1. PRESENTATION BY WEBBER WENTZEL TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY ON THE MINERAL AND PETROLEUM RESOURCES AMENDMENT BILL, 2007 (B10D-2007) 4 June Peter Leon

2. Issues which we address in this presentation
Amendments in respect of disposals requiring the “prior written approval” of the Minister
Time limits for the Minister’s decisions under the MPRDA and the Bill
The powers of the Minister of Minerals and Energy (“the Minister”) in respect of land occupied by a “community”
Amendment to section 17(2)(b) of the MPRDA: the “concentration of mineral resources”
Amendments to the transitional arrangements in relation to the conversion of old order mining rights (proposed new sub-items 3A and 3B of item 7 of Schedule II to the MPRDA)

3. Amendment to section 11 – clause 8 of the Bill
Currently, under section 11 only the disposal of a controlling interest in an (unlisted) company or a close corporation which holds a prospecting or mining right requires the consent of the Minister of Minerals and Energy ("the Minister"). The Minister’s consent is not required for disposal of an interest in a listed company which holds a prospecting or mining right
The amendment effected by clause 8 of the Bill will require:
the prior written approval of the Minister in respect of the disposal of any interest in an unlisted company or a close corporation
the prior written approval of the Minister in respect of the sale of a "controlling interest" in a listed company. A failure to obtain the consent of the Minister will result in the relevant transaction being "void"

4. Amendment to section 11 – clause 8 of the Bill continued
The disposal by a company which holds a fraction of one percent interest in a mining right or prospecting right will require the "prior written approval" of the Minister
This will have serious negative effects on the bankability of prospecting and mining rights and will lead to unnecessary regulatory backlogs
We suggest that section 11 of the MPRDA is amended so as to clarify that it is the disposal of a controlling interest in an unlisted company or close corporation which holds a prospecting right or a mining right which requires the Minister’s consent

5. Time limits
The Bill fails to set any time limits for the taking of decisions by the Minister to grant or refuse, inter alia, prospecting and mining rights
This omission is critical to the issue of regulatory certainty and investor confidence
The substantial delays in the processing of applications for rights under the MPRDA is a matter of public record

6. Time limits continued
Of the prospecting rights applications received by the DME between May 2004 and September 2007, only (42 percent) were granted
Of the 15 prospecting rights applications received by the DME between October 2007 and March 2008, none has been granted
Of the mining rights applications received by the DME between May 2004 and March 2007, only 359 (24 percent) were granted
Of the 470 mining rights applications received by the DME between April 2007 and March 2008, only three (less than 1 percent) have been granted
(DME Monthly Update on Applications: Mineral Regulation and Administration, Issue 3, 31 March 2008)

7. Time limits continued
The Bill should provide that all important regulatory decisions (eg those relating to the grant or refusal of applications for rights under the MPRDA) must be taken within a specific period, eg 180 days for a mining right and 90 days for a prospecting right, failing which such application must be deemed to be accepted
This would accord with international best practice, promote administrative efficiency as well as investor confidence
See for example the Competition Act, 1998, sections 13(6) and 14(2) of which provide that a merger must be regarded as having been approved if a period of 20 business days has expired and the Competition Commission has not either extended the period or issued a certificate approving, conditionally approving or prohibiting the merger

8. Time Limits continued
According to the Fraser Institute's Annual World Survey of Mining Companies (2007/2008), South Africa’s rank in the “policy potential index” has slipped from 34/53 in 2003–2004 to 50/68 in 2007–2008 (Botswana is ranked 11th)
Furthermore, 66 percent of investors were “mildly/strongly deterred” by uncertainty concerning the administration, interpretation and enforcement of existing regulations; and 60 percent of investors were “mildly/strongly deterred” by regulatory duplication and inconsistency

9. The Minister’s new powers in respect of land occupied by a “community” – clause 1 of the Bill
Under clauses 13, 19 and 83 of the Bill, iro the grant of prospecting and mining rights and the conversion of old order mining rights, the Minister may impose any conditions to such rights "as are necessary to promote the rights and interests of the community, including conditions requiring the participation of the community.”
"Community" is defined in clause 1(c) of the Bill as:
"a group of historical disadvantage persons [sic] with interest or rights in a particular area of land on which the members have or exercise communally rights in terms of an agreement, custom or law"
This may result in a situation where the Minister imposes conditions on a prospecting right or a mining right which go beyond the requirements of the Mining Charter
No guidance is afforded to the Minister as to:
what conditions are "necessary to promote the rights and interests of the community"
what form of "participation" in a prospecting right or a mining right the Minister may require

10. The Minister’s new powers in respect of land occupied by a “community” continued
This is contrary to the rule of law requirement (section 1(c) of the Constitution) as the MPRDA provides no guidelines as to how the discretion to decide what conditions are "necessary to promote the rights and interests of the community" should be exercised
The principle of the rule of law in relation to discretionary power was discussed by the Constitutional Court in Affordable Medicines Trust and others v The Minister of Health and others 2006 (3) SA 247 (CC), where the court held:
"Where broad discretionary powers are conferred, there must be some constraints on the exercise of such power so that those who are affected by the exercise of the broad discretionary powers will know what is relevant to the exercise of those powers or in what circumstances they are entitled to seek relief from an adverse decision".
Moreover, the definition of "community" in clause 1(c) of the Bill is very wide and it is unclear what the exercise by "historical disadvantage persons [sic]" of rights in land in terms of "custom" means.
We accordingly suggest that the proposed additions to sections 17, 23 and item 7 of Schedule II to the MPRDA are deleted.

11. Amendment to section 17(2)(b) of the MPRDA – clause 13(e) of the Bill
The proposed s 17(2)(b) requires the Minister to refuse to grant a prospecting right if it results in a “concentration of the mineral resources in question under the control of the applicant and their associated companies with the possible limitation of equitable access to mineral resources”
The Bill does not provide the Minister with any guidance as to:
what an "associated company" means
what constitutes a "possible limitation of equitable access to mineral resources”; and
what constitutes a "concentration of mineral resources"
The Minister must therefore refuse to grant a prospecting right to a company dominant in a particular mineral when faced with a competing application from a company which is owned by historically disadvantaged South Africans
This will have a chilling effect on exploration activity by major mining companies
It is difficult to see how any major mining company will ever be able to acquire a prospecting right again

12. Addition of sub-items 3A, 3B to item 7 of Schedule II to the MPRDA – clause 83(d) of the Bill
The Minister must refuse to convert a mining right if the applicant does not comply with all the requirements of item 7 of Schedule II to the MPRDA, including the requirement that the applicant provide "documentary proof" of its compliance with the MPRDA’s BEE and social upliftment objects
The proposed amendment:
has serious implications for security, as well as continuity, of tenure
does not take into account the negative consequences for the mining company, its workforce or investor sentiment
has the potential to create frustrating bureaucratic delays as well as disagreement as to whether or not a mining company has met the BEE and social upliftment objects of the MPRDA
contradicts assurances previously provided by the Director-General of Minerals and Energy ("the DG") that mining companies “will automatically convert” old order mining rights
(“Last year marks watershed" Financial Mail 30 March 2007)
should, accordingly, be deleted

13. Conclusion
The Bill presented an opportunity to promote investment in South Africa’s mining industry
The Bill, however, appears to be a regulatory lost opportunity
Webber Wentzel:
would be happy to provide written drafting proposals on the Bill
requests an opportunity to comment on the environmental aspects of the Bill, which we have not had sufficient time to analyse