Mineral Rights – Minerale regte

Minerals and Mining Policy of South Africa: Green Paper

Green and White Papers. The process of making a law sometimes begins with a discussion document, called a Green Paper. This is drafted in the Ministry or department dealing with the particular issue in order to show the way that it is thinking on a particular policy.

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Prof Johan D van der Vyver

NATIONALISATION OF MINERAL RIGHTS IN SOUTH AFRICA

The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) deprived landowners of the ownership of unexplored mineral and petroleum products and proclaimed mineral and petroleum resources to be “the common heritage of all the people of South Africa” with the State as the custodian thereof. Prospecting and mining rights in respect of “unused old order rights” and the conversion of “old order prospecting rights“ and “old order mining rights” into “new order” prospecting and/or mining rights have been subjected to radical time constraints and strenuous substantive conditions to be approved by the Minister of Mineral and Energy Affairs. Whereas the State in the past regulated prospecting and mining activities, mainly to secure safety measures and protection of the environment, the legislature has now imposed stringent requirements for the granting of prospecting and/or mining rights because it has become the owner of mineral and petroleum resources—either as personification of “the people of South Africa” or as a public trustee of “the heritage of all the people of South Africa.”

Section 25 of the Constitution of the Republic of South Africa distinguishes between deprivation of property, which is not subject to the payment of compensation by the State, and expropriation for which compensation must be paid. It is commonly accepted that expropriation is constituted by deprivation plus an additional element or elements. There are two possible factors that will convert a deprivation into expropriation: either the vesting of ownership of the rights of which the owner has been deprived in another entity, for example the State; or, as stipulated in Article 25, by depriving the owner of his or her rights in the public interest or for a public purpose. It is argued in this essay that the deprivation of mineral and petroleum resources amounted to expropriation under either of these two perceptions of expropriation.

NASIONALISERING VAN MYNREGTE IN SUID-AFRIKA

Die Wet op die Ontwikkeling van Minerale en Petroleum Hulpbronne, Wet 28 van 2002, het grondeienaars van hulle eiendomsreg ten aansien van onontginde minerale en petroleum produkte ontneem en bepaal nou dat minerale en petroleum hulpbronne “die gemeenskaplike erfenis van die hele bevolking van Suid-Afrika” is met die Staat as die bewaarder daarvan. Prospekteer- en mynregte ten aansien van “ongebruikte ou orde regte” en met betrekking tot die oorskakeling van “ou orde prospekteerregte” en “ou orde mynregte” na “nuwe orde” prospekteer en/of mynregte is onderworpe gestel aan ingrypende tydsbeperkings en veeleisende substantiewe voorwaardes wat deur die Minister van Minerale en Energie Aangeleenthede goedgekeur moet word. Terwyl die Staat in die verlede prospekteer- en mynregte gereguleer het, hoofsaaklik met die doel om veiligheid en omgewingsbewaring te bevorder, het die wetgewer nou streng vereistes gestel vir die vergunning van prospekteer en/of mynregte omdat dit eienaar geword het van minerale en petroleum hulpbronne – òf as personifikasie van “die bevolking van Suid-Afrika” òf as ’n openbare trustee van “die erfenis van die hele bevolking van Suid-Afrika”.

Artikel 25 van die Grondwet van die Republiek van Suid-Afrika maak ’n onderskeid tussen ontneming van eiendom, wat nie die betaling van vergoeding deur die Staat vereis nie, en onteiening, waarvoor wel vergoeding betaal moet word. Dit word algemeen aanvaar dat onteiening bestaan uit ontneming plus ’n bykomstige element of bykomstige elemente. Daar is twee moontlike faktore wat ’n ontneming in onteiening kan omskep: òf die verkryging van eiendomsreg ten aansien van dit wat ontneem is deur ‘n ander entiteit, byvoorbeeld die Staat, òf soos wat in Artikel 25 aangedui word, deur die ontneming van die eienaar se regte in die openbare belang of vir ’n openbare doel. In hierdie artikel word geargumenteer dat die ontneming van minerale en petroleum hulpbronne onder enigeen van die twee persepsies op onteiening neerkom.

http://www.dejure.up.ac.za/index.php/en/volumes/45-vol-1-2012/69-article-7.html

On 1 May 2004, the Mineral and Petroleum Resources Development Act (MPRDA), entered into force. The MPRDA transformed the state of South African mineral law quite considerably. It abolished the existing mineral law, introduced a new system relating to the exploration and mining of minerals, and made special provision for the transition from the old to a new order.

South Africa is a mineral rich country and probably a leading mining country in the world as far as the variety and quantity of minerals produced are concerned. Over the years regional legislation was adopted to regulate the exploration and mining of particular categories of minerals. In 1991, the legislature enacted the Minerals Act (MA) to consolidate those laws into a single mineral law regime for the whole country. The MA afforded to the concept of “mineral” a broad meaning to include “any substance, whether in solid, liquid or gaseous form, occurring naturally in or on the earth, in or under water or in tailings and have been formed by or subjected to a geological process, excluding water, but including sand, stone, rock, gravel and clay, as well as soil, other than topsoil.”   In common parlance, the concept of minerals is confined to substances such as gold, diamonds, coal, chrome, uranium, manganese, platinum and the like. In the common law the owner of land was owner of everything in the land in accordance with the rule cuius est solum ad caelum et ad inferos (ownership of land includes everything above the property up into the heavens and below to the centre of the earth). While minerals were not extracted from the land, they formed part of the land and were therefore owned by the owner of the land. Once they were extracted from the land, the minerals became a distinct legal object separate from the land and could consequently become the property of a person other than the landowner.

The concept of “mineral rights” came to be confined in South African law to an entitlement to search for and to mine minerals.   Some judgments refer more succinctly to the “right to mine”, which has similarly come to denote “the right to prospect and mine for minerals and extract and dispose of them.”    It is a real right, sometimes referred to as a quasi-servitude, and must therefore be distinguished from the ius in re sua (ownership) of the minerals as such. The granting of a right to explore and mine minerals could be obtained in various ways. The owner of the land could apply for a certificate of rights to minerals in respect of the land of which he or she was the owner. Mineral rights could be ceded to a third person through the registration of a notarial deed registered against the title deed of the land, or a certificate could be issued to the third person authorising that third person to explore and to mine the minerals. The right granted to the third person could apply in general or only in respect of a particular category of minerals. It was not uncommon in South Africa for landowners to separate their ownership of the land from mineral rights, for example by retaining the mineral rights relating to the land upon the sale of the land.

Where mineral rights vested in a person other than the landowner, that person was “entitled to go upon the property to which they relate to search for minerals, and, if he (the holder) finds any, to sever them and carry them away.” Upon separation of the minerals from the land, they became distinct legal objects, and the person with mineral rights would acquire ownership of the minerals separated from the land.

The person who has acquired mineral rights was also entitled to transfer the right to search for and to mine the minerals to a third person. This could be done through (a) a prospecting contract, or (b) a mineral lease agreement. The mineral lease agreement afforded the right for a limited period only. The repository of mineral rights could claim compensation from the third person to whom he or she had transferred the prospecting rights.

One must therefore distinguish between (a) the ownership of minerals and (b) mineral rights in the sense of searching for and extracting minerals from the land. Ownership of minerals that formed part of the land vested in the landowner, and following their extraction from the land vested in the person with mineral rights, which could be the owner of the land or a person other than the land owner.

Since early times, the State has assumed a power to regulate the exploration and mining of minerals. The State’s power of regulation must not be confused with the notion of “eminent domain” of English law or the exercise of “police powers” in American law. These concepts are imbedded in remnants of the feudal system under which the Queen or the State assumed ownership of the land and therefore owned mineral and petroleum resources in or on the land. In South African law, the State was not the owner of minerals but merely exercised control over the exploration and mining of minerals. The State, in the exercise of such regulatory powers, was primarily concerned with the maintenance of safety measures and protection of the environment.

The MA made provision (a) for the issuing by the State of a prospecting permit, and (b) for a power of the State to afford the right to mine for minerals. These rights could only be granted to the mineral rights holder, or to a person that had acquired written consent of the mineral rights holder to explore the minerals. A prospecting permit and mining rights were now subject to the granting of such rights by the State.

A prospecting permit could be granted, upon request, by the Department of Mineral and Energy Affairs, and could be afforded to (a) the holder of mineral rights, or (b) a person authorised by a prospecting contract or a mineral lease agreement to search for minerals. A prospecting permit could be issued for a period of 12 months or for a longer specified period and was subject to renewal. Authorisation for mining operations was also administered by the Department of Mineral and Energy Affairs, and could be granted to (a) the holder of mineral rights, or (b) a person authorised to mine the minerals on specified land.

The principles enshrined in the MA were thrown overboard by the MPRDA. Mineral rights as regulated by the MA were discarded. The ownership of minerals that vested in the landowner was abolished. Section 3(1) of the MPRDA now proclaims: “Mineral and petroleum resources are the common heritage of all the people of South Africa and the State is the custodian thereof.”

The “old order” rights remained in force for a specified period of time (one to five years) and the holder of those rights must within that period apply for prospecting and mining rights. Prospecting and mining rights are no longer registered in the Deeds Office but in the Registration Office for Mineral and Petroleum Titles in Pretoria. Rights in respect of minerals can only be transferred with the written consent of the Minister of Mineral and Energy Affairs.

