Green Paper

Mineral Policy of South Africa

3 February 1998

Contents

Introduction

Chapter One
BUSINESS CLIMATE AND MINERAL DEVELOPMENT

1.1 Investment and Regulatory Climate
1.2 Taxation
1.3 Mineral Rights and Prospecting Information
1.4 Small-Scale Mining
1.5 Mineral Beneficiation
1.6 Minerals Marketing
1.7 Research and Development

Chapter Two
PARTICIPATION IN OWNERSHIP AND MANAGEMENT

Chapter Three
PEOPLE ISSUES

Chapter Four
ENVIRONMENTAL MANAGEMENT

Chapter Five
REGIONAL CO-OPERATION

Chapter Six
GOVERNANCE

Appendices

Consultative Process Conducted by the Mineral Policy Process Steering Committee
Record of Mineral Policy Meetings and Submissions
List of Abbreviations and Names
Legislation Cited
Commissions Cited

Invitation for Public Comments

The public is invited to respond to the Green Paper on the Mineral Policy of South Africa. Written responses should reach the Department of Minerals and Energy at the address below not later than 31 March 1998.

Written comments on the Green Paper should be sent to:

The Director
Minerals Bureau
Private Bag X4
Braamfontein
2017

Attention: Ms TD Gcabashe

Telefax: (011) 403-2061
E-mail: Rita@mejhb.pwv.gov.za

For further enquiries please phone:

Ms TD Gcabashe at (011) 339-4414 ext 407
or
Ms MS Gaven at (011) 339-4414 ext 408

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 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.

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.

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

1. 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 ore bodes, 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

1. 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

1.3.1.2 Ownership of mineral rights

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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

1.3.1.4 Other jurisdictions

1. 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.
2. 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

1. 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.
2. 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

1. 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.
2. 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

1. 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.
2. 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.

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.

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

1. 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.
2. Government’s long-term objective is for all mineral rights to vest in the State.
3. State-owned mineral rights will not be alienated.
4. Government will promote minerals development by applying the "use it or lose it" principle.
5. 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 pursuance of the objective stated in section 1.3.6.1 ii above, the following new system for granting access to mineral rights will apply:

1. i) The right to prospect and to mine for all minerals will vest in the State.
2. 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.
3. 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

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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

1. Small-scale miners require information on the availability of mineral rights and mineral deposits.
2. Access is required to mineral rights and to the surface areas necessary to exploit these rights.
3. Unfragmented and adequate information is required on mineral regulations, geology, mining and environmental aspects and mineral marketing.
4. Technical assistance and training is required for small-scale miners in the broad spectrum of mineral-related activities.
5. Access to investment financing is required.
6. 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.
7. Administrative procedures should be simplified and speeded up.
8. 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.
9. Tax and royalties rates, levies and financial guarantees for rehabilitation should not constrain the development of small-scale operations.
10. An integrated and co-ordinated approach is required from all the government departments and other agencies to promote and develop small-scale mining activities.
11. 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

1. Minimum standards in respect of the environment should be maintained for all mining operations.
2. Other land-use options should not be curtailed by small-scale mining activities.
3. Health and safety standards and the rights of workers should be maintained in small-scale mining operations.
4. Development of the mineral potential of especially the underdeveloped regions of the country is required.
5. Communities should be consulted regarding mineral development and should enjoy lasting benefits from such developments.
6. Government should promote and encourage small-scale miners to operate within sound business principles.
7. The deleterious effects of artisanal or subsistence 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

1. Information on mineral rights and mineral deposits available for development will be made accessible, particularly for the benefit of small-scale miners.
2. 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

1. Access to funding for small-scale mining will be encouraged and facilitated through appropriate and targeted institutions.
2. 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.
3. 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.
4. 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.
5. 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.
6. All spheres of government and development agencies will work towards co-ordinating their activities in respect of the promotion of small-scale mining activities.
7. 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.
8. Government will facilitate the mutually beneficial co-existence of big and small-scale mining operations.

