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

Over the next two weeks, two events that define the political economic agenda take place in parliament in Cape Town. Tomorrow evening, President Jacob Zuma will deliver his state of the nation address and in two weeks’ time, Finance Minister Pravin Gordhan brings out the speed point machine to explain how government will pay for all its needs over the coming year when he presents the budget.

The two events take on added significance as they take place in a year when South Africa is due to hold elections while celebrating 20 years of democracy.

President Zuma will most likely use his State of the Nation address to reflect on his government’s five year term but also the ANC’s 20 years in power. He will most likely point to success in the improvement of access to water and electricity, improved access to education as more children now enter Grade R and the improvement of the lives of the poor through access to social grants.

The opposition will be keen to point out that no significant movement has been made in reducing unemployment while the public health and education system are crumbling in part. Crime, while stabilising, remains high and South Africa’s competitiveness in many areas of economic life has either stagnated or is deteriorating.

Those complaints are likely to simply be drowned out by pomp and ceremony and sense of occasion.

The main reason that President Zuma will have to fall back on history in his address is because he has little to share as a current achievement. Infrastructure spending, his point of strength throughout his term of office feels like it has ground to a halt, with no new projects confirmed and actual spending lagging behind what was planned.

There is thus unlikely to be any new initiatives announced, all that might be saved for the new parliament, where the ANC expects to retain its majority and Zuma fully expects to lead it as president.

One of the most remarkable achievements of South Africa’s democratic government has been the reform in public finances. The reform was part of the adoption of Growth Employment and Redistribution (GEAR) as the official economic policy in 1996.

The process started with the merger of the department of finance and the department of state expenditure to create what is today known as the National Treasury. This led to the introduction of the three year budgeting system, the Medium Term Expenditure Framework (MTEF), which has brought stability and predictability to the budgeting process.

It then evolved to produce one of the most evolved and sophisticated and transparent budgeting systems in the world, but it also produced the budding romance between Minister Trevor Manuel and his director general at the time, Maria Ramos.

The most remarkable feature of South Africa’s budget is the phenomenal growth it has undergone, with spending now exceeding R 1 trillion, but also how spending has been redirected. When the ANC took power in 1994, South Africa spent more on servicing the interest on its debt than it did on education.
That changed in the early 2000s, when the reduction of national debt through selling off its assets and slowing down capital expenditure allowed government to reduce debt and therefore interest paid on it.

The most keenly watched item on the budget will be measures to boost economic growth as a way to fight poverty and unemployment. Opposition parties will also watch the growth of the Public Service Wage Bill, which has grown briskly over the past few years, due to higher numbers of employment and generous wage increases.

This in turn influences the Public Service Borrowing Requirement, where markets will watch closely to ensure that SA does not borrow to pay its civil servants, a slippery slope for any country to be caught in.

South Africa’s re-engineering of public finances has been compared to redesigning a plane in mid-flight. It is a technically complex undertaking that is probably the single biggest reason we have a stable democracy to celebrate. It should never be taken for granted.

By: Thebe Mabanga, Media Director Magna Carta