were the significant changes to the MPRD Act by the Amendment Act:

    • The definition of “Historically Disadvantaged Person” which includes a reference to “Community”; and
    • The introduction of the need to obtain an Environmental Authorisation for Prospecting Mining.

    In the first point, Scholes explained how the minister is now meant to facilitate participation of community to get mining rights. The problem is the amendment bill is not effected yet and therefore there are no guidelines on how the minister is meant to facilitate this participation.

    Scholes reminded the guests that his take on the legal framework in South Africa was on the negative side because he deals with the irregularities daily. His own firm, Malan Scholes, won ten judgments against the Minerals Minister last year and there was widespread litigation against the State.

    Key learnings from his presentation;

    • The Amendment Act states, mining companies now have an obligation to facilitate the participation by Communities in the Mining industry. This obligation appears to have been amended in the Amendment Bill. It’s not yet law. And there are no guidelines or regulations as to how this is to occur
    • The Amendment Bill grants wide powers to the Minister to promote beneficiation of minerals and petroleum in South Africa and he /she is required to consult with affected stakeholders before designating minerals and mineral products. Scholes said it was difficult to form a view of this provisions in the Amendment Bill without corresponding Regulations being promulgated

    It was an insightful and very technical session on the laws and suggested laws around mining. From the session it was clear that consistency in the laws are essential, not only for regulating the industry but to make sense to potential investors.

    Potential investors don’t have to like our laws but they need to know what they are getting themselves into and to evaluate if it makes sense for them.

    Check out Mining Weekly’s report on the session: Click here

    Written by Tokiso Molefe Senior Account Manager: New Media and Content