1.4.4.3 Regulation and administration

1. Mining regulations will be administered consistently, while adopting an approach of guidance and advice towards small-scale miners.
2. The DME, in conjunction with other relevant Government departments, will streamline the regulatory and administrative procedures in respect of mineral exploration and exploitation.
3. Health and safety standards will be maintained in small-scale mining operations.
4. Processing of the Environmental Management Programme Reports (EMPRs) will be expedited.

1.4.4.4 Environmental management

1. 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.
2. Government will support the provision of training and skills development for small-scale miners in environmental management.
3. Intensive environmental management guidance will be provided in areas where there is a high concentration of small-scale miners.
4. Financial guarantees for rehabilitation will be flexible and site specific.

1.5 Mineral Beneficiation

1.5.1 Background

1. 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 jewelry.
2. 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.
3. 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.
4. 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.
5. Economic and fiscal certainty is required for the long-term planning needed for developments of the magnitude of mineral beneficiation projects.
6. Raw materials prices paid by local beneficiators should not place them at a disadvantage in relation to overseas competitors.
7. Stable and competitive tariffs for electricity and the transport of beneficiated products are required.
8. Hurdles to beneficiation include a limited local market for beneficiated products, high capital costs and a lack of technology in certain fields.
9. 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

1. Beneficiation projects should be initiated on the basis of market forces and decisions taken by individual companies pursuing well-considered business objectives.
2. Demand-side factors, such as relationships with existing customers, should be taken into account in respect of mineral beneficiation.
3. Measures instituted to promote mineral beneficiation should not be detrimental to the international competitiveness of the mining industry in respect of unbeneficiated mineral exports.
4. Raw materials prices should be determined by the market and not by Government.

1.5.3.2 Other views

1. 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.
2. Policies and regulations that constrain the acquisition and ownership of precious metals and minerals by jewelry manufacturers should be reviewed.

1.5.4 Policy Proposals

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. Decisions regarding beneficiation projects will be based on sound economic principles.
8. Prices for minerals and processed mineral products will be determined by the market.
9. Policies and regulations that constrain the development of the local jewelry 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 the economy 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

1. Government intervention in respect of minerals marketing should be limited to protecting the national interest.
2. Transfer pricing should be dealt with by law enforcement.
3. There may be merit in researching co-ordinated marketing of certain commodities as a means to increase foreign exchange earnings.
4. The potential role of a mineral marketing audit office should be researched.
5. 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

1. The view that the State could match the marketing and sales performance of the private sector is contradicted by experience elsewhere in the world.
2. Government intervention in minerals marketing is unwarranted and harmful and is emphatically opposed by mining companies.
3. 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.
4. The imposition of a levy on sales is opposed as an unnecessary additional form of taxation.
5. 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

1. The marketing of minerals in South Africa will be determined by market forces. State intervention will generally be limited to addressing market failures.
2. 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.
3. 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.
4. Government will encourage and support market development by producers.

1.7 Research and Development

1.7.1 Background

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. In instances where mining houses have identified advantages they have co-operated on research and development activities.
8. 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

1. Research and development undertaken by the State should be user influenced and complement private sector activity.
2. 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

1. Appropriate fiscal incentives for research and development need to be developed.
2. 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.
3. There should be a provision within the Mine Health and Safety Act to make levy funds available for the administration of SIMRAC activities.
4. Capacity relating to the minerals and mining industry within various research institutions should be developed.

1.7.4 Policy Proposals

1. 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.
2. The recommendations of the Leon Commission on the restructuring of SIMRAC, i.e. the need for competent research management and overseeing of its programmes, will be implemented.
3. 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.
4. A system of matching grants will be considered for funding research and development projects.
5. Focussed and co-ordinated research on economic geology will be supported by Government and industry to attract exploration investment to South Africa.
6. 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.

