South Africa’s regulatory environment for mining discussed at a seminar

February 1st, 2019
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Partner and Co-chairperson at Herbert Smith Freehills, Peter Leon, spoke about the state of South Africa’s regulatory environment for mining at a seminar hosted by Herbert Smith Freehills and Pinheiro Neto Advogados on 22 November 2018 in Johannesburg.

By Kgomotso Ramotsho

Herbert Smith Freehills and Pinheiro Neto Advogados hosted a seminar titled ‘Investing in Mining and Infrastructure Projects in South Africa (SA) and Brazil: A Comparative Discussion,’ in November 2018. In his opening remarks Brazilian ambassador, Nedilson Jorge, said it is of great relevance for both SA and Brazil to continuously have a fruitful discussion of mutual interests on topics such as mining and infrastructure and to exchange ideas between the two countries. Mr Jorge added that the Brazilian Embassy has been committed to promoting events such as seminars dedicated to engaging Brazil and SA.

Partner and Co-chairperson of its Africa Group at Herbert Smith Freehills, Peter Leon, said the SA mining industry has been characterised by regulatory uncertainty for the past five years. He added that among other things this was a result of arbitrary and dilatory decision making by the Department of Mineral Resources officials under the Mineral and Petroleum Resources Development Act 28 of 2002, and the damaging provisions in the Mineral and Petroleum Resources Development Amendment Bill B15D of 2013 (the Bill) which Parliament proved inept to ameliorate.

Mr Leon said another issue the mining industry has is the controversy surrounding the final Mining Charter III, which was the successor to the 2010 Mining Charter. He pointed out that these factors have weighed heavily on investor confidence. He added that SA was not doing well in investment attractiveness as it was 54% in 2014 and 43% in 2017.

Mr Leon said another issue was with the exploration budgets in the country. He noted that in 2012 exploration budgets in SA mining companies were nearly at US$ 350 million, but in 2017 it dropped to US$ 80 million. However, Mr Leon, pointed out that in 2018 the mining sector started showing signs of recovery and in September 2018, Minerals Council South Africa, formerly known as the Chamber of Mines reported that, from 2016 to 2017, investments grew by 20% from R 67, 6 billion to R 80, 9 billion. Production rose by 10% from R 574 billion to R 630 billion, with exports rising by 4% from R 295 billion to R 307 billion.

Mr Leon added that on 27 September 2018 the Minister of Mineral Resources, Gwede Mantashe published the final version of SA’s third official Mining Charter III. He added that this version was welcomed by the Mineral Council as opposed to the version that was published by his predecessor in 2016 and 2017, which provoked acrimony, litigation and adverse pronouncements by sovereign credit ratings agencies.

Mr Leon said after several years of extremely damaging regulatory uncertainty, the mining sector in SA appears to be turning a corner. He added that the withdrawal of the Bill, and the finalisation of a more manageable Mining Charter, has created the conditions for an improved cooperation between the government and the mining industry. He pointed out that with deep capital markets, sophisticated financial systems, as well as world-class engineering schools and firms, SA still has the necessary attributes to reclaim its place as the continent’s leading mining destination.

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.

This article was first published in De Rebus in 2019 (Jan/Feb) DR 13.