The key question to be considered in this survey is whether or not the changes brought about by the MPRDA amounted to expropriation of the “old order” rights of a landowner and/or of the holder of mineral rights. The High Court, North Gauteng decided that it did amount to expropriation.  However, the Supreme Court of Appeal begged to differ. The matter is currently pending before the Constitutional Court of South Africa.

http://www.dejure.up.ac.za/index.php/en/volumes/45-vol-1-2012/69-article-7.html

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Minerals and Mining Policy of South Africa: Green Paper

1.3 Mineral Rights and Prospecting Information

1.3.1 Background

1.3.1.1 Nature and content of mineral rights

i) The South African system of mineral rights has developed over many years to its present state under a dual system in which some mineral rights are owned by the State and some by private holders. The State controls the exercise of prospecting and mining rights under the administrative system of prospecting permits and mining authorisations referred to below.

ii) Under common law, ownership of the land includes ownership of the minerals in the land. The law developed in such a way that the right to minerals in respect of land can be separated from the title to the land, for example upon original grant of the land or by subsequent transactions. The owner of land from which mineral rights have not been separated may separate the mineral rights from the land ownership by ceding them to another person or by reserving them to himself or herself. The mineral rights are then held under separate title which may include all the minerals in the land concerned or only a particular mineral or minerals.

iii) Mineral rights constitute rights in land. They are officially registered by the State, and are a form of property protected under the Constitution.

iv) Mineral rights are tradeable. They have been and continue to be the subject of considerable financial investment that has resulted in the acquisition and registration of rights by prospectors and miners over relevant areas of interest.

v) Mineral rights represent a parcel of rights including the rights to prospect and mine together with ancillary rights to do what is reasonably necessary in order to effectively carry on prospecting or mining operations. The holder of mineral rights may grant subordinate rights to prospect under a prospecting contract or grant subordinate rights to mine under a mineral lease or may sell or otherwise dispose of the rights.

vi) The mineral rights owner is compensated by the exploiter of the minerals for the depletion of the non-renewable resource through the payment of royalties. It is generally accepted that in principle royalties are charged on production or revenue.

https://www.gov.za/documents/minerals-and-mining-policy-south-africa-green-paper

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1.3.1.2 Ownership of mineral rights
i) The two main categories of owners of mineral rights are the State and private holders. Unfortunately, the current deeds registry system does not provide reliable overall figures indicating what percentage of the mineral rights is owned by each of these categories of holders. Statistics kept by the Department of Minerals and Energy since 1993 indicate that with the exclusion of the coastal zone and sea areas, the mineral rights in respect of which prospecting permits and mining authorisations have been issued are divided in the proportion 1/3 state-owned and 2/3 privately owned. This does not necessarily imply that for the country as a whole, including the coastal zone and sea areas, mineral rights are held in these proportions, but illustrates that the private sector is a substantial holder of mineral rights. A distinguishing feature of the South African mining industry at present is that almost all privately-owned mineral rights are in white hands.

ii) In the former TBVC states and self-governing territories mineral rights were largely owned by those states and territories but, for the purposes of prospecting and mining legislation, administered as if they were privately owned.

It has been estimated that mineral rights in respect of some 19 million hectares, which represent 15% of the land area of the Republic, fall into this category, including mineral rights held by Government in trust for specific tribes and communities.

This category also includes those mineral rights which vest in the Lebowa Minerals Trust under the Lebowa Minerals Trust Act, 1987, and the Ingonyama Trust under the Kwa-Zulu Ingonyama Trust Act, 1994.

In terms of the present Constitution, mineral rights in this category vest in the State except for those held by the abovementioned two trusts as well as mineral rights held in trust for specific tribes.

iii) The State is the owner of mineral rights in various areas of surveyed and unsurveyed State land as well as in privately-owned land where mineral rights have specifically been reserved to the State. Under prior legislation the latter class of land was known as ‘alienated State land’ in respect of which prospecting rights together with the exclusive right to obtain mining rights were vested in the landowners or their nominees. According to section 43 of the Minerals Act, such rights were replaced with similar rights for a period of only five years which ended on 31 December 1996.

iv) Mineral rights in certain rural areas, situated mainly in Namaqualand and in the Northern Cape, are regarded as state-owned for the purposes of the minerals legislation. However, management boards in those areas exercised through the years extensive authority in respect of the granting of prospecting and mining rights.

v) Provision has been made in the Constitution read with the Restitution of Land Rights Act, for relief to persons or communities who were dispossessed of rights in land under any racially discriminatory law after 19 June 1913. Mineral rights are rights in land and can therefore be subject to the Act.

vi) There is an active market and continual movement in mineral rights, some 6 000 mineral cessions and prospecting contracts having been registered in deeds offices in South Africa for the five year period from 1991 to 1996.

In September 1995 the Mineral Policy Process Steering Committee was formed consisting of representatives from both the executive and legislative branches of Government, as well as organised business and organised labour. The mandate given to the Steering Committee was to conduct an extensive consultative process to canvass stakeholder opinion for the preparation of a new minerals and mining policy for South Africa. In November 1995 a Discussion Document on Minerals and Mining Policy for South Africa was published and extensive written comments were received. Four hundred people attended public mineral policy workshops held in March 1996, at which a wide range of issues were debated. Bilateral meetings were held with inter alia provincial governments, ministries, departments, investment analysts, foreign-owned mining companies and environmental interest groups. In addition written submissions were received from several interested parties during the consultative process. Details of these consultations are recorded in an appendix. The end result of this, the most comprehensive consultative process yet conducted for a review of a minerals and mining policy in South Africa, was a document containing proposals that have been drafted after careful consideration of a very broad range of views. The submission of the document to the Minister of Minerals and Energy concluded the task of the Steering Committee.

https://www.gov.za/documents/minerals-and-mining-policy-south-africa-green-paper

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Introduction

South Africa’s mining industry is supported by an extensive and diversified resource base, and has since its inception been a cornerstone of South Africa’s economy. The changes which have come about in our country make it necessary to prepare the industry for the challenges which are facing all South Africans as we approach the twenty-first century.

The review process has taken account of the problems and opportunities confronting the mining industry against the backdrop of changes in the country’s policy and institutional environment. In particular, the passage to the Mine Health and Safety Act of 1996 will have far reaching impacts on the industry in the areas of health and safety and human resource development. Changes in labour legislation and the introduction of employment equity legislation, as well as the reform of the environmental regulatory system, create a dynamic context for this policy review. Beyond our borders increasing competition, both in commodity markets and for investment, from mineral-rich countries that have liberalised their economic and political systems to attract investment are significant influences on the policy reform process.

The policy review process has had to take account of current problems and opportunities facing the mining industry. The gold mining sector particularly, is having to re-examine its production techniques in the light of a static gold price, deep levels of working and higher operating costs. Undoubtedly some of the older mines are reaching the end of their lives, leading to job losses and the other attendant negative effects of downscaling, but these problems are being tackled energetically within the sector, through restructuring of mining groups, technological advances and innovative methods of improving productivity. Apart from gold mining, there are many other minerals being produced, for some of which South Africa is the leading producer and holder of reserves. The Green Paper also has a chapter on small-scale mining which is intended to encourage the small and medium sized operator, to the benefit of employment and the overall economy. Future mineral policy has to take account of the international nature of the mining industry in order to ensure the continuing prosperity of our own mines.

In September 1995 the Mineral Policy Process Steering Committee was formed consisting of representatives from both the executive and legislative branches of Government, as well as organised business and organised labour. The mandate given to the Steering Committee was to conduct an extensive consultative process to canvass stakeholder opinion for the preparation of a new minerals and mining policy for South Africa. In November 1995 a Discussion Document on Minerals and Mining Policy for South Africa was published and extensive written comments were received. Four hundred people attended public mineral policy workshops held in March 1996, at which a wide range of issues were debated. Bilateral meetings were held with inter aliaprovincial governments, ministries, departments, investment analysts, foreign-owned mining companies and environmental interest groups. In addition written submissions were received from several interested parties during the consultative process. Details of these consultations are recorded in an appendix. The end result of this, the most comprehensive consultative process yet conducted for a review of a minerals and mining policy in South Africa, was a document containing proposals that have been drafted after careful consideration of a very broad range of views. The submission of the document to the Minister of Minerals and Energy concluded the task of the Steering Committee.

The Minister requested the Department of Minerals and Energy to consider certain adjustments to the document in line with his budget speech in the National Assembly on 21 May 1997. The views of stakeholders, such as small-scale miners, environmental groupings and communities, who felt that they were not properly consulted by the Steering Committee, as well as the outcomes of other policy processes (e.g. CONNEP) were also considered in the final editing of the document. The document was then ratified and signed by the Minister of Minerals and Energy as a Green Paper on Minerals and Mining Policy for South Africa.

The Green Paper is organised into six main themes covering the issues which have been identified by the Steering Committee in the process of consultation discussed above. These are:

  • Business Climate and Mineral Development, which looks at the continuation of policy conducive to investment and includes a section on Mineral Rights and Prospecting Information which proposes changes to the system of access to, and mobility of, mineral rights;
  • Participation in Ownership and Management, which examines racial and other imbalances in the industry;
  • People Issues, which looks at health and safety, housing needs, migrant labour, industrial relations and downscaling;
  • Environmental Management;
  • Regional co-operation; and
  • Governance.

Each chapter and subchapter contains a general background to the particular issue, a statement of intent (policy objective), the views of the different stakeholders and, finally, the policy statements by Government.

Policy making occurs in a dynamic setting, and minerals and mining policy, which is necessarily broad in its scope, needs to be co-ordinated with other policies which properly fall within the remit of other forums. Reference is therefore made in the document to matters that need to be considered by other policy forums, such as the Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa.

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Chapter One: BUSINESS CLIMATE AND MINERAL DEVELOPMENT

This chapter covers seven topics relevant to the climate for mining business and mineral development.

Section 1.1 stresses the importance of a stable macro environment for economic growth in which measures that encourage investment in mining, as in other industries, are adopted.

Section 1.2 is concerned with fiscal policy as an integral part of mining and minerals policy. Several aspects of exploration and mining which have a major bearing on fiscal policy are raised together with policy proposals that are prerequisites for minerals development. The Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa (Katz Commission) is currently considering mining taxation and the taxation of mineral rights. In due course the Commission’s findings should be considered in conjunction with the broad objectives of minerals and mining policy. The topics of taxation of mineral rights and allocations from national revenue collection to provinces in which mining takes place are raised in section 1.3 and in chapter 6, respectively.

Section 1.3 deals with mineral rights and prospecting information. The nature, scope and content of rights to prospect and mine are central to any policy on minerals and mining. It has been contended that the system of mining and mineral rights currently in place in South Africa has frustrated new investment. Equally, however, others have argued that the legislative framework has helped materially in the exploration and mining of South Africa’s unique mineral deposits. In reaching policy conclusions Government must weigh these and other contending views. In order to improve current arrangements, Government will seek changes and adjustments that are conducive to increased minerals investment and address past racial inequity without disturbing investor confidence in the mining industry in South Africa. Several new proposals are put forward.

Section 1.4 focuses on small-scale mining and puts forward a number of policy proposals directed at encouraging and facilitating the development of the small-scale exploration and mining sectors.

Section 1.5 looks at mineral beneficiation in broad outline. Several policies aimed at the development of South Africa’s mineral wealth where this is economically justifiable are proposed.