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

1. Government is unshakable 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.
2. 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.
3. 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.
4. The Government has decided not to embark upon a programme of nationalisation to reverse ownership patterns in the mining sector.
5. 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.
6. 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

1. The State should take a constructive interventionist role in altering the patterns of ownership in the industry and promoting black ownership at all levels.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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

1. Participation and ownership issues are of general application and should not be at the core of mining and minerals policy.
2. 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.
3. 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.
4. Removal of discrimination is already well advanced via legislative and regulatory change supplemented by education, training, work reorganisation and other corporate initiatives.
5. 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.
6. 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

1. Government will continuously promote a wider spread of ownership and seek to facilitate acceleration of the changes that are already under way.
2. 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").
3. Government will encourage real worker participation in the management of all mines.

Chapter Three

PEOPLE ISSUES

The mining industry provides jobs for over half a million people directly, and for many more when both up- and down-stream multiplier effects are taken into account. The industry has created towns and nodes of economic development throughout the country. Because of the nature of the work, especially in the very deep mines, the industry has provided large numbers of employment opportunities for less skilled workers, from South Africa itself and from the region.

The labour situation in mining has been associated with the most controversial aspects of colonial and apartheid rule. These include pass laws, compounds, the migrant labour system, the reservation of skilled work for white people, and the denial of trade union rights to black workers up until 1982. The special control of mine labour and application of racial domination in the industry pre-dates the apartheid era by three-quarters of a century.

Reform began, slowly at first, in the early 1980s. While the process of change has accelerated in the past few years, the legacy of decades of discriminatory practice cannot be eradicated overnight - indeed the impact of some reforms will take a good many years to be fully visible.

Across the labour market as a whole, Government has embarked upon a programme of legislation that will ensure that the momentum of change is maintained. The tripartite approach embodied in the National Economic Development and Labour Council (NEDLAC) and other relevant statutary bodies should help underpin the process of constructive engagement among the concerned parties.

Improving relationships between people in the industry, allowing opportunities for human development and addressing the need for a safer and more healthy working environment are essential if the mineral wealth of the country is to be used to its greatest potential. At the same time, the industry has shed almost a third of its jobs in the last eight years and this trend of shrinking employment levels, in the gold sector in particular, is likely to continue, although its timing and scale cannot be accurately anticipated. A major challenge lies ahead in managing the social consequences of downscaling in the industry - which extends to linked industries and to urban and rural communities all over Southern Africa.

3.1 Mine Health and Safety

3.1.1 Background

1. The current fatality, injury and disease rates in the South African mining industry are unacceptably high.
2. Following the 1995 report of the Leon Commission of Inquiry into Health and Safety in Mines, Parliament has passed the Mine Health and Safety Act, 1996. It is hoped that this will lead to a significant improvement in the health and safety profile of the South African mining industry.
3. At national level, tripartite institutions have been established in terms of the Act. These institutions will continually influence policy development and law on matters relating to health and safety in line with the provisions of the Mine Health and Safety Act:
1. The Mine Health and Safety Council will advise the Minister of Minerals and Energy on health and safety at mines.
2. The Mining Qualifications Authority will advise the Minister of Minerals and Energy on education and training policy in the mining industry, in line with the Mine Health and Safety Act of 1996 and the South African Qualification Act of 1995.
4. The Mine Health and Safety Inspectorate has been restructured as a separate branch under the Chief Inspector, within the Department of Minerals and Energy.
5. At mine level, the manager is required by the Act to develop and implement a health and safety policy, based on the officially approved policies set at national level and in consultation with health and safety committees at the mine which include management and employee representatives.
6. The health and safety policies that are developed at national level and mine level are implemented within a context that is laid down by the Act:
1. In pursuance of a health and safety culture each mine must establish a policy that will incorporate the employees’ rights set out in the Mine Health and Safety Act:
1. the right to representation and participation;
2. the right to education and training;
3. the right to health and safety information;
4. the right to leave a dangerous working place.
2. All employees have the responsibility to:
7. take care of their own health and safety and safety of others who may be affected by their activities;
8. use and take proper care of protective clothing, and other health and safety facilities and equipment provided for that purpose;
9. report any situation which presents a risk to the health or safety of persons;
10. comply with the provisions of the act.
11. Previous legislation did not, in practice, address the occupational health care and compensation problems of mineworkers.
12. The spread of HIV/AIDS through the workforce is likely to be a feature of the mining and other industries over the next decade and beyond.
13. There are health and safety problems associated with small-scale mining which the current legislation and government policies do not adequately address.

