Leon warns of MPRDA Amendment Bill consequences

3rd June 2014 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

Leon warns of MPRDA Amendment Bill consequences

Peter Leon
Photo by: Duane Daws

JOHANNESBURG (miningweekly.com) – The Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill’s pursuit of beneficiation in an economy that was not fully equipped to leverage the benefits could place strain on South Africa’s mining companies whose core focus was extracting the minerals.

This emerged at a Deloitte in Conversation discussion, entitled ‘Strategic implications of the MPRDA Amendment Bill’, on Tuesday, ahead of the expected promulgation early next year of the contested Bill.

Speakers at the event highlighted that, despite visible efforts to improve the regulatory system, remove ambiguities and streamline administration, the unintended consequences of the new Bill could create further difficulties for mining companies operating in an already strained environment.

And its stipulation that a certain amount of designated minerals needed to be beneficiated locally before exports could be pursued placed the nation and its exporters in breach of several international trade agreements, as well as jeopardised existing long-term export offtake agreements.

Speaking at the Deloitte-sponsored discussion, Webber Wentzel partner and head of the mining regulatory group Peter Leon said the Bill set out that any company wishing to export a mineral or mineral product must first comply with the beneficiation provisions and must receive written approval from the Mineral Resources Minister.

But this contravened the provisions of the World Trade Organization's General Agreement on Tariffs and Trade, to which South Africa is a party, among other trade law agreements, which prohibited quantitative restrictions on exports and export licensing.

The Minister was required to consult the various relevant national departments and take into account macroeconomic stability, energy security, industrialisation, food security and infrastructure development, besides others, before the designation of minerals, and the intent must be published in the Government Gazette.

However, the Minister was afforded wide discretionary powers to set the percentages, quantities, qualities and timelines for beneficiation in regulations, and to determine the terms and conditions applicable to beneficiation of mineral resources.

“The Zuma administration is particularly fixed on mineral beneficiation as the way to create jobs and uplift the economy,” Leon said, but he noted that the promotion of compulsory beneficiation of minerals as outlined in the amendment was not linked to the economic feasibility of beneficiation.

Beneficiation was energy intensive and South Africa did not have a well-established beneficiation industry, he explained.

“The reality is that it is currently uneconomical to beneficiate in South Africa,” Deloitte added.

Deloitte energy and resources leader Andrew Lane added that beneficiation was “difficult” and miners were not necessarily “tooled up” to undertake the task.

With a limited ability to beneficiate, mining companies needed to partner with others that had the requisite capabilities to pursue downstream manufacturing in South Africa.

“Overall, the Bill has the potential to increase uncertainty, drive up costs, and threaten investor returns, while increasing dependency on healthy stakeholder relationships,” Deloitte said.