Section 1.6 takes the view that in the area of mineral marketing, policy should endorse market principles and provide for Government to play a supportive role.

The last section focuses on research and development infrastructure conducive to the optimal development of the country’s resources. A number of policies directed at stimulating such development and ensuring the continuing competitiveness of the minerals industry are proposed.

1.1 Investment and Regulatory Climate

1.1.1 Background

  1. The South African mining industry, one of the country’s few world-class industries, has the capacity to continue to generate wealth and employment opportunities on a large scale.
  2. Mining is an international business and South Africa has to compete against developed and developing countries to attract both foreign and local investment. Many mining projects in South Africa have tended to be unusually large and long term, requiring massive capital and entailing a high degree of risk.
  3. South Africa has an exceptional minerals endowment, and in several major commodities has the potential to supply far more than the world markets can consume.
  4. As articulated in its macroeconomic strategy, Government has committed itself to a continuing process of economic liberalisation, thus strengthening the competitive capacity of the economy, fiscal and tariff reform and bureaucratic deregulation. These are essential steps towards enhancing the country’s competitiveness, attracting foreign direct and portfolio investment and creating a climate conducive to business expansion. The mining industry among others will benefit in the long term from these developments.
  5. By its very nature the mining industry has the potential to endanger human health and safety as well as the physical environment. It is the responsibility of Government to establish a regulatory framework that minimises such dangers without imposing excessive cost burdens on the industry and thereby jeopardising its economic viability.

1.1.2 Intent

Government will create a stable macro-environment that supports economic growth and in which business, subject to appropriate regulation, can operate profitably, be internationally competitive and satisfy their shareholders’ and employees’ expectations. In this way Government will encourage investment in mining as in other industries.

In addition, Government will facilitate access to business opportunities and resources to those previously excluded, including helping equip such individuals/groups with the necessary skills to enable them to compete effectively in the market-place.

1.1.3 Policy Requirements

1.1.3.1 Views of the investment community and mining companies
  1. The distinctive characteristics of the mining industry need to be recognised in the formulation of the policy and regulatory framework. The framework must be consistent and stable so that investors can be confident in their financing decisions and the industry can be confident about its continuing ability to do business profitably.
  2. Investors place a high premium on macro-economic, political and social stability, as well as smoothly functioning labour relations.
  3. Foreign investors need the freedom to repatriate profits and capital.
  4. South African-based mining companies wish to see a speeding-up in the comprehensive dismantling of foreign exchange controls.
  5. Investors need security that they will be allowed to exercise their rights to exploit minerals, subject to statutory requirements.
  6. Non-confidential and publicly available information about the minerals sector needs to be well organised so that it is readily accessible to investors.
  7. New investors need opportunities for access to mineral rights.
  8. The cornerstones of any policy to promote investment must be market principles and economic efficiency.
  9. The nature of international mineral markets and of South Africa’s mineral resources must be taken into consideration when promoting investment, including the effect of increased supplies on prices.
1.1.3.2 Other views
  1. Equitable access to all natural resources is required, based on economic efficiency and sustainability.
  2. The creation of wealth and employment is required for the economic empowerment of communities, both directly and through the multiplier effect. This is especially relevant in the underdeveloped regions of the country.
  3. Investment incentives and promotional activities should be cost-effective and should not lead to inequitable demands on the fiscus.

1.1.4 Policy Proposals

i) Government will seek to create a macro and regulatory environment conducive to economic growth and development, in which the mining industry can make effective use of its human and capital resources.

ii) Through the new Labour Relations Act and the specific industry-level and workplace structures it creates, Government will facilitate improved industrial relations in the industry.

iii) Government will seek to ensure, within the constraints of its available resources, the efficient provision and functioning of the physical, social and institutional infrastructure necessary for the competitiveness of the mining industry.

iv) Government will ensure the effective organisation and accessibility of public information about the minerals sector.

v) Government will aim to lower barriers to entry to prospective new investors in the industry.

1.2 Taxation

1.2.1 Background

1.2.1.1 The current system of mining tax

i. The taxation of mining activities follows the normal rules of taxation, subject to the following particular features:

a) Income

A mining company may derive income from mining operations and non-mining operations. Different rules and tax rates are applied according to the nature of such income. Differences also apply according to whether the mining income is derived from gold or other operations.

b) Deduction of expenditure

A mining company incurs a wide range of expenditure. Some of this is in the nature of current expenditure (deductible in terms of the general deduction formula), and some in the nature of capital expenditure. The capital expenditure provisions of the Income Tax Act provide for the immediate deduction of capital expenditure and of expenditure on prospecting and incidental operations. Capital expenditure includes expenditure on shaft sinking, mine equipment, development, general administration and management. Some assets such as housing for residential accommodation, motor vehicles for private use of employees, and some railway lines and pipelines qualify only for a partial annual redemption.

c) Ring-fencing

The Income Tax Act applies a ring-fence to the taxable income of a mine, by restricting the deduction of its capital expenditure to the taxable income from mining on that mine. In certain circumstances the ring-fence may be breached by up to 25% of taxable income to allow a company to apply a portion of its expenditure on one mine against the taxable income of another of its mines.

d) Capital allowance

To encourage high capital investment during times of inflation, the Income Tax Act provides for a capital allowance, calculated as a percentage per annum of total expenditure, which is transformed into a deduction against current capital expenditure.

e) Environmental funds

Mining companies are required by law to make financial provision for mining-related environmental rehabilitation. If in the form of a trust fund, the Income Tax Act permits the deduction of this provision from income, and exempts from tax the receipts and accruals of registered environmental funds established to hold these provisions.

f) Tax rate and formula tax

Non-mining income, as well as mining income not derived from gold mining is taxed at the flat company rate. Income from gold mining is taxed on a formula basis. The effect of the formula is that gold mines which are marginally profitable pay tax at a lower rate than the normal company rate, or no tax at all, and more profitable gold mines pay tax at a rate greater than the normal company rate. The intention of this is to encourage the mining of marginal orebodies, while retaining an overall tax rate for the gold industry at approximately the same rate as the standard company rate. The formula tax, therefore, has the effect that a gold mine can continue to operate at marginal profit levels without paying tax until it regains profitability sufficient to attract tax. In this way it preserves employment in an industry which has a large number of employees and is prone to fluctuations in profitability.

g) Royalties

For purposes of this chapter, royalties are not regarded as a tax and are discussed in section 1.3.

h) Other

No severance tax is imposed. Mining companies are liable, in certain circumstances, to the secondary tax on companies. Indirect taxes paid by mining companies include value-added tax, regional services levies, transfer duties, customs and excise duties and donations tax. (In the case of value-added tax a mining company does not pay the tax on its export sales, since all exports are exempt, and the mine is entitled to a refund in respect of all input taxes paid by it.)

1.2.1.2 Aspects of exploration and mining which have a bearing on mining tax

i. Any mining taxation system needs to recognise the following aspects:

  1. The risk to reward ratio in exploration is high, and mining itself is attended by a high degree of geological, project and market risks.
  2. Particularly in big-scale and deep-level operations large amounts of capital are required. This capital is at high risk over long periods.
  3. Mining companies are usually required to provide their own infrastructures because of the remote location of mineral deposits.
  4. Mining involves the realisation of a wasting asset and the mine has little or no residual value. Continuing investment is therefore necessary in exploration, the acquisition of rights to mine and the development of new mines. All these activities form an essential part of the mining business cycle.
  5. Taxes that increase mining costs have the effect of increasing the cut-off grade of ore, thus reducing the life of a mine and sterilising mineral assets. It has therefore long been recognised that, in principle, mines should be taxed on profit and not in a manner which increases costs.
  6. Legitimate expenses should be treated in an appropriate way, the efficient use of resources should be encouraged and not retarded, and the system should not be subject to frequent change, change at short notice or change with retrospective effect.
  7. In view of international competition for investment funds, the tax system should be designed to assist in attracting and retaining investment in South Africa.
  8. In several countries a policy that the State should be compensated for the finite natural resources which are mined finds expression in the imposition of a severance tax. According to the Margo Commission a severance tax imposed on profits becomes a discriminatory surcharge on income tax. If imposed on revenue, or on physical production, it raises costs at the margin and renders unpayable bodies of ore that, but for the tax, would be payable. In addition a severance tax may also be unfairly discriminatory in penalising the primary winning of minerals as opposed to their subsequent beneficiation and utilisation in manufacturing.

1.2.2 Intent

Government will maintain and promote a stable legal and fiscal climate that does not inhibit the mining industry from making the fullest possible contribution to the national economy.

1.2.3 Policy Requirements

1.2.3.1 Views of the investment community and mining companies
  1. There must be a consistent and stable fiscal regime that compares favourably with those in other jurisdictions.
  2. The tax system should be such as to allow for attractive returns on capital.
  3. The tax system should recognise, through appropriate measures, the risks inherent in mining, such as high capital commitment, long lead times, geological uncertainty and cyclical and volatile markets.
  4. Mineral beneficiation projects share many of the risks referred to above.
  5. Mines should be taxed on profits and not in a way which increases costs.
  6. The total tax burden is highly relevant to investment decisions so the levels and structures of national, provincial and local taxes, levies and imposts should be assessed in their entirety. The industry should be consulted when decisions regarding mining taxation are to be made.
  7. The tax system should not discourage, in particular through ring-fencing, the use of the financial strengths of an existing company to invest in the establishment of new mines.
  8. Severance taxes should not be imposed.
1.2.3.2 Other views
  1. The mineral industry should make its rightful contribution to tax revenues, both through taxes and royalties.
  2. The tax system should encourage the adding of value to raw materials.
  3. Levies and taxes should be used to fund environmental rehabilitation of land affected by past and current mining activities.
  4. Inter-sectoral equity in terms of taxation should be achieved.
  5. Consideration should be given to using tax measures to improve access to mineral rights.
  6. The tax system should promote the optimal utilisation of South Africa’s mineral resources.
  7. The tax system should be used to empower the provinces to influence the economic development process and to deal with the effects of downscaling.

1.2.4 Policy Proposals

  1. In developing mining tax policy, Government is committed to ensuring that the tax regime will be consistent and stable and that the aggregate rate of tax will be internationally competitive.
  2. Government will seek, wherever possible, to minimise taxes which increase the costs of mining.
  3. Government is committed to ensuring that the tax system does not inhibit mining but encourages the efficient use of resources.
  4. The Katz Commission is investigating mining tax in South Africa. The Commission’s recommendations will need to be considered in conjunction with the policy options set out here. It is understood that the Commission will be considering a number of tax issues, for example:
    1. redemption of capital expenditure in mining;
    2. capital allowances for gold mining;
    3. ring-fencing;
    4. tax deductions for exploration;
    5. a tax on mineral rights; and
    6. the extension of the gold-mining formula taxation to other types of mining.

