Mineral bill review adds to policy uncertainty

Minister hints at lifting BEE targets

THE regulatory uncertainty that has bedevilled SA’s resources sector in recent years is set to continue with a request that a controversial amendment bill be returned for review and reopened for public comment

Changes to the Mineral and Petroleum Resources Development Amendment Bill could go beyond the oil and gas sector and include changes to the pricing of strategic minerals such as coal if Mineral Resources Minister Ngoako Ramatlhodi has his way.

In an interview with Business Day, he also hinted at increasing the level of mining companies’ black equity ownership.

Mr Ramatlhodi has asked President Jacob Zuma not to sign the amendment bill. There was a lack of public involvement in its passage through the National Council of Provinces, and there are concerns that its oil and gas provisions

We’ve got to look at this as a matter of urgency. We don’t have it back yet, but hopefully we’ll get a favourable response

could stifle the nascent sector.

He said on Saturday that he wanted the controversial sections on the oil and gas components to be redrafted and the document to be opened to public debate around not only those provisions, but also the pricing of minerals designated as important to industrialisation.

While he acknowledged the need for regulatory certainty to underpin investor confidence, Mr Ramatlhodi outlined his intention to change the bill to head off any challenges or damage to investor sentiment. “We don’t want trouble around this amendment. We’ve got to look at this as a matter of urgency,” he said.

“We don’t have it back yet, but hopefully we’ll get a favourable response. In the meantime, we are preparing as if it is coming back. I’ve assembled a team of relevant ministers from finance, trade and industry and energy.”

The ministers met in Cape Town last week and were telling officials in their departments to “look at the broad principles that we are proposing be looked at”.

Other ministers had raised concerns about Mr Ramatlhodi’s early suggestion that the bill be split into mining and energy — primarily oil and gas — components as it could complicate issues like methane extraction from coalfields, he said.

“I don’t want to rush into conclusions. I’m approaching this with an open mind.”

The energy sector has proposed capping government and empowerment ownership of oil and gas exploration and production rights at 50%, he said.

The bill says the state has the right to a 20% free interest in those rights and is entitled to buy a further stake at an agreed price or on the basis of a production sharing agreement.

“This clause has the effect of granting the state an unlimited participation interest in the right or rights,” Webber Wentzel lawyers Pulane Kingston and Jonathan Veeran have said. Previously, state participation was capped at 30%.

The African National Congress and Cabinet members wanted to ensure changes to the bill would allow the state to participate in the sector directly rather than in partnerships, Mr Ramatlhodi said.

“Whatever legislation we produce should not compromise the ability of the state to enter the field should we want to do so. We want to use these minerals to develop our own industries,” he said.

If the bill is returned for review, the Department of Mineral Resources wants to revisit the cost of designated minerals to spur industrial growth.

The bill stipulates that minerals designated strategic by the resources minister be sold to local companies not at market prices but at a gate price, basically at production cost excluding the cost of transportation to customers.

“There is a view that says we might want to get bit more of a discount than leave it at the gate price, where it is at the moment,” Mr Ramatlhodi said.

“I’m not sure where we are going to settle. We are consulting on all these things.” He said he had met Chamber of Mines president Mike Teke on Friday.

“The question of pricing is not a decision. It’s a thought. At the end, you want people to express their views and then we negotiate,” he said.

Mr Teke said specifics of the bill had not been discussed at the

meeting. “We, the chamber, would really like to consult with him before he makes any moves on the bill, if it does come back,” Mr Teke said yesterday, refusing to be drawn on whether the chamber would like to change aspects of the bill related to mining.

Pressed on the potential push for minerals to be sold at belowgate prices, Mr Teke said: “I’d like to cross that bridge when we come to it. We’d have to have deep, extensive consultations with members of the chamber.”

There were other points in the bill that the technical teams were looking at addressing, Mr Ramatlhodi said, without elaborating.

He would like to see a higher level of black equity ownership of mining companies. Asked his view of the 26% ownership requirement stipulated in the Mining Charter, a target that has been set for the end of the year, he said: “I think it should be increased.”

“I don’t have a magic figure. First we must get the target met and met in substance, not just ownership but the overall transformation of the industry, like full participation of empowerment partners and individuals. They should not only receive royalties but be part of management.”

The Mining Charter, which laid out transformation targets for the decade to end-2014, is likely to be analysed, with the results to set the tone for the review.

Mr Ramatlhodi would like to see consolidation of small black mining companies to effect greater control of production and the prices of commodities.

Mr Ramatlhodi, who tried to help resolve a damaging fivemonth platinum strike upon taking office, declined to set a date for the completion of the audit of compliance with the requirements of the charter.

“I’ve not been focusing on that. Resolving the platinum strike was my top priority. I don’t have a date by which we will complete that audit. I must switch my attention away from the strike and move into the heart of the operations of the ministry,” he said.