3.1.2 Intent

Government will promote healthy and safe working conditions in all mines and deal humanely with the health consequences of work in the mining industry.

3.1.3 Policy Requirements

3.1.3.1 Views of the employers

1. Policy should have as its objective the creation of an affordable, equitable and sustainable health-care system for employees.
2. It is imperative that regulations governing safety in mines should be realistic and practically enforceable and are focused on areas where they are most needed.
3. Health and safety in mines should be regulated by Acts of Parliament.
4. Employees must accept the obligation to comply with safety standards.
5. Government should develop a national HIV/AIDS plan in consultation with all stakeholders.

3.1.3.2 Views of labour

1. Trade union representatives should be included in decision making on health and safety matters.
2. Health and safety training for employees should take a priority position in the training programmes of the mines.
3. The capacity of the Department of Minerals and Energy to deal effectively with health and safety issues needs to be upgraded urgently.

3.1.3.3 Other views

1. The State must recognise the cost to society and especially to rural communities of disabled and ill mineworkers and ex-mineworkers. It must be recognised that these persons have little or no chance of re-employment and must rely on disability payments or pensions.
2. The State must recognise the health and safety aspects associated with small-scale mining.

3.1.4 Policy Proposals

1. Government will expedite the full implementation of the Mine Health and Safety Act and the recommendations of the Leon Commission.
2. Government will, in consultation with employers and labour, develop a programme in the mining industry that ensures the physical, psychological and vocational rehabilitation of disabled workers to enable them to earn a living.
3. A national database on occupational health will be developed that reflects the prevalence and incidence of occupational disease among mineworkers and ex-mineworkers. (Policy in regard to currently employed mineworkers will be developed by the Mine Health and Safety Council (MHSC) in terms of the Mine Health and Safety Act. Policy for ex-mineworkers will be developed by the Department of Health in consultation with the MHSC).
4. Government will, in consultation with employers and labour, review the system of compensation payouts to mineworkers and ex-mineworkers in the light of increases in the cost of living.
5. The system of implementing proper medical care for disabled and diseased ex-mineworkers will be reviewed
6. A coherent and comprehensive policy towards HIV/AIDS will be developed by the State in consultation with the stakeholders as part of a national policy. Government will address the manner in which epidemiological research into HIV/AIDS is conducted; and specifically the manner in which mineworkers are tested, and counselled, educated and treated.
7. The International Labour Organisation Safety and Health in Mines Convention will be referred for consideration to the National Economic Development and Labour Council and the MHSC before ratification by Government.
8. Whilst maintaining health and safety standards in the small-scale mining sector, Government will review current legislation to ensure that the relevant provisions are practically applicable.
9. Government has accepted that a properly structured system of administrative penalties could be more effective than a system of criminal enforcement in achieving the ultimate goal of the Mine Health and Safety Act, which is to improve health and safety in the mining industry. In this regard, Government will, in consultation with employers and labour, introduce an appropriate system of administrative penalties into the Act to replace, in respect of certain offences, the current system of criminal sanctions.