1.3 Mineral Rights and Prospecting Information

1.3.1 Background

1.3.1.1 Nature and content of mineral rights

i) The South African system of mineral rights has developed over many years to its present state under a dual system in which some mineral rights are owned by the State and some by private holders. The State controls the exercise of prospecting and mining rights under the administrative system of prospecting permits and mining authorisations referred to below.

ii) Under common law, ownership of the land includes ownership of the minerals in the land. The law developed in such a way that the right to minerals in respect of land can be separated from the title to the land, for example upon original grant of the land or by subsequent transactions. The owner of land from which mineral rights have not been separated may separate the mineral rights from the land ownership by ceding them to another person or by reserving them to himself or herself. The mineral rights are then held under separate title which may include all the minerals in the land concerned or only a particular mineral or minerals.

iii) Mineral rights constitute rights in land. They are officially registered by the State, and are a form of property protected under the Constitution.

iv) Mineral rights are tradeable. They have been and continue to be the subject of considerable financial investment that has resulted in the acquisition and registration of rights by prospectors and miners over relevant areas of interest.

v) Mineral rights represent a parcel of rights including the rights to prospect and mine together with ancillary rights to do what is reasonably necessary in order to effectively carry on prospecting or mining operations. The holder of mineral rights may grant subordinate rights to prospect under a prospecting contract or grant subordinate rights to mine under a mineral lease or may sell or otherwise dispose of the rights.

vi) The mineral rights owner is compensated by the exploiter of the minerals for the depletion of the non-renewable resource through the payment of royalties. It is generally accepted that in principle royalties are charged on production or revenue.

1.3.1.2 Ownership of mineral rights

i) The two main categories of owners of mineral rights are the State and private holders. Unfortunately, the current deeds registry system does not provide reliable overall figures indicating what percentage of the mineral rights is owned by each of these categories of holders. Statistics kept by the Department of Minerals and Energy since 1993 indicate that with the exclusion of the coastal zone and sea areas, the mineral rights in respect of which prospecting permits and mining authorisations have been issued are divided in the proportion 1/3 state-owned and 2/3 privately owned. This does not necessarily imply that for the country as a whole, including the coastal zone and sea areas, mineral rights are held in these proportions, but illustrates that the private sector is a substantial holder of mineral rights. A distinguishing feature of the South African mining industry at present is that almost all privately-owned mineral rights are in white hands.

ii) In the former TBVC states and self-governing territories mineral rights were largely owned by those states and territories but, for the purposes of prospecting and mining legislation, administered as if they were privately owned. It has been estimated that mineral rights in respect of some 19 million hectares, which represent 15% of the land area of the Republic, fall into this category, including mineral rights held by Government in trust for specific tribes and communities. This category also includes those mineral rights which vest in the Lebowa Minerals Trust under the Lebowa Minerals Trust Act, 1987, and the Ngonyama Trust under the Kwa-Zulu Ngonyama Trust Act, 1994. In terms of the present Constitution, mineral rights in this category vest in the State except for those held by the abovementioned two trusts as well as mineral rights held in trust for specific tribes.

iii) The State is the owner of mineral rights in various areas of surveyed and unsurveyed State land as well as in privately-owned land where mineral rights have specifically been reserved to the State. Under prior legislation the latter class of land was known as ‘alienated State land’ in respect of which prospecting rights together with the exclusive right to obtain mining rights were vested in the landowners or their nominees. According to section 43 of the Minerals Act, such rights were replaced with similar rights for a period of only five years which ended on 31December 1996.

iv) Mineral rights in certain rural areas, situated mainly in Namaqualand and in the Northern Cape, are regarded as state-owned for the purposes of the minerals legislation. However, management boards in those areas exercised through the years extensive authority in respect of the granting of prospecting and mining rights.

v) Provision has been made in the Constitution read with the Restitution of Land Rights Act, for relief to persons or communities who were dispossessed of rights in land under any racially discriminatory law after 19 June 1913. Mineral rights are rights in land and can therefore be subject to the Act.

vi) There is an active market and continual movement in mineral rights, some 6 000 mineral cessions and prospecting contracts having been registered in deeds offices in South Africa for the five year period from 1991 to 1996.

1.3.1.3 Provisions for intervention by the State

In addition to the modes of acquisition of mineral rights referred to in paragraph 1.3.1.1 iv) above, the State can intervene under section 17 of the Minerals Act to grant prospecting rights in circumstances where an intending prospector cannot trace the holder of the mineral rights or where an heir has not taken cession of the mineral rights in an estate. According to section 24 of the Minerals Act, mineral rights and other rights in land may be expropriated in the public interest against compensation payable by the person requesting expropriation. It is therefore possible to expropriate the right to prospect and the right to mine. Under the current law, the State may, by virtue of section 18 of the Minerals Act, conduct an investigation on any land to establish the presence, nature and extent of minerals in or on that land, provided that such an investigation is in the national interest.

1.3.1.4 Other jurisdictions

i) South Africa and the USA are two of the few major mining countries which have a dual system of public and private ownership of mineral rights. In most other countries the right to minerals is vested in the State. However, in some countries, of which Chile and Australia are good examples, the state system is such as to allow a mining company de facto permanent title to such rights.

ii) In jurisdictions where mineral rights are publicly owned, a system of licensing is usually applied which provides security of tenure sufficient to attract exploration and mining. Many countries, notably in South America but increasingly elsewhere, which employ licensing systems for publicly-owned mineral rights, have successfully attracted large and continuing investment in exploration and mining.

1.3.1.5 The exercise of prospecting and mining rights in South Africa

i) In South Africa, the mineral right owner is not permitted to prospect or mine for minerals without having obtained a prospecting permit or mining authorisation from the State. These licences are not transferable. They are aimed at controlling prospecting and mining, having regard to considerations of health and safety, environmental rehabilitation and responsible extraction of the ore. Conversely, a prospecting permit or mining authorisation cannot be granted unless the applicant is the holder of the relevant mineral right or has acquired the holder’s consent to prospect or mine.

ii) Reconnaissance work can and does take place without the necessity to hold a permit, provided the work does not fall within the definition of ‘prospecting’ in the Minerals Act.

1.3.1.6 Records of prospecting work

i) According to section 19 of the Minerals Act, the holder of any prospecting permit or mining authorisation is obliged to furnish certain prospecting information to the State within one year after completing the digging of any excavation or drilling a borehole for the purpose of prospecting. The information must be kept confidential by the State. When 15 years have elapsed from the date of the completion of the excavation or borehole concerned, the State may disclose the information unless any person with a pecuniary interest in the excavation or borehole satisfies the State that his or her interest will be prejudiced by such disclosure.

ii) In most other jurisdictions confidentiality against disclosure to third parties of basic prospecting information furnished to the State is afforded during the currency of the prospecting licence or for very short periods. In such jurisdictions, where public ownership of mineral rights prevails, the policy is directed at assembling a public record of exploration work as a resource for future exploration.

1.3.2 Intent

Government will:

i) promote exploration and investment leading to increased mining output and employment;

ii) ensure security of tenure of mining rights;

iii) prevent hoarding or sterilisation of mineral rights;

iv) address past racial inequities by assisting those previously excluded from participating in the mining industry to gain access to mineral rights;

v) recognise the responsibility of the State as custodian of the nation’s mineral rights; and

vi) take reasonable legislative and other measures, to foster conditions conducive to mining which will enable entrepreneurs to gain access to mineral rights on an equitable basis.

1.3.3 The Present System: Views For and Against

Many differing views have been expressed in support of or against the current arrangements in respect of mineral rights and prospecting information.

1.3.3.1 Private ownership

i) Proponents of private ownership maintain that:

  1. It has been and remains ideally suited to effective utilisation of South Africa’s distinctive ore bodies, for example, by providing the absolute security of tenure necessary in the development of very deep gold mining along the West Wits line. The capacity to retain mineral rights securely for the development of new mining ventures when these become possible is a positive feature of private ownership.
  2. Holding of mineral rights is a critical parameter in the valuation of a mining company by international investors. The company is valued according to its future potential (‘blue sky’) which depends on an ongoing flow of new projects derived from such mineral holdings.
  3. Private ownership of mineral rights based in the law of property is preferable to a pure licensing system of rights based in administrative law and involving administrative discretion. Private ownership affords the absolute long-term security of tenure that attracts investment in exploration, mining and marketing.
  4. South Africa has the ability to produce at a level far exceeding the world’s ability to consume several commodities such as manganese, chrome, platinum and vanadium. Mineral rights in such commodities are held as part of long-term mining plans. Owners have a record of having expanded production in line with growth in demand and have also invested substantial funds in new product development and other forms of promotion to foster market growth.
  5. Private ownership is consistent with a market economy and with an international trend towards reducing the direct role of Government in the mining industry.
  6. Private ownership encourages trade in and utilisation of mineral rights, as is evident from the figures referred to in paragraph 1.3.1.2 above.

ii) Critics of private ownership of mineral rights argue that:

  1. Minerals are part of the nation’s endowment so that the State is the rightful custodian of this endowment.
  2. South Africa (along with the USA) is out of step with other major mining countries, where public ownership of mineral rights has led to successful exploration and mining industries.
  3. Private ownership of mineral rights suppresses exploration activity as well as the opportunity for alternative views to be taken of the economics of mining an unexploited ore body.
  4. It allows hoarding of mineral rights. As such, the system is a barrier to entry against potential investors.
  5. Complex and fragmented mineral right holdings and the multiplicity of owners in South Africa militate against new investment by prospective new entrants who encounter difficulty and cost in identifying holders of mineral rights and obtaining mineral rights.
  6. The system is inaccessible to small-scale miners, and inhibits the development of a vibrant junior mining sector.
  7. Private ownership of mineral rights limits equal and equitable access to mineral rights and resources.
1.3.3.2 State ownership

i) Those in support of the transfer of privately-held mineral rights to the State contend that:

