Most Read Contributor in South Africa, September 2016
In the mining industry, where huge capital is required to
develop projects and construct mines, the ability of the listed
company to raise funds on the stock exchange is crucial. However
the Mineral and Petroleum Resources Development Amendment Bill,
2012, published in December, could severely hamper South
Africa's capital raising capability.
This is according to Otsile Matlou, Director and Head of Mining
at ENS (Edward Nathan Sonnenbergs), who says the concern is with
regards to amendments to Section 11 of the Mineral and Petroleum
Resources Development Act of 2002 (MPRDA).
"If this amendment ever became law, then South Africa's
ability to raise much needed funds for mine development and
production from the capital market would essentially cease to
exist. This would put an industry, already suffering from the
effects of a devastating industrial action and a weak global
economy, into greater difficulty," he says.
Otsile explains that the implementation of the MPRDA gave the
State custodianship of the mineral resources on behalf of the
people of South Africa. Section 11 of the MPRDA was crafted as an
anti-avoidance provision to ensure that parties do not circumvent
the objects of the MPRDA through skillful commercial
According to Matlou, Section 11 was designed to tackle two types
of transitions: asset transactions (involving the transfer,
letting, assignment or disposal of mining and prospecting rights or
any interest in such rights) and share transactions (involving the
disposal of a controlling interest in a company which holds mining
or prospecting rights).
"Parliament realised that many mining companies, including
the leading mining houses such as Anglo American, AngloGold
Ashanti, BHP Billiton, Gold Fields, Impala Platinum and Lonmin, are
listed and their shares are traded daily. An exception was built
into section 11 exempting changes of control of listed companies
from the requirement that the Minister of Mineral Resources must
consent to each and every change of control of a listed
company," he says.
However, in 2008, following four years of implementing the
MPRDA, the Department of Mineral Resources (DMR) http://www.dmr.gov.za/ identified certain
loopholes in the wording of section 11. Matlou says Parliament
sought to address these in the Mineral and Petroleum Resources
Development Amendment Act, 2008 by, inter alia, increasing the
ambit of section 11 to cover every disposal of any shares -even one
share - by a mining company.
According to Matlou, this amendment did not address the loophole
in section 11 but rather seemed to increase the difficulty of
commercial enterprise in the mining industry. "Although the
State's custodianship of the mineral resources has been widely
accepted in the mining industry, the experience of mining companies
between 2004 and 2008 was that section 11 consents took too long to
By increasing the ambit of section 11 to cover every disposal or
acquisition of any interest or share, all that Parliament was doing
in 2008 was to overburden the already stretched capacity of the DMR
to process section 11 applications and the 2008 Amendment has not
come into force," he says. The 2008 Amendment has not come
Matlou says the 2012 Bill went a step further in regard to
section 11 by proposing to delete the listed company exemption. In
simple terms, he says this means that each time a share of a listed
mining company is traded on the stock market, either on the
Johannesburg Securities Exchange or elsewhere, the Minister must
"However, it's clear that the Minister and the DMR do
not have capacity to do so. Even more problematic is the impact of
this proposed amendment on capital markets. If the amendment became
law, shares of listed companies will effectively cease to be
tradable. Clearly the State is encountering problems with how some
in the mining industry are structuring transactions to circumvent
the objects of the MPRDA.
It is therefore necessary to enact laws designed to deal with
this. Such laws must be clear and precise. In addition, the
capacity of the DMR to execute its function of regulating the
mining industry must be increased," he says.
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