3.2 Human Resource Development

3.2.1 Background

1. The mineral industry has been characterised by racism in past practices of job reservation and in restricted access to training and advancement. Problems that are present, but not confined to the minerals industry, are a poorly developed human resource base and a concentration of skills and positions of responsibility in the hands of whites.
2. The advancement of black workers and professionals into positions of seniority and into management in the mining industry has been limited.
3. The majority of mineworkers have not had access to education and training opportunities and, as a result, the majority are functionally illiterate. This situation has a negative impact on safety and health standards and on productivity.
4. In recent years, many mining companies have made efforts to redress past discrimination and to ensure that individuals with potential have the opportunity to reach higher levels of responsibility in the industry. Although aggregate statistical evidence is not yet to hand, individual mining houses report that a good majority of their apprentice artisans, learner-miners and other trainees are black and that, given the country’s demography, this situation will continue into the foreseeable future. Over and above expenditure on training for purposes of ensuring a more productive and safer workforce, individual mining companies have invested in the education of communities connected to their activities. Up until now, training provided by mining companies has been, perforce, fragmented and lacks national standardisation. This situation is being addressed by the South African Qualifications Authority Act.
5. The Mine Health and Safety Act provides for the establishment of a Mining Qualifications Authority (MQA) which will advise the Minister of Minerals and Energy on education and training policy in the mining industry.
6. A more comprehensive concept of human resource development which aims to have a more efficient, productive and better paid workforce through education and training is being adopted by all role players. This will upgrade the quality of life of the entire workforce.
7. The Leon Commission has found that it is unsatisfactory to use Fanagalo as the language of the mines, because the language has a very limited vocabulary. While it may be satisfactory for giving simple commands it is quite inadequate to convey the nature and extent of the dangers that lurk beneath the surface, the source of such dangers, and how best to avoid them.

3.2.2 Intent

Government will encourage, support and facilitate human resource development in the mining and mineral industry.

3.2.3 Policy Requirements

3.2.3.1 Views of the employers

1. Primary responsibility for education from the basic to the advanced level lies with the State through the academic and vocational education system.
2. For a competitive industry, South Africa needs an education and training system which provides a high quality secondary and tertiary education to meet the industry's operational and strategic needs in a cost-effective manner. The learning system should provide employees with flexible skills and attitudes to contribute to the profitability and safety of the enterprise.

3.2.3.2 Views of labour

1. Full union participation in structures dealing with education and training issues, from mine level to industry level, is essential.
2. Education and training needs to incorporate a new set of values reflecting democratic change in the country.
3. Education and training programmes provided by the unions should be recognised by the State and by mine employers. Union committees should have access to proper facilities from which to conduct their duties in the workplace. They should have access to training venues and equipment in order to conduct steward and membership education and training.
4. Educational subsidies, including contributions from the mining industry, should be made available for the study of disciplines related to mining in line with general policies on support for technical and vocational training.
5. An industry training fund should be established via a small training levy on the mining industry wage bill. Mining companies providing or funding recognised training should be refunded from the training fund.
6. In line with the National Qualifications Framework, on-mine training programmes and capacity building should be adapted to incorporate life-long skills and to provide flexibility in workers’ career paths to assist miners to find post-mining employment in the context of downscaling and mine closure.

3.2.3.3 Other views

1. Entry of black students to minerals-related fields of study needs to be promoted to overcome the legacy of past discriminatory practices.
2. Hardships caused by job losses due to retrenchments and mine closures need to be ameliorated through appropriate education and training programmes to provide affected workers with enhanced employment possibilities, whether within the mining industry or elsewhere.

3.2.4 Policy Proposals

1. Government will support and promote provision of appropriate education and training in the mining industry. Particular emphasis will be placed on Adult Basic Education and Training (ABET), and health and safety training at all levels.
2. ABET will be aimed at the following:
1. to provide workers with an education and training base for further learning and career path advancement;
2. to enhance health and safety in the workplace;
3. to develop workers’ skills and understanding to enable them to participate more actively in the process of change within the workplace and the community;
4. to contribute to the removal of all discriminatory barriers within the industry, particularly those of a racial nature.
3. The Department of Minerals and Energy will continue to promote representivity and redress past imbalances in selection of staff and in its support for internal education and training.
4. Government will discourage the use of Fanagalo as a medium of communication in the minerals and mining industry. The language policy of the mining industry will be guided by the multi-lingual reality of South Africa, and constitutional rights regarding language.
5. Government will require that all learning achievements in the minerals and mining industry are registered on the National Qualifications Framework, to enable people to progress through various learning pathways, across levels of learning, and throughout their lives.
6. Funds of the Mining Qualifications Authority will consist of monies appropriated by Parliament; monies collected in terms of the Mine Health and Safety Regulations and other applicable laws; fees obtained from services provided by the MQA; and any other monies received from any other source.
7. Government will ensure that people in the minerals and mining industry have access to quality education and training so that they can gain the knowledge and skills they need for work and to improve their lives.