  1. Transfer of mineral rights to the State will release mineral terrains for new entrants, which will stimulate private sector activity.
  2. State control of mineral rights will remove difficulties in cost and delays surrounding fragmented mineral right holdings.
  3. A system of state-owned mineral rights would enable the State to enforce the submission and release of exploration information, thereby avoiding duplication of exploration activities.
  4. State ownership of mineral rights is more prevalent in the world than is private ownership of mineral rights.
  5. State ownership will prevent the hoarding of mineral rights and allow equal and equitable access to potential investors, in particular small-scale miners.

ii) Contentions raised against a transfer of mineral rights to the State are that:

  1. Transfer of mineral rights to the State will require the payment of compensation, which would be an inappropriate use of the State’s limited financial resources.
  2. The blanket transfer of mineral rights to the State could easily lead to administrative difficulties in a system not geared to the management of mineral rights, extensive delays and hence a loss of investor confidence that could seriously damage the South African mining industry.
  3. There is no indication that the transfer of mineral rights to the State will automatically result in more successful exploration and mining. It is argued that in South Africa there is evidence to the contrary in that state ownership of mineral rights has made these rights subject to policies that have impeded rather than promoted mineral development. As indicated above, it has been estimated that two-thirds of the mineral rights in respect of which prospecting and mining activities are conducted are privately held. Management of deposits that will be brought to account in the future requires a long-term perspective attuned to changes in technology and markets that is more likely to be found in the private sector.
  4. State ownership based in a system of administrative law offers less security than a system of private ownership based in the law of property, and is susceptible to inefficiency and corruption.
  5. A bias towards state ownership would run counter to the Government’s philosophy and policy on competition and privatisation.
  6. Prospecting information and mineral rights are separate forms of property. Ownership of the latter does not automatically confer title to the former.
1.3.3.3 Disclosure of prospecting information

In relation to prospecting information there are broadly two contending views. On the one hand, it is argued that more data on prospecting results should be made publicly available as a resource for future exploration efforts by new prospectors and prospectors with new techniques. Against this it is held that prospecting data are the product of effort and investment by prospecting companies, the data constitute property that can be bought and sold and an incentive should be provided for the prospecting effort to be undertaken by protecting the confidentiality of the data for a reasonable period. As a further complication, contentions in support of the public release of prospecting data after fixed periods ignore the nature of prospecting programmes that do not have a readily determinable point of completion.

1.3.4 Tax on Mineral Rights

One view is that a tax should be imposed on privately held mineral rights to open access to such rights. Such a tax would not be payable by operating mines or where the retention of mineral rights is part of a long-term mining strategy that is in the national interest, or where there is active exploration taking place. If the owner of the mineral rights is unable or unwilling to pay a mineral rights tax, the rights may either be sold to a willing purchaser or at no cost to the owner be transferred to the State.

  1. Opponents of such a tax reject the view that the rights would be better utilised if transferred to the State. They have also contended that it would be contrary to the Constitution to use a tax to induce taxpayers to surrender assets to the State without payment for these assets. In addition to questions about the constitutionality of such a tax, and whether it will achieve its objective, opponents of such a tax contend that there are practical difficulties in applying such a tax; for example, how could this be done equitably across a range of mineral rights where commercial values may differ greatly and which may be held by a multiplicity of holders? They argue that the tax would be contentious, wrongly burden the holding of rights intended for future use, raise the investment threshold, delay investment decisions, generate uncertainty about mineral right holdings and require considerable administrative effort. It could become a source of litigation, for example in so far as its application to property held in trust is concerned. In addition, such a tax directed at a policy purpose, as opposed to revenue generation, would be inconsistent with the guiding principles articulated by the Katz Commission and hence detract from the evolving coherence of the country’s fiscal policy.
  2. It is also contended that, if a tax on mineral rights were introduced, expenditure on market development (such as R & D on possible new products and promotion of long-term growth in the market) incurred by the taxpayer should be allowed as a credit against the tax liability, in addition to the current value of past prospecting-related expenditures. Proponents of this view observe that ownership of mineral rights affords the long-term predictability of security of tenure on which major commitment to future development depends.

1.3.5 The Need and Capacity for Change

Whilst the Government recognises that the system currently in place has some positive features, it concludes that the status quo must be changed with a view to achieving the policy objectives set forth in paragraph 1.3.2 above. Government believes that changes will be implemented on an incremental basis. Notwithstanding changes to the current mineral rights dispensation, the State shall guarantee security of tenure.

1.3.6 Policy Proposals

1.3.6.1 Ownership of mineral rights

i) Government recognises the inherent constitutional constraints of changing the current mineral rights system, but it does not accept South Africa’s system of dual state and private ownership of mineral rights.

ii) Government’s long-term objective is for all mineral rights to vest in the State.

iii) State-owned mineral rights will not be alienated.

iv) Government will promote minerals development by applying the “use it or lose it” principle.

v) Government will take transfer of mineral rights in cases where a holder of mineral rights cannot be readily traced or where mineral rights have not been taken cession of and are still registered in the name of a deceased.

1.3.6.2 A new system for granting access to mineral rights

As a transitional arrangement in persuance of the objective stated in section 1.3.6.1 ii above, the following new system for granting access to mineral rights will apply:

i) The right to prospect and to mine for all minerals will vest in the State.

ii) Government will develop detailed legislative proposals for the introduction of the new system of access to all mineral rights. In developing such proposals provision will be made for:

  1. prospecting and mining rights to be made to the first qualifying applicant and in cases of competing applications such rights will be granted on merit;
  2. security of tenure by granting prospecting and mining rights for specified periods which are capable of cancellation or revocation only for material breach of the terms and conditions of the right;
  3. registerable prospecting and mining rights which will be transferable with the consent of the State;
  4. the holder of a prospecting right to be entitled to progress to a mining right on compliance with prescribed criteria and work commitments;
  5. annual minimum work and investment requirement to discourage the unproductive holding of prospecting and mining rights;
  6. a retention licence which may, upon written application, be granted to the holder of a prospecting right in cases where the holder, having explored the area and established the existence of an ore reserve which is, at the time of completion of the exploration programme, considered to be uneconomical due to prevailing commodity prices (market conditions) or where the exploitation thereof might lead to market disruption not in the national interest. Such licence will enable the holder thereof to retain the reserve without the commitment to minimum work and investment requirements. The licence will be granted for a limited period in respect of the property concerned;
  7. precluding the issue of a prospecting or mining right over an area in respect of which a currently valid prospecting or mining right is held for the same mineral;
  8. predetermined standard terms and conditions, for all prospecting and mining rights;
  9. the reduction, as far as possible, of discretionary powers by applying standard requirements or objective criteria;
  10. payment of compensation by the holder of the mining right to the registered holder of mineral rights. Such compensation will be payable in the form of royalties as determined by the State. No distinction will be made between royalties payable to the state and those payable to private holders of mineral rights. The quantum of royalties will be internationally competitive and will not inhibit the initiation of new projects;
  11. payment of a surface rental, determined by the State, by the holder of a prospecting or mining right to the registered land owner; and
  12. the approval of an Environmental Management Programme prior to the issue of a prospecting or mining right.

iii) Persons, including their successors in title, or assigns or nominees, who could lay claim, under section 43 of the Minerals Act, 1991, to the exclusive right to prospect for a mineral to which the right was reserved to the State, shall after the lapsing of the period that ended on 31 December 1996, or the approved longer period, no longer be deemed to be the sole holder of such rights.

1.3.6.3 Reconnaissance work

A non-exclusive licence for broad-based, non-destructive exploration will be implemented. Such licences will be for a limited period in respect of the area required. A reconnaissance licence will not entitle the holder thereof to a prospecting or mining right.

1.3.6.4 Disclosure of prospecting information

It will be a condition of any prospecting right or reconnaissance licence issued or renewed that all information and data from prospecting shall be submitted to the State after completion or abandonment of any particular prospecting activity. The State will release such information to the public at any time from the date of submission of such information unless the prospector retains a prospecting or mining right in respect of the land concerned or an application therefor is pending. Such information submitted to the State will be used to create a national exploration data base.

1.3.6.5 Data base of mineral rights holdings

Government will apply, through the Departments of Land Affairs and Minerals and Energy, greater resources to expediting the process of the compilation of a readily-accessible data base.

1.3.6.6 Tax on mineral rights

Government will investigate the feasibility of imposing a mineral rights tax or other mechanisms which would be intended to discourage the non-utilisation of privately-owned mineral rights. Such investigation, which will be undertaken by the Department of Minerals and Energy in association with the Department of Finance, will take into account the findings of the Katz Commission which is giving attention to this matter.

1.4 Small-scale Mining

1.4.1 Background

i) A flourishing small-business sector usually increases competitiveness in an economy and is an efficient vehicle for the creation of jobs. The fall in the real price of minerals has led to the closure of numerous large-scale operations. Well-managed small-scale mining has the potential to take over and mine economically where large-scale mining is unable to operate profitably. In this way small-scale mining can make a meaningful contribution to the total global production.

ii) The development of small-scale mining alongside mining in underdeveloped regions would also increase the portfolio of minerals being produced and could lead to the exploitation of resources that would otherwise be sterilised. In addition, it could provide a channel for increased access to the mining industry.

iii) For the sake of clarity, the concept of small-scale and artisanal mining needs to be defined. There are significant potential environmental and health and safety problems associated with artisanal mining, which is often the only means of subsistence available to individuals. By artisanal mining is meant small-scale mining involving the extraction of minerals with the simplest of tools, on a subsistence level. There is no generally agreed definition of the term small-scale mining – although it is often defined with regard to mine’s output, capital investment, numbers employed or managerial structure. Small-scale mining is a relative term; thus the choice of limiting criteria to distinguish between small and larger-scale mining (such as production rate, capital and labour employed) will differ from commodity to commodity and from country to country. In South Africa, small-scale mining ranges from very small operations that provide subsistence living (artisanal mining), to the ‘junior’ companies for which revenue is such that subsistence living is not the prime motivator.

iv) In many countries with large mining industries, both small and large exploration and mining companies compete aggressively and successfully side by side. This allows for the exploitation of small (low capital) and large (high capital) projects and provides opportunities for more entrepreneurial operators.

v) Worldwide, it is apparent that many new and major ore deposits have been located by small and lean exploration companies, who make decisions efficiently and rapidly. Typically these companies locate deposits and either sell them off to larger companies or, because they wish to be involved in the mining phase, enter into joint ventures with larger companies which provide expertise and/or capital to develop the project. This provides a healthy synergy between large and small operators.

vi) The interests of the country and the community demand that all forms of mining, whether large, small or artisanal, should be subject to the same requirements in respect of licensing, safety, health and the environment.

vii) Small-scale mining already takes place on a sizeable scale in South Africa. Opportunities for small-scale mining projects are found mainly in gold, diamonds, coal, industrial minerals and in minerals derived from pegmatites. These opportunities are often confronted by problems, such as:

  1. access to mineral rights – the present South African mineral rights ownership system is seen by many as a major blockage in the development of small-scale mining.
  2. access to finance – financiers are seldom willing to participate in small-scale mining ventures which often provide limited security and financial returns.
  3. incoherent structure – there is a lack of appropriate structures that assist small-scale mining development.
  4. location of operations far from major markets.
  5. lack of management, marketing and technical skills – new small-scale mine operators face technical barriers to participate in mining, including lack of skills in dealing with aspects such as complex metallurgical processes, practical mining problems and business skills.

