Without Prejudice December 2011
In a speech delivered on 2 August, Minister of Mineral
Resources, Susan Shabangu, gave a stern warning to the mining
industry when she indicated that the Department of Mineral
Resources (DMR) is serious about the implementation of measures to
address the "evil triplets of poverty, inequality and
unemployment" faced within the communities where mining
operations are conducted.
Legal nature of a mining right
The Mineral and Petroleum Resources Development Act 28 of 2002
(MPRDA) illustrates that the holder of a mining right, granted in
terms of the MPRDA, has a limited real right in respect of the
minerals or petroleum in the land to which such right
relates.
The court held in the Meepo case that the granting of a
mining right is contractual. It found that the minister is a
representative of the state, which is the custodian of mineral
resources in South Africa. Furthermore, it found that an applicant
is granted a limited real right by the DMR for a specified
duration, mineral, surface area, subject to the conditions
determined or agreed on. Regulation 12 to the MPRDA reiterates the
court's view when it states that the terms and conditions of a
mining right agreed upon will be approved by the minister.
What are the terms and conditions of a mining right?
The MPRDA sets out a number of terms and conditions to which the
holder of a mining right is obliged to adhere before the minister
grants the mining right. s23(1)(b), (e) and (h) highlight the said
terms and conditions imposed on the holder of a mining right
namely:
(e) The applicant has provided financially and otherwise for the prescribed social and labour plan; and
(h) The granting of such a right will further the objects referred to in s2(d) and (f) and in accordance with the charter contemplated in s100 and the prescribed social and labour plan.
s2(d), (f) and (i) stipulate some of the objects of the MPRDA which are to:
(d) Substantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nation's mineral and petroleum resources;
(f) Promote employment and advance the social and economic welfare of all South Africans; and
(i) Ensure that holders of mining and production rights contribute towards the socio-economic development of the areas in which they are operating.
Furthermore, it is interesting to note that the objects of the
MPRDA specifically address the terms and conditions with which the
holder of a mining right is obliged to comply for purposes of
addressing the "evil triplets".
The holder v the custodian
As already mentioned, the state is the custodian of the mineral
and petroleum resources, which are the common heritage of all the
people of South Africa, and the Ministry is a representative of the
state. s24(b) of the Constitution of the Republic of South
Africa adds a further emphasis with regards to the role of
the Ministry.
The MPRDA has made provision in s23(1)(d) for the preservation of
the environment in terms of which the Minister must grant the
mining right, if it will not result in unacceptable pollution,
ecological degradation or damage to the environment.
The Amendment of the Broad-Based Socio-Economic Empowerment Charter
for the South African Mining and Minerals Industry (Mining Charter)
illustrates that mineral resources are non-renewable in nature and
their exploitation must (in line with the Constitutional provisions
for ecological, sustainable development and use of natural
resources) emphasise the importance of balancing concomitant
economic benefits with social and environmental needs without
compromising future generations. This explains the paternalistic
manner of the Ministry with regard to the protection of the mineral
resources.
The DMR's mechanisms to address the "evil
triplets"
One of the striking objects of the MPRDA is to ensure that all
people, especially those seen as historically disadvantaged South
Africans, are able to benefit from the mining activities in their
communities. This must be in line with s25(4) of the Constitution,
which stipulates that every individual must have access to the
natural resources of the country.
The MPRDA and the Mining Charter are mechanism tools that the DMR
has adopted to ensure that the holders of the mining rights are
committed to the development of the community through their various
undertakings. For instance, s25(2)(h) provides for the holder of a
mining right to submit a prescribed annual report, detailing the
extent of compliance with the provisions of s2(d) and (f), which
deal with the expansion of opportunities for historically
disadvantaged persons, the promotion of employment, and the
advancement of the social and economic welfare of all South
Africans. Ultimately, the holders of the mining rights would have
used their own discretion in determining both the undertakings and
the amounts committed to. If there are any changes to the documents
submitted pursuant to the application of the right, for example the
company can no longer afford to employ as many people as were
initially contemplated, they may submit an amendment to their
mining right in terms of s102.
In addition to this, s93 of the Act stipulates that any authorised
person may during office hours, without a warrant, enter mining
production in order to inspect any operation carried out and
require the holder of the right to produce any book, record
statement or other document for inspection. One of the reasons for
these inspections is to ensure that the holder is complying with
the undertakings that have been made in the Mining Work Programme,
Social and Labour Plan, and Environmental Management Programme are
complied with.
The holder of a mining right is required to report back in terms of
compliance with the Mining Charter and must ensure that by 2014
there will be 10% participation by women and a 26% ownership by
historically disadvantaged South Africans. Furthermore, the holder
must adhere to the Mining Charter's scorecard, which dictates
that BBBEE codes have a target of 1% of net profit after tax and
must be spent on mine community development projects.
The consequences of non-compliance
The mining right granted to an applicant is not absolute. It can
be suspended, cancelled or terminated by virtue of s47 and s93. s93
of the MPRDA allows for an authorised person from the DMR to
suspend or terminate the right, if the holder does not comply with
the terms and conditions agreed upon or contravenes any provisions
of the Act. The order must be confirmed by the Director General for
it to have effect. Furthermore, s47 of the MPRDA provides for the
Minister to cancel or suspend a mining right, among others, if the
holder breaches any material term or condition of the right. This
was recently illustrated when on 26 September the DMR served a s47
notice on Central Rand Gold (CRG) cancelling its mining
rights.
But practically speaking, what happens if the holders experience
challenges and are therefore unable to implement these tools? Does
this mean that they are now at the mercy of the DMR and there is no
room for compromise? For example in the CRG matter, the company was
committed to spending R32.9 million on its social labour projects
during its first two years of operation. Due to the various
operational challenges it faced, it was only able to spend R18.8
million. This example illustrates some of the challenges
faced by mining companies in complying with the MPRDA and the
Mining Charter. With this in mind, one wonders if the DMR looks at
the holder of the right's circumstances before issuing the
notices mentioned.
It would appear that government and trade unions' perception of
the Mining Charter as good tool for transformation is one not being
embraced by the mining industry.
When served with a s93 notice, production comes to a stop. Can the
mine afford that? When the right is taken away in terms of s47 the
impact is jobs losses, loss of production and the possibility of
not acquiring another licence. The relationship between the holder
of a mining right and the custodian of the mineral resources is
weakened as the "evil triplets of poverty, inequality and
unemployment" remain unresolved. Until both the holder and
custodian of the mineral resources meet each other halfway in terms
of compliance, the "bogeyman" called nationalisation to
be laid to rest because, for some parties, this is the only
solution.
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