3.3 Housing and Living Conditions

3.3.1 Background

1. Hostels have been a significant feature of the system of labour on the mines since the birth of the modern mining industry in the late nineteenth century. Workers were often forced to live in austere, regimented single-sex hostels, subject to strict legal and extra-legal controls.
2. The housing and living conditions for many workers in the mining industry are sub-standard. These conditions impact adversely on their health, productivity and well-being.
3. The hostel system for black workers has been run on racial and ethnic lines and has been discriminatory.
4. Progress has been made in upgrading hostel accommodation which has, in some instances, included the provision of married quarters.
5. Since mining operations are frequently located far from existing settlements, the provision of housing has been undertaken by employers as part of the infrastructure required to develop the mine. South Africa is unusual among the world’s major mining countries in the provision of accommodation by employers.
6. There is merit both in continuing to provide accommodation (and to upgrade accommodation), within the constraints of costs, and in encouraging and facilitating home ownership/rental by employees within nearby communities.
7. The large number of workers housed in hostels and the costs of converting such accommodation requires a planned and phased approach to improving mineworkers’ living conditions. The principles of choice and full consultation with key stakeholders should apply to the planning and implementation of upgrading of accommodation and living conditions.
8. The whole structure of mining towns and settlements must be altered to integrate mineworkers into the local economy and to end the racially discriminatory provisions that apply to housing for black mineworkers.

3.3.2 Intent

To seek to ensure that all employees have a choice in their pursuit of suitable housing and living conditions.

3.3.3 Policy Requirements

3.3.3.1 Views of the employers

1. Accommodation should be affordable and sustainable.
2. Financing schemes used to improve mineworkers’ living conditions should be based on payment for services rendered.
3. Housing is part of remuneration and is settled by collective bargaining.

3.3.3.2 Views of labour

1. A range of tenure types should be offered to workers including rental accommodation, home ownership and social housing. Housing options should include single and family accommodation, accommodation in nearby settlements where feasible, and accommodation in mineworkers’ home areas. The principle of choice for mineworkers over a wide range of flexible housing options should apply.
2. Existing hostels on mines should be converted over time into family units and into single units for miners without families, or who elect not to live with their families. Included in the provision of family housing should be community and education services and facilities.
3. Every mine should, in conjunction with representative trade unions, be required to draw up a five-year plan for the improvement of living conditions for workers, incorporating specific targets.
4. The management of hostels must be democratised so that residents participate jointly with mine management in all areas of decision making around running the hostels.

3.3.3.3 Other views

The provision of family housing should be associated with expanded community services and facilities, including education.

3.3.4 Policy Proposals

1. Government will, in consultation with the Mine Health and Safety Council, propose measures regarding the standard of housing and nutrition of employees who are accommodated at mines. These measures should include the monitoring of compliance.
2. iGovernment will investigate the improvement of housing and accommodation for workers and their families at mines, with due regard to the sustainability of communities thus established.
3. State assistance for both the upgrading of hostels to single accommodation and the conversion of hostels to family housing will be investigated.