1.4.2 Intent

Government will encourage and facilitate the sustainable development of small-scale mining in order to ensure the optimal exploitation of small mineral deposits and to enable this sector to make a positive contribution to the national economy.

1.4.3 Policy Requirements

1.4.3.1 Views of small-scale miners

i) Small-scale miners require information on the availability of mineral rights and mineral deposits.

ii) Access is required to mineral rights and to the surface areas necessary to exploit these rights.

iii) Unfragmented and adequate information is required on mineral regulations, geology, mining and environmental aspects and mineral marketing.

iv) Technical assistance and training is required for small-scale miners in the broad spectrum of mineral-related activities.

v) Access to investment financing is required.

vi) Regulations in respect of mining should be relevant, understandable and affordable to the small-scale miner and should be enforced in a site-specific manner.

vii) Administrative procedures should be simplified and speeded up.

viii) Institutional research and development in respect of all the aspects of mineral development and exploitation relevant to small-scale mining is required, as well as the transfer of this technology to small-scale miners.

ix) Tax and royalties rates, levies and financial guarantees for rehabilitation should not constrain the development of small-scale operations.

x) An integrated and co-ordinated approach is required from all the government departments and other agencies to promote and develop small-scale mining activities.

xi) A co-operative and supportive approach towards the small-scale mining sector is required from the other sectors of the mining industry.

1.4.3.2 Other views

i) Minimum standards in respect of the environment should be maintained for all mining operations.

ii) Other land-use options should not be curtailed by small-scale mining activities.

iii) Health and safety standards and the rights of workers should be maintained in small-scale mining operations.

iv) Development of the mineral potential of especially the underdeveloped regions of the country is required.

v) Communities should be consulted regarding mineral development and should enjoy lasting benefits from such developments.

vi) Government should promote and encourage small-scale miners to operate within sound business principles.

vii) The deleterious effects of artisanal or subsistance mining on the environment and on safety and health elsewhere in the world, dictates the necessity for research in this area. Meanwhile, resources need to be employed by the State to control artisanal mining as effectively as possible.

1.4.4 Policy Proposals

1.4.4.1 Mineral rights

i) Information on mineral rights and mineral deposits available for development will be made accessible, particularly for the benefit of small-scale miners.

ii) Mineral right holders will be encouraged through relevant legislation and other measures to make potentially mineralised areas that are not being utilised, available to other developers, especially small-scale miners.

1.4.4.2 Access to finance and technology

i) Access to funding for small-scale mining will be encouraged and facilitated through appropriate and targeted institutions.

ii) The costs of state advice and support for the small-scale mining sector will be weighed against the benefits of the application of such support to other mining or non-mining activities.

iii) The Department of Minerals and Energy (DME) will co-ordinate needs-driven research by the Science Councils and ensure that this information and technology is accessible to the small-scale mining sector.

iv) The DME, in consultation with private industry, organised labour, non-governmental organisations, tertiary institutions, research organisations and foreign aid agencies, will investigate the establishment of training facilities for small-scale miners, not only in South Africa, but in the region as a whole.

v) Information on all aspects relating to mineral development and exploitation will be made available by the DME by means of a ‘one-stop shop’ approach.

vi) All spheres of government and development agencies will work towards co-ordinating their activities in respect of the promotion of small-scale mining activities.

vii) The line functions of the DME will be restructured and enhanced in order to efficiently facilitate access to support small-scale mining on the broad spectrum of activities involved in such endeavours.

viii) Government will facilitate the mutually beneficial co-existence of big and small-scale mining operations.

1.4.4.3 Regulation and administration

i) Mining regulations will be administered consistently, while adopting an approach of guidance and advice towards small-scale miners.

ii) The DME, in conjunction with other relevant Government departments, will streamline the regulatory and administrative procedures in respect of mineral exploration and exploitation.

iii) Health and safety standards will be maintained in small-scale mining operations.

iv) Processing of the Environmental Management Programme Reports (EMPRs) will be expedited.

1.4.4.4 Environmental management

i) Small-scale mining, like the rest of the mining industry, will be required to adopt measures that will promote environmental sustainability by means of the application of consistent standards and acceptance of the ‘polluter pays’ concept.

ii) Government will support the provision of training and skills development for small-scale miners in environmental management.

iii) Intensive environmental management guidance will be provided in areas where there is a high concentration of small-scale miners.

iv) Financial guarantees for rehabilitation will be flexible and site specific.

1.5 Mineral Beneficiation

1.5.1 Background

i) The term beneficiation, used broadly to describe the successive processes of adding value to raw materials from their extraction through to the sale of finished products to consumers, covers a wide range of very different activities. These include large-scale and capital-intensive operations like smelting and technologically sophisticated refining as well as labour-intensive activities such as craft jewellery.

ii) Through adding value or beneficiating mineral resources a country can maximise the rent it derives from exploitation of its natural resource base and have it serve as a foundation for further industrial development.

iii) For many decades, where there have been viable opportunities, the mining industry has invested in mineral beneficiation. However, South Africa has the potential to increase the proportion of mineral output that is beneficiated by virtue of its large reserves, technological skills and low energy costs.

iv) That South Africa has an abundance of raw materials available for beneficiation is not sufficient, or even necessary, for beneficiation to take place economically here. Other factors on the demand side need to be taken into account too, of which proximity and access to markets are the most weighty.

v) Economic and fiscal certainty is required for the long-term planning needed for developments of the magnitude of mineral beneficiation projects.

vi) Raw materials prices paid by local beneficiators should not place them at a disadvantage in relation to overseas competitors.

vii) Stable and competitive tariffs for electricity and the transport of beneficiated products are required.

viii) Hurdles to beneficiation include a limited local market for beneficiated products, high capital costs and a lack of technology in certain fields.

ix) Due to a combination of factors, the real prices of numerous minerals have declined over the past four decades, leading to a general deterioration in the terms of trade for raw material exporting countries, as well as appreciable volatility in export revenues.

1.5.2 Intent

The aim of the policy will be to develop South Africa’s mineral wealth to its full potential and to the maximum benefit of the entire population. Government, therefore, will promote the establishment of secondary and tertiary mineral-based industries aimed at adding maximum value to raw materials.

1.5.3 Policy Requirements

1.5.3.1 Views of the mining industry and minerals industry

i) Beneficiation projects should be initiated on the basis of market forces and decisions taken by individual companies pursuing well-considered business objectives.

ii) Demand-side factors, such as relationships with existing customers, should be taken into account in respect of mineral beneficiation.

iii) Measures instituted to promote mineral beneficiation should not be detrimental to the international competitiveness of the mining industry in respect of unbeneficiated mineral exports.

iv) Raw materials prices should be determined by the market and not by Government.

1.5.3.2 Other views

i) Due to the risks inherent in large-scale mineral beneficiation projects, supply-side incentive measures should be instituted by Government to promote value-adding activities.

ii) Policies and regulations that constrain the acquisition and ownership of precious metals and minerals by jewellery manufacturers should be reviewed.

1.5.4 Policy Proposals

i) A greater degree of co-operation and co-ordination will be established between the Departments of Minerals and Energy and Trade and Industry in respect of mineral beneficiation.

ii) In order to promote mineral beneficiation, efficient supply-side measures will be introduced, such as lower royalty rates for projects that include beneficiation. Qualification for such incentives will, however, require a commitment to promote further local downstream beneficiation through, inter alia, export parity pricing of products.

iii) Government is committed to promote investment in mineral beneficiation activities through ensuring competitive and stable costs of public services and goods, such as electricity and transport.

iv) The State will continue to support research with a view to developing new or improved beneficiation techniques and to developing new applications for locally produced mineral products.

v) Non-confidential information that could promote the beneficiation of South Africa’s minerals held by Government departments and parastatal research organisations will be effectively disseminated to the private sector.

vi) Science Councils and Government departments will endeavour to establish joint-venture research and training programmes with universities and the private sector in order to produce the necessary skilled and productive manpower required for mineral beneficiation developments.

vii) Decisions regarding beneficiation projects will be based on sound economic principles.

viii) Prices for minerals and processed mineral products will be determined by the market.

ix) Policies and regulations that constrain the development of the local jewellery manufacturing industry will be reviewed by the Department of Minerals and Energy and other departments and institutions involved.

1.6 Minerals Marketing

1.6.1 Background

  1. South Africa possesses an exceptional mineral endowment. The role that mining plays in theeconomy and the share that minerals contribute to exports, define South Africa as a minerals-based economy.
  2. The minerals industry energetically promotes, markets and sells its products domestically and internationally on competitive markets.

1.6.2 Intent

Mineral marketing policy will be based on market principles. Government’s role will be supportive, and intervention will generally be limited to addressing market failures.

1.6.3 Policy Requirements

1.6.3.1 Views in favour of state intervention in marketing

i) Government intervention in respect of minerals marketing should be limited to protecting the national interest.

ii) Transfer pricing should be dealt with by law enforcement.

iii) There may be merit in researching co-ordinated marketing of certain commodities as a means to increase foreign exchange earnings.

iv) The potential role of a mineral marketing audit office should be researched.

v) Consideration should be given to a small levy on sales to fund market development efforts.

1.6.3.2 Views against state intervention in marketing

i) The view that the State could match the marketing and sales performance of the private sector is contradicted by experience elsewhere in the world.

ii) Government intervention in minerals marketing is unwarranted and harmfuland is emphatically opposed by mining companies.

iii) The establishment of a minerals marketing audit office is not necessary. The Reserve Bank has sufficient statutory power to regulate the flow of funds into and out of the country.

iv) The imposition of a levy on sales is opposed as an unnecessary additional form of taxation.

v) Minerals marketing is a private sector activity that is best handled by the producers themselves as has been done successfully throughout the years. There is no necessity for nor benefit in the establishment of a statutory minerals promotion body.

