Is South Africa’s mining regulatory framework hospitable to investment and why are global perceptions of SA’s mining industry currently somewhat negative?
One of the lead speakers at the forthcoming Joburg Indaba, Peter Leon, Head of Webber Wentzel’s Mining and Energy Projects Practice, says “the proof of the pudding is in the eating”. According to a survey published earlier this year that gauges the opinions of CFOs and CEO of the world’s major mining companies, SA’s position has fallen from 54th last year to 64th out of 96 surveyed countries. This places SA in the bottom third globally.
The Fraser Institute survey from Vancouver, Canada examines the global regulatory environment for mining and how friendly countries' policies are in encouraging investment. SA’s position looks even more stark when compared with another country just north of its border that stands at position 17 out of 96, namely Botswana.
Leon says global perceptions have fallen in the wake of Marikana last year and general labour unrest locally, but there are also problems with existing cumbersome and unclear mining legislation. Referring to the current proposed amendments to the Mineral and Petroleum Resources Development Act, 2002 (MPRDA) under the Mineral and Petroleum Resources Development Amendment Bill, 2013 (the Bill) in Parliament, he believes the amendments in their current form will exacerbate an already existing policy uncertainty.
“A general lack of mining policy uncertainty can be traced to a lack of clarity and certainty in the MPRDA itself. The law is not clear on the exercise of ministerial powers for example as well as the discretionary powers of administrative officials. Another problem is the Act generally lacks proper time limits and it takes an inordinate amount of time to obtain a decision on applications for prospecting or mining rights.”
“In Botswana for example applicants receive a decision within 60 days of a compliant application, while here in SA it takes six months for prospecting rights and at least a year for mining rights.” Leon says that often even these deadlines are missed by the Department of Mineral Resources, which does not exactly inspire investor confidence.
Looking at the reasons Botswana scores so highly in the Fraser Institute survey, Leon says the mineral department in Botswana went out of their way to cut red tape and streamline the mining process back in 1991. They have an independent mining commission comprising a panel of mining experts to expedite the process and keep administrative red tape to a minimum.
Leon also says the open ground in Botswana can be accessed efficiently online in an open and transparent manner, unlike in SA where the database is out of date and difficult to access.
The local SAMRAM system needs to be only accessed online to cut down on human error and abuse of the manual system, but in SA we still have a dual online and manual system which defeats the purpose of reducing administrative challenges while remaining open and transparent. Leon says it needs to be mandatory for requests and applications to be processed only online, which will cut out backdoor dealings or corrupt practices.
Regulatory practices are becoming more arduous and cumbersome and it appears the latest amendments to the MIR Act will also seek to remove time restraints on government, which will further bog the system down and create more investment delays.
Leon says the ANC’s own report commissioned last year highlighted the efficiency of the system in Ghana and recommended SA follow the speedier and more transparent Ghanaian method of requesting and lodging mining and exploration rights. But will they heed their own report?
Concluding with his ideal wish list to improve the regulatory landscape locally, one of the critical topics to be discussed at this month’s Joburg Indaba conference, Leon says he would eliminate government discretion as much as possible to create policy certainty. He would also remove the export licensing system, which he says is in conflict with global best practice and international trade law.
Lastly he would, “jack up” and improve the SAMRAM system to boost efficiency and transparency and transform SA’s mineral regulatory system to create a better environment for business investment.