3.4 Migrant Labour

3.4.1 Background

1. The system of migrant labour for black workers in the mining industry is deeply entrenched in the industry and within communities that have supplied labour for the mines, in some cases for over 120 years.
2. The system was used by the mining industry to provide labour at low wages and low cost for the labour-intensive work on the mines. At the same time political, economic and social factors affecting rural communities throughout Southern Africa made migrant labour in many instances the only option to generate income.
3. Migrant labour is associated with a range of negative consequences including the denial of normal family life to migrant workers, poor living conditions in single-sex hostels, and social disruptions including the break-up of marriages.
4. The underdevelopment of parts of South Africa and of foreign countries supplying labour has created a situation of dependence on migrant labour for jobs and mineworkers’ remittances. Approximately half the Gross National Product of Mozambique and Lesotho comprises mineworkers’ remittances. As a result, individuals, communities and foreign countries have an interest in preserving the current system.
5. Mine employment patterns show a trend towards stabilisation of the workforce and a greater reliance on local recruitment. Despite such trends, migrant labour from rural areas within South Africa and from neighbouring countries will be a feature of mine employment for a long time to come.
6. Migrant labour is an important topic that affects the mining industry. It is a complex issue that is under consideration by the Chamber of Mines, the Employment Bureau of Africa, the National Union of Mineworkers and the South African and foreign governments.
7. The Labour Market Commission of 1996 considered a new approach for dealing with access to the SA labour market by non-South African nationals. The Commission:
1. believes that the migrant labour system should be phased out, but that in the process the terms of access of citizens of the Southern African region should be easier than for citizens of other countries;
2. finds that compulsory deferred pay arrangements constitute a human rights violation;
3. recommends that the current migration policy be thoroughly reviewed. Policy should be informed by a coherent set of non-discriminatory principles based on international norms. The revised policy will be effected by a single immigration statute governing the entry of all foreigners into the country.

3.4.2 Intent

The system of circulating migrant labour will be regularly reviewed with the intention of minimising the adverse social consequences. In the longer term, Government will seek to phase out the migrant labour system.

3.4.3 Policy Requirements

3.4.3.1 Views of the employers

1. The principle of choice for employees and for employers over the offering and the engaging of labour should apply.
2. Mining companies should have the right to hire workers from anywhere they choose without restraint, including all the countries in the region.
3. Employers and employees should have the right to agree upon conditions of employment suited to their mutual needs.

3.4.3.2 Views of labour

1. There should be no discrimination against mineworkers on the basis of their geographical origin.
2. Workers on South African mines should be granted the same rights and freedoms as all other workers in the country. Employers and foreign states should be prohibited from treating migrant workers as a special category as they have in the past.
3. Employment contracts for mineworkers should be identical to those for all other workers. Workers and their trade union representatives should be entitled to re-negotiate their employment contracts directly with their employers and not be compelled to return home to do so.
4. As the mining industry cuts its labour requirements through the increased use of technology and stabilises its workforce, it is likely that foreign and less-skilled migrant mineworkers will suffer most as they are the least equipped to deal with the consequences of job loss and have fewer job opportunities. It is important that the interest of these workers are safeguarded.
5. Use of foreign labour should be regulated. The regulation should be aimed at keeping the volume of labour from outside at acceptable levels so that the region is supported in the process of addressing the endemic unemployment without unleashing anger in South Africa. However, people already working in the mining industry should have a right to retain those jobs.

3.4.4 Policy Proposals

1. The migrant labour system as it applies to the mining industry in its present form will be reformed.
2. Government will convene a South African regional forum for multi-party consultation on changes to the migrant labour system in order to protect the interests of migrant mineworkers and to manage the effects on neighbouring countries and on labour-supplying regions within South Africa.
3. Government will continue to permit citizens of the South African Customs Union countries and Mozambique access to the mining labour market on an acceptable basis.
4. Government will instigate a review of the system of compulsory deferred pay with a view to it being phased out after consultations with affected parties. Voluntary deferred pay schemes will be permitted.
5. Foreign miners will have the right to be treated as any other potential immigrant to South Africa or temporary resident. Employers will be required to observe the regulations and protocols of immigration law in their hiring practices. All the rights and benefits of a particular category of employment will be enjoyed by foreign miners, including the right of temporary residents to bring accompanying dependants into the country. Migrants will be eligible for permanent residence or citizenship once they have worked in South Africa for the required period. Years worked will be deemed continuous notwithstanding the annual end-of-contract breaks.
6. South Africa will subscribe to the International Labour Organisation conventions on migrant labour where relevant to the country’s situation. Government will refer these conventions to the National Economic Development and Labour Council prior to their ratification.