1.6.4 Policy Proposals

i) The marketing of minerals in South Africa will be determined by market forces. State intervention will generally be limited to addressing market failures.

ii) Barriers, economic and otherwise, to mineral exports will be identified and appropriate strategies for their removal will be devised.All measures which restrict the sale of South African minerals on foreign markets will be opposed.

iii) Transfer pricing will be dealt with by more efficient enforcement of laws. To this end co-operation and co-ordination will be established between the Department of Finance and the Department of Minerals and Energy.

iv) Government will encourage and support market development by producers.

1.7 Research and Development

1.7.1 Background

i) South Africa’s diversity of mineral deposits poses a spectrum of technological challenges for the country’s mining industry. World leadership has been achieved in the technology and practices to exploit the deep, complex and difficult mineralogy of many of South Africa’s unique resources. Innovative solutions have been developed by the established mining houses and research institutions.

ii) Research and development in the mineral industry needs to conform to the development of a comprehensive science and technology policy that will address the country’s needs. Policy in this regard is set out in the Science and Technology White Paper and tackles issues such as directing the country’s research and development effort towards addressing the needs of its citizens, the balance between applied and fundamental work, redressing past discrimination in access to training related to research and development and the methods of funding these activities.

iii) A relatively large number of stakeholders representing a variety of disciplines perform research and development activities for the minerals and mining industry and these efforts need to be synergistic and complementary.

iv) The State is involved in research and development both as part of the national scientific and technological effort and on behalf of the industry through the CSIR, Mintek and the Council for Geoscience as well as at universities and technikons.

v) The Science Councils form part of the technology bridge between mining operations and available science, engineering and technology. It is here that the State’s contribution is greatest.

vi) Co-operative research on health and safety is essential. The Leon Commission has commented on the role of the Safety in Mines Research Advisory Committee (SIMRAC) that the selection of research fields reflects a failure to apply a rigorous needs-based assessment and to carry out research related to occupational health.

vii) In instances where mining houses have identified advantages they have co-operated on research and development activities.

viii) Mining companies remain committed to research and development on process cost reduction and customer satisfaction, which serves their own interests and is funded by themselves, whilst recognising the potential contribution of user-influenced public sector research for common interests.

1.7.2 Intent

Government will undertake and promote research, technology development and technology transfer that will stimulate the optimal development of the country’s resources in the longer term and ensure that the industry remains competitive.

1.7.3 Policy Requirements

1.7.3.1 Views of the minerals industry

i) Research and development undertaken by the State should be user influenced and complement private sector activity.

ii) Funding for the work of SIMRAC is provided exclusively by the mining industry. However, the Chief Inspector of Mines has control over the allocation of such funds and no limit exists on the funding for SIMRAC that the Inspector may demand of the industry. Such research should be funded in good part by Government. The costs of administering SIMRAC are to be borne by the public in terms of the Mine Health and Safety Act.

1.7.3.2 Other views

i) Appropriate fiscal incentives for research and development need to be developed.

ii) Focused and co-ordinated research on applied economic geology should be supported by Government and industry to attract new exploration companies to South Africa and locate new ore deposits.

iii) There should be a provision within the Mine Health and Safety Act to make levy funds available for the administration of SIMRAC activities.

iv) Capacity relating to the minerals and mining industry within various research institutions should be developed.

1.7.4 Policy Proposals

i) Research and development efforts will be directed to areas of high need to develop solutions in exploration, mining, processing and conservation and rehabilitation of the environment as well as methods to exploit the value adding potential of the country’s minerals. This applies to large and small-scale mining.

ii) The recommendations of the Leon Commission on the restructuring of SIMRAC, ie the need for competent research management and overseeing of its programmes, will be implemented.

iii) Research on occupational health in the mining industry will, as recommended by the Leon Commission, receive due attention as part of the mine health and safety research programme.

iv) A system of matching grants will be considered for funding research and development projects.

v) Focussed and co-ordinated research on economic geology will be supported by Government and industry to attract exploration investment to South Africa.

vi) Co-operation between the various mining and mineral processing research and development institutions will be encouraged to make best use of existing facilities, to promote collaborative research efforts, to promote technology transfer and to ensure that minerals-related research and development is conducted in accordance with the country’s science and technology policy and national objectives for the minerals industry. The results of the technology foresight exercise being conducted by the Department of Arts, Science, Culture and Technology will contribute to this endeavour.

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Chapter Two: PARTICIPATION IN OWNERSHIP AND MANAGEMENT

Past legislation and practices have inhibited black ownership of assets, in mining as in other of the country’s principal producing sectors. While various initiatives are under way to introduce black investors into the industry, ownership of the main mining companies remains as yet essentially unchanged.A long-term perspective is needed because of the difficulties of raising the large capital sums involved.

Similarly, workplace discrimination (legislated in some cases) obstructed the advancement of black people into middle and senior management positions in the mining industry. Progress has been made in recent years, both on the mines (notably via apprenticeship and other training programmes) and in head offices. But the impact will take some years to start being really visible because of the long periods needed for employees to acquire the practical experience required for promotion.

Black participation in ownership and management of the mining industry will have special political significance for South Africa’s development as a market-based democracy.

2.1 Background

i) Government is unshakeable in its commitment to removal of racial discrimination in the workplace, in mining and elsewhere, through the bill of rights entrenched in the Constitution, as well as other supportive legislation.

ii) In similar spirit, Government believes that it will be profoundly in the interests of the economy for the mining industry to have a wider spread of ownership and to be regarded with pride by South African society in general.

iii) The Labour Relations Act (LRA) and other relevant legislation will assist in eliminating racially discriminatory practices at all levels within the mining industry. Mining companies have also taken steps to remove barriers to the advancement of black people and women in the industry. It will, nevertheless, require a considerable period of time before previously excluded groups can gain the technical and academic qualifications and experience that are required for the exercise of high level management and technical responsibilities in the mining industry. Government will continually monitor progress in addressing the racial and other imbalances and review whether intervention targeted at the mining industry is required.

iv) The Government has decided not to embark upon a programme of nationalisation to reverse ownership patterns in the mining sector.

v) The Labour Market Commission has recommended that steps be taken to facilitate worker participation in the organisation of work, as provided for in the LRA. These measures should create smooth industrial relations and facilitate workplace efficiency.

vi) The Mine Health and Safety Act, 1996 embodies a commitment to building a culture of co-operation in the workplace by establishing a range of tripartite structures. At mine level, health and safety committees consisting of employee and management representatives will promote workplace democracy as well as mine health and safety.

2.2 Intent

Government will encourage changes leading to equity of opportunity in respect of access to ownership and management of the mining industry.

2.3 Policy Requirements

2.3.1 Views concerning previously disadvantaged groups

i) The State should take a constructive interventionist role in altering the patterns of ownership in the industry and promoting black ownership at all levels.

ii) There should be a Workplace Anti-Discrimination Act that provides for an official audit of the extent of racial discrimination at every mine and puts in place a procedure, backed by law, to remove racial discrimination.

iii) The South African mining industry is heavily dominated by a small number of mining houses, all of which are white owned. Business ownership and control in the country in general, and particularly in the mining industry given its complexion should be deracialised. The mining industry needs to demonstrate rapid, visible and significant transformation in line with the rest of South African society.

iv) By virtue of their contribution to insurance and pension funds, mine employees and black people in general already have significant financial interests in the industry. Such financial interests should be used to secure significant participation in the control of mining companies through exercising governance rights of shareholders.

v) Changes in ownership to achieve a broader spread as well as greater participation in managing mining companies on the basis of ownership should be promoted through the development of Employee Share Ownership Participation Schemes (ESOPS). Criteria used in developing ESOPS in the mining industry need to provide for genuine participation in managing operations, be of sustained value rather than linked to operations with a short life and be tailored for low income workers. Corporate initiatives around ESOPS are hampered by Income Tax laws and the Companies Act which should be amended so as to remove obstacles to such schemes.

vi) Due to the concentrated ownership that characterises the mining industry and in recognition of the long time that will be required for deracialisation of ownership to occur through market forces, specific initiatives are required to achieve effective deracialisation. A new form of corporate governance is required that will create conditions for effective employee participation through a system of co-determination.

vii) Development of the small-scale mining sector resulting from companies disposing of unwanted properties to black-owned companies or through the State purposefully allocating its mineral rights to black-owned companies will not produce genuine economic empowerment as this will be confined to small deposits or to future mining and will not address the inequity in the present distribution of mining industry ownership.

2.3.2 Views of the investment community and mining companies

i) Participation and ownership issues are of general application and should not be at the core of mining and minerals policy.

ii) Market forces dictate ownership of mining companies. Investment in public companies is open to everyone. Principally via insurance and pension funds, people of all races already have significant financial interests in the industry.

iii) The evolution of a wider spread of ownership will take place through market processes. Over the past few years a number of black-led financial companies have emerged with the resources to get involved in the large-scale sector, and various transactions are under consideration in the small-scale sector too. Some large corporations are actively facilitating these processes. It is only a matter of time before such developments come to fruition on a meaningful scale.

iv) Removal of discrimination is already well advanced via legislative and regulatory change supplemented by education, training, work reorganisation and other corporate initiatives.

v) In general, especially given the country’s demographics, effective participation by blacks in ownership and management will be far better achieved by encouraging investment and growth rather than by directives and controls.

vi) Consequently, while greater such participation is both essential and welcome, there is no case for government intervention to achieve it. Radical changes to the system of corporate governance are similarly unwarranted: generic reforms are already well under way in the light of the 1995 report of the King Committee on Corporate Governance.

2.4 Policy Proposals

i) Government will continuously promote a wider spread of ownership and seek to facilitate acceleration of the changes that are already under way.

ii) Consequently Government will consider the introduction of specific initiatives such as those set out below:

  1. Government will facilitate steps to deracialise business ownership and control by means of focused policies of black economic empowerment. In the mining sector, State intervention through parastatal development finance institutions (including the Industrial Development Corporation and the Development Bank of SA) to finance investment in new and existing mining ventures in partnership with black companies will be encouraged.
  2. Employee Share Ownership Participation Schemes are a practical vehicle to promote a broader spread of ownership and participation in mining companies. Government will facilitate such changes by adjusting the administration of tax and company law to reduce obstacles to establishing ESOPS for low income workers. (The third Interim Report of the Katz Commission “very much supports the objective of greater employee share ownership in South Africa,” and states that ESOPS should include “the entire labour complement of a company … particularly employees at the lower level of the organisation”).

iii) Government will encourage real worker participation in the management of all mines.

