New broom

Finweek English Edition - - INVESTMENT -

Lawyers are con­vinced that South Africa’s min­ing sec­tor is in for an­other in­stal­ment of pro­longed un­cer­tainty if newly ap­pointed Min­is­ter of Min­eral Re­sources Ngoako Ra­matl­hodi suc­ceeds in hav­ing the Min­eral and Petroleum Re­sources De­vel­op­ment Amend­ment (MPRDA) bill sent back to the up­per house of par­lia­ment, the Na­tional Coun­cil of Prov­inces.

“The only way to stop the bill go­ing into law would be to write a new bill which would start the whole process again,” said Peter Leon, head of en­ergy and min­ing at Web­ber Wentzel.

Said Andrew Mitchell, a part­ner at Fasken Martineau: “What is prob­lem­atic in all of this is the un­cer­tainty it cre­ates and it’s why we’re just not get­ting the min­ing in­vest­ment.” Last month, Ra­matl­hodi asked Pres­i­dent Ja­cob Zuma to de­lay sign­ing the MPRDA into law.

The State had suc­cess­fully writ­ten into the pro­posed leg­is­la­tion the abil­ity for it to take a 20% free-carry in any liq­uid fuel de­vel­op­ments in SA, which would in­clude shale gas ex­plo­ration and de­vel­op­ment as well as off­shore oil dis­cov­er­ies. Fur­ther­more, the MPRDA al­lowed for the State to ex­tend its hold­ings to con­trol of these projects, on commercial terms.

No petro­chem­i­cal com­pany would be sat­is­fied with the risk of hav­ing to cede con­trol, es­pe­cially in a de­vel­op­ment that called for hun­dreds of mil­lions of rand in cap­i­tal ex­pen­di­ture.

Ra­matl­hodi sug­gested that the clauses be ex­ter­nalised from the MPRDA.

Weeks later, he mooted other po­ten­tial changes. Per­haps most con­tro­ver­sially, he said the is­sue of tar­iffs on cer­tain ex­ported strate­gic min­er­als – such as coal and iron ore – should also be re­vis­ited.

“The prob­lem with this is that the Cham­ber of Mines and the Depart­ment of Min­eral Re­sources [DMR] had reached a com­pro­mise on treat­ment of strate­gic min­er­als so that would have to change,” said Leon. The cham­ber was plan­ning to is­sue a press re­lease, but it never ma­te­ri­alised.

“As a lawyer by pro­fes­sion, I think he wants to un­der­stand all the is­sues first,” said Debby Ntombela, an at­tor­ney for Ho­gan Lovells. “I per­son­ally don’t think his ad­min­is­tra­tion will be as ag­gres­sive as his pre­de­ces­sor [Su­san Sha­bangu] and that he’ll seek a bal­ance be­tween in­vest­ment and trans­for­ma­tion. He is also work­ing closely with the deputy min­is­ter God­frey Oliphant, who has been in the min­istry since 2007, so he re­ally un­der­stands the is­sues.” Leon be­lieves that lift­ing em­pow­er­ment tar­gets and re-writ­ing stricter leg­is­la­tion for the ex­port of coal and iron smacks of a devel­op­men­tal-state ap­proach to min­ing as Govern­ment seeks to boost ben­e­fi­ci­a­tion. In this re­gard, Ra­matl­hodi’s sug­ges­tions carry over­tones of the so-called Sims re­port – State In­ter­ven­tion in Min­ing – dis­cussed at the last ANC na­tional con­ven­tion in 2012.

Sims was the ANC’s re­sponse to calls for na­tion­al­i­sa­tion and while it in­sisted na­tion­al­i­sa­tion of the min­ing sec­tor should not pro­ceed, it took a much harder line on state in­ter­ven­tion in min­ing in a way that de­terred for­eign in­vest­ment.

“We’ve seen clients who have said there’s too much un­cer­tainty,” said Ni­cola Jack­son, an at­tor­ney with Fasken Martineau. “I hope we’re be­ing a bit alarmist with these changes, but we’ll have to see.”

The DMR is in f lux with a num­ber of per­son­nel changes on the boards in­clud­ing that of the di­rec­tor-gen­eral, cur­rently oc­cu­pied by for­mer head of geo­sciences Thibedi Ra­mon­tja. “He’s too aca­demic and too weak for Ra­matl­hodi,” said an in­dus­try source. “Un­der Sha­bangu, the DMR was in clover be­cause they ran her. With Ra­matl­hodi, he is the new broom and he won’t be run by any­body.”

Min­is­ter of Min­eral Re­sources Ngoako Ra­matl­hodi

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