Mining set for troubled 2017

‘UNCERTAINTY IS BUILT INTO OUR LAWS’

Nedbank Corporate and Investment Banking (CIB) expects continued regulatory uncertainty to further weigh on the troubled, local mining industry in 2017.

“And there’s a very real chance we are going to do further damage to our mining industry simply because South Africa Inc doesn’t seem to have got its head around what it wants from its mining industry,” said Paul Miller, who is CIB principal of mining finance. He said the uncertainty didn’t relate to the legislative process regarding amendments to existing laws but rather in the way laws are constructed. “Uncertainty, discretion and the lack of timelines is actually built into our regulations; it’s built into our law,” he said.

According to Miller, in some cases the discretion awarded to the minister of mineral resources and delegated to officials with vague guidelines often leads to different interpretations of the law. And a lack of set timeframes for decisions is problematic.

Optimum Coal’s section 11 application was approved within weeks of application, while Keaton Energy, which submitted a similar application in May 2016, is still awaiting a decision, he said.

“None of what I’m saying applies to the state’s transformation objectives or to whatever its policy is. The process is inherently uncertain, [it] remains so, and no amount of amendments or new versions of the charter are going to change that until you go right back and say we want certainty on timelines, on the requirements for how decisions are made,” he said.

He said the 2017 regulatory year will be influenced by concerns about the environmental obligation of companies under the National Environmental Management Act and the Malan Scholes case, which seeks to set aside the mining charter. Multiple legal challenges related to the former public protector’s State of Capture report, largely influenced by Optimum Coal, are also expected.

If commodity prices recover, the domestic sector will not necessarily do so but may instead tread water, Miller warns. Despite the challenges, Nedbank CIB’s mining unit says it enjoyed a remarkable year in 2016.

According to Nivaash Singh, head of mining finance international, the unit closed 24 debt finance deals across 10 African countries and nine commodities, with a total deal value of about R20 billion.

He said the group is growing its African lending franchise to provide a full spectrum of finance solutions in other jurisdictions.