6.1 Regulation and Promotion

6.1.1 Background

i) In order to promote, support and regulate minerals and mining it is essential that Government institutions are competent and efficient. Exploration and mining are high risk businesses and consequently it is important that individuals and companies are confident in their dealings with state institutions, and that decisions are made timeously and efficiently. If contracts are to be negotiated and investment mobilised it will be important that institutions respond rapidly and professionally.

ii) The governance of the mining industry involves a number of players, including specialised government agencies, such as the Council for Nuclear Safety and the Council for Geoscience and Mintek, that have a significant influence on the industry. At the level of central Government – in which a number of departments have an interest in the industry – it is the DME which has the primary role in governance.

iii) The Leon Commission proposals regarding restructuring in the DME in order to address safety and health issues, have been incorporated in the Mine Health and Safety Act of 1996. These will, therefore, not be discussed in this chapter, other than to note that certain provisions of the Act remain to be implemented.

6.1.2 Intent

The regulatory and promotional activities of Government will be conducted in a transparent and efficient manner in carrying out its brief to encourage the development of the mineral industry, and to regulate it for the benefit of all South Africa’s people.

6.1.3 Policy Requirements

6.1.3.1 Views of the minerals industry

i) Sensible regulation requires an understanding of the nature and interrelated technical complexities of mining, making the existence of a single, central regulatory agency highly desirable. That agency should be the DME, working as necessary through its own regional offices.

ii) The Department should serve as the pivotal link between the industry and other government departments and regulatory agencies.

iii) Subject to any obligations to maintain confidentiality of private information, the DME should make adequate information available on all the aspects involved in mineral investment and exploitation.

iv) Mineral regulation and administration should be conducted efficiently and expeditiously.

v) The DME must be adequately staffed by skilled personnel.

vi) The structure of the DME must be such that it is accessible and responsive to all sectors of the mineral industry in all parts of the country, and that the span of control is not stretched.

vii) In order to improve access to and investment in the mineral industry, relevant government institutions should not only assume a regulatory role but should actively pursue a promotional role as well.

viii) Interdepartmental communications, particularly between the DME and the Departments of Environmental Affairs, Water Affairs, and Trade and Industry, should be improved in order to decrease the potential for cross-cutting legislation.

ix) An overall review is needed of which organisations of government will best serve the industry. The review should focus, in particular, on efficiency and competence in the administration and functioning of government agencies whose activities have a direct bearing on the mining industry. Regulatory and service agencies of the government should be attuned and responsive to the needs of and constraints upon the industry.

6.1.3.2 Other views

i) The DME should look after the interests not only of the minerals industry, but also of the communities in the areas where mineral exploitation activities take place.

ii) The racial and cultural make-up of the DME should better reflect that of the community.

iii) The DME should cultivate a culture of development and promotion of the industry and people associated with it as well as functioning as a regulatory body.

iv) No intermediate institutions such as minerals trusts, should be involved in the process of mineral regulation and administration.

6.1.4 Policy Proposals

The DME will be the lead agent for governance of the minerals industry.

i) The structure of the DME will, amongst others, provide for:

  1. separate intra-departmental components and mechanisms to handle the promotion of the industry on the one hand and regulation on the other;
  2. a separate structure, within the regulatory component, to control environmental management in the mining industry;
  3. a separate mine, health and safety inspectorate;
  4. the improvement of administrative procedures in respect of the granting of prospecting and mining rights;
  5. the provision of a cost effective ‘one-stop shop’ information and advice service to the minerals industry; and
  6. ongoing research, co-ordination and review of minerals and mining policy.

iii) Government will ensure that all associated institutions concerned with the minerals industry will be guided in terms of national objectives and priorities. To this end it will be a statutory requirement that representatives from the DME serve on the boards of such institutions.

iv) In particular, the Council for Geoscience should focus on serving as a national resource for South Africa that can make data available at nominal cost. This may require a review of the Council’s mission and Government’s funding policy towards this institution.

v) The staff composition of the DME will reflect the demographics of South Africa.

vi) In the process of establishing mining operations, the relevant mining company will consult the affected community, taking due cognisance of the local economic development needs and local intergrated development plans.

vii) Intermediate statutory regulatory institutions, such as minerals trusts, will be phased out.

6.2 National and Provincial Governments and Municipalities

6.2.1 Background

  1. Mineral affairs are allocated to the national level. In the Constitution mineral affairs are not mentioned in schedule 4 stipulating functional areas of concurrent national and provincial legislative competence, nor in schedule 5 stipulating functional areas of exclusive provincial legislative competence.
  2. The Minerals Act provides for the Department of Minerals and Energy to regulate prospecting, the exploitation of minerals, utilisation of land and environmental impact studies whilst health and safety issues are regulated in terms of the Mine Health and Safety Act.
  3. Irrespective of the emphasis in the Constitution on national responsibility for mineral affairs, in practice the provinces, due to the wide range of functions they have, also impact on mineral affairs, and vice versa. Several provinces are keen to promote mining in their areas.
  4. Mineral affairs interact with the following functions referred to in schedule 4 or 5 of the Constitution: agriculture, environment, health services, local government, nature conservation, regional planning and development, soil conservation, industrial promotion, urban and rural development, and public works.
  5. In view of the Constitution, it is important to ensure that uniform mineral management and regulatory standards be maintained throughout South Africa and that services provided by Government be rendered in an equitable manner.
  6. Constitutional provision is made for the equitable division of revenue raised nationally among the national and provincial governments and municipalities. This sharing of a national pool of revenue, which includes revenue from mining taxation, involves intricate considerations which fall within the functions of the Financial and Fiscal Commission.

6.2.2 Intent

Government will ensure equal treatment and standards in respect of the management and regulation of the mineral industry in all the provinces of South Africa.

6.2.3 Policy Requirements

6.2.3.1 Views of the minerals industry and investors

i) Sensible regulation requires an understanding of the nature and interrelated technical complexities of mining, making the existence of a single, central regulatory agency highly desirable.

ii) Because of the way the industry has evolved, as well as the need for consistency of policy and practice across provincial and local boundaries, there should be minimal devolution of authority to separate provincial or lower level bodies. Such bodies should not be empowered to create laws or regulations which impact on mining.

iii) In cases where there is a need for issues to be dealt with at sub-national level, a consultative process with all affected parties is essential.

iv) The relationship between a mine and its provincial authority and municipality has many dimensions but the basic criterion should be that the authorities avoid undue involvement in the operations of a mine.

v) Where a mine uses services provided by a municipality such services should be charged for on an economic and equitable basis, governed by the costs of provision; mines should not be burdened with inflated prices designed to improve the financial position of the municipality.

vi) Where a mine supplies its own services or can obtain them competitively from a supplier other than the municipality, it should not be obliged either to pay rates in respect of such services or to acquire them from the municipality.

6.2.3.3 Views of provincial governments and municipalities

i) In order to guide or affect the economic growth and development process, some influence is required in the minerals arena, be it at legislative, executive or operational level.

ii) Mechanisms are required whereby the negative social and economic consequences of mine closures can be planned for and ameliorated.

iii) There is a clear need for integration of regional/local, DME and Department of Trade and Industry attempts to stimulate small-scale entrepreneurial activities.

6.2.4 Policy Proposals

i) The minerals and mining industry will be governed at national level through a single lead department.

ii) Services provided to a mine by provincial governments or municipalities will be charged for on an equitable basis.

iii) A formal mechanism will be established whereby provinces can engage with national government on mineral industry issues where these relate to agriculture, the environment, economic affairs and other relevant provincial competencies.

iv) Provincial governments and municipalities will have access to the expertise and information available in the DME and associated institutions.

6.3 Stakeholder Consultation

6.3.1 Background

  1. The mineral industry has been an important factor in the development of South Africa’s infrastructure and much of its secondary industry. It is a major provider of employment and other business opportunities, both directly and through backward and forward linkages. In order for the mineral industry to play its required role in respect of economic growth and the earning of foreign exchange, good co-operation will be required between Government, labour and the industry. This can only be achieved when policy formulation, management and regulation are conducted in an atmosphere of openness and in close consultation with stakeholders in the industry.
  2. South Africans recognise that there are large and complicated issues involved in mineral development activities. Development decisions affect the public in more ways than just providing employment opportunities. The stakeholders and affected communities should be involved in discussing all the issues surrounding mineral development activities and should participate in the decision-making process.
  3. The Mine Health and Safety Act includes a variety of provisions relating to tripartite consultation and co-operation in respect of different health, safety, education and training issues; these will, therefore, not be addressed in this section.

6.3.2 Intent

The management and regulatory activities of Government will be conducted in a transparent manner and will take into account the views and interests of all the stakeholders in the minerals industry.

6.3.3. Policy Requirements

6.3.3.1 Views of the minerals industry
  1. An ongoing opportunity to debate all issues pertinent to mining and minerals policy, that would also provide a forum in which the views of other interested parties could be canvassed, is required. Such a structure and process are essential in order to achieve a collaborative approach to policy formulation, as well as to give coherence and focus to what could otherwise be a fragmented and insufficiently consultative approach to policy.
  2. The minerals industry will be promoted through information and education programmes relating to the contribution of the industry to the economy, the role of minerals in everyday life, and mineral-related issues such as the environment and safety and health.
6.3.3.2 Other views
  1. A forum should be established where the views of communities affected by mining could be heard.
  2. A greater degree of co-operation and co-ordination between government departments is required, as well as between Government and the private sector.
  3. A tripartite forum is required to advise the Minister of Minerals and Energy on issues related to mining, such as the environment.

6.3.4 Policy Proposals

A statutory board will be established that will advise the Minister of Minerals and Energy on mining and mineral matters that fall outside the Mine Health and Safety Act. It will provide a forum in which government departments, representatives of the principal stakeholders, viz. business and labour, as well as other interested parties, can debate issues that bear upon existing or new policies.

https://www.gov.za/documents/minerals-and-mining-policy-south-africa-green-paper

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