DMR’s ca­pac­ity-con­straint re­al­ity

Finweek English Edition - - NEWS - David McKay davidm@fin­week.co.za

An im­por­tant fea­ture of the Depart­ment of Min­eral Re­sources’ ( DMR) an­nual re­port, pub­lished in Oc­to­ber, was ac­knowl­edge­ment of its ca­pac­ity con­straints, both in its le­gal and f inan­cial ac­tiv­i­ties.

As a re­sult, Thibedi Ra­mon­tja, di­rec­tor-gen­eral of the depart­ment, con­ceded in his bud­get speech in par­lia­ment on 16 Oc­to­ber that ca­pac­ity-build­ing was a key goal for the 2013/14 fi­nan­cial year which, by the way, al­ready kicked off in April.

Two phrases pulled from the an­nual re­port demon­strate the ca­pac­ity prob­lems.

“The depart­ment’s in­abil­ity to at­tract and re­tain key staff such as in­spec­tors and min­eral econ­o­mists re­mains a chal­lenge,” the DMR said in its re­port, adding that the res­ig­na­tion of its chief fi­nan­cial of­fi­cer had hin­dered its fi­nan­cial ac­tiv­i­ties.

The re­port fur­ther stated that the chief direc­torate of Le­gal Ser­vices had “…con­tin­u­ously ex­pe­ri­enced se­vere ca­pac­ity chal­lenges dur­ing the last few years”. This was ow­ing to a “… con­stant in­crease in ap­peals and lit­i­ga­tion.

“This phe­nom­e­non has re­sulted in un­nec­es­sary ad­di­tional lit­i­ga­tion against the depart­ment, and is of ma­jor con­cern.”

As if to demon­strate the point, the DMR’s au­di­tor qual­i­fied the depart­ment’s fi­nan­cial state­ments. Ayanda Shezi, DMR spokesper­son, told Fin­week that the prob­lem was with rev­enue col­lec­tions, es­pe­cially per­mit fees and roy­alty col­lec­tions.

There’s tacit ac­knowl­edge­ment in th­ese state­ments of crit­i­cism the SA min­ing sec­tor has had of its reg­u­la­tor for sev­eral years: that min­ing li­cence ap­pli­ca­tions take too long, while con­ver­sa­tions with the DMR are pro­lix, and time con­sum­ing.

Bruce Fal­con, an at­tor­ney for Brink, Fal­con & Hulme Inc, said that he hoped ca­pac­ity im­prove­ments were even-handed so that more peo­ple would be ded­i­cated to ap­prov­ing min­ing and prospect­ing li­cence ap­pli­ca­tions.

“The fo­cus on the com­pli­ance side might be in re­la­tion to the re­cent resur­gence of the BEE as­pects, which will be high on the DMR’s hit list again,” he said.

The wor­ries about ca­pac­ity in the DMR, how­ever, have been over­taken by the larger is­sues of pol­icy cer­tainty and se­cu­rity of ten­ure. Ques­tions about min­is­te­rial dis­cre­tion have long trou­bled SA’s min­eral law, but the un­cer­tainty has been height­ened re­cently fol­low­ing pro­posed amend­ments to the Min­er­als & Petroleum Re­sources De­vel­op­ment Act (MPRDA). “Re­gard­ing the ad­min clean-up that it [DMR] is em­bark­ing upon, this is highly com­mend­able, but it won’t mean much if they don’t get the pol­icy sorted out,” says Ni­cola Jack­son, a part­ner at Fasken Martineau, an in­ter­na­tional law firm.

“The rea­son in­vestors are look­ing else­where is be­cause of the pol­icy un­cer­tainty.”

Keith Scott, MD of MSA Group, a com­pany that pro­vides con­sult­ing ser­vices to the min­ing sec­tor, says: “I was in In­dia re­cently and al­most all of my clients ex­pressed reser­va­tions about the pro­posed MPRDA amend­ments, es­pe­cially those per­tain­ing to min­is­te­rial dis­cre­tion on pric­ing. Th­ese clients felt that un­cer­tainty on th­ese amend­ments would pre­vent them from in­vest­ing.”

The DMR, how­ever, seems co­cooned to the broader anx­i­ety, fo­cused as it is on its in­ter­nal func­tions. Ra­mon­tja com­mented in par­lia­ment that the SA min­ing sec­tor was, in fact, grow­ing, sug­gest­ing the sec­tor would re­cover as the global econ­omy ad­justed to slower growth in China.

The num­ber of mines had in­creased to 1 579 in 2012, com­pared to 993 in 2004, rep­re­sent­ing 59% growth, he said. In the last three years, how­ever, the num­ber of ac­tive mines has grown by only 4%.

He added that the min­ing in­dus­try’s con­tri­bu­tion to GDP had in­creased to 9.3% last year.

“I f ind it sur­pris­ing that, given the marked de­crease in min­ing ac­tiv­ity over the past year or so, the min­ing in­dus­try’s GDP has in­creased. Th­ese fig­ures don’t talk to what we are see­ing in re­al­ity; well, cer­tainly not from the cor­po­rate and le­gal side,” said Jack­son.

The strain felt by the DMR’s le­gal di­vi­sion may be in­creased, es­pe­cially if the MPRDA amend­ments are passed. In this light, one won­ders whether the DMR’s prob­lems are largely of its own mak­ing.

Thibedi Ra­mon­tja

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