3.5 Industrial Relations and Employment Conditions

3.5.1 Background

1. It is the duty of the State to create a framework that will facilitate a healthy and productive relationship between employers and employees.
2. The Labour Relations Act provides a framework for industrial relations in the mining industry to take a less adversarial and more productive approach than has existed hitherto. This should underpin workplace efficiency and national economic growth.
3. The Labour Market Commission has recommended that the Department of Labour establish a Section for Mining within the Chief Directorate: Labour Relations. This directorate would be responsible for facilitating smooth industrial relations in this industry and, in particular, for facilitating the establishment of workplace forums and councils and putting in place the necessary training and guidance infrastructure.
4. In terms of the Mines and Works Act, mining on Sunday is prohibited. Essential maintenance work is allowed on Sundays. Additional work may be permitted by the Minister of Minerals and Energy "in the national interest". Extended operating times, not only in mines but in other sectors of the economy, has important employment creation potential. The prohibition on Sunday work in general and the regulation of working hours in the mining industry in particular, were seen by the Labour Market Commission as detrimental to the productivity of labour and capital.

3.5.2 Intent

Government will create a framework to facilitate a productive and non-adversarial approach to industrial relations and ensure that minimum standards apply to work in mining.

3.5.3 Policy Requirements

3.5.3.1 Views of the employers

1. All the necessary institutional arrangements are in place for meaningful discussions between employers and employees on all issues of mutual interest in the workplace. Any Government attempt to influence the balance between employers and employees could have serious implications, not only for the workplace partners, but also for Government itself.
2. In the new approach to industrial relations and improvement in workplace conditions, relationships should encourage rather than inhibit workplace efficiency and flexibility in a balanced and performance-based system.
3. Industrial relations matters are best left to arrangements agreed between employers and employees. Government should commit itself to ensuring a legislative and regulatory environment which secures opportunity for the workplace parties to settle their affairs without intervention.

3.5.3.2 Views of labour

1. The same basic conditions applicable to other workers should be extended to mineworkers.
2. There should be a national job grading system, linked to a national minimum wage safety net. Profit sharing across the industry should be facilitated by new tax laws and tax paybacks to ensure that the ‘same job, same pay’ principle can be implemented across the industry. This system should be developed by a commission of inquiry under Government guidance. This will necessitate the formation of a National Bargaining Council for the mining industry, which should be encouraged by Government policy.

3.5.4 Policy Proposals

1. Government will investigate the feasibility of using the machinery of the Employment Standards Commission to set safety-nets to collective bargaining in specific sectors of the mining industry where statutory wage protection measures are not in force.
2. Government will encourage the formation of workplace forums in every mine.
3. Government will facilitate a process to establish a Bargaining Council for the mining industry.
4. Government will review the current restriction of Sunday work. It will be guided in this regard by the findings of the Labour Market Commission, the result of negotiations between employers and trade unions, and the outcome of discussions between the Departments of Minerals and Energy and Labour.

3.6 Downscaling

3.6.1 Background

1. Since 1987, the South African mining industry has shed over 250 000 jobs. A substantial number of jobs have also been lost in the industries supplying mines and providing goods for mineworkers and mining communities. The social costs of this process have been huge. The remoteness of many mines and their dominance in local economies make mine downscaling a particularly destructive process. A disproportionate burden of suffering has been and is being borne by workers and their families in rural areas, which have, for generations, supplied labour to the mines and in mining towns.
2. Mining involves the extraction of finite resources and there inevitably comes a time when a mine must close. Up until 1987, mine closures were more than compensated for by the expansion of existing mines and the establishment of new operations. This pattern has now been broken. The depletion of ore reserves, combined with labour-saving technology required to improve competitiveness, will ensure a contraction of mining employment for the foreseeable future. A decline in a long-established mining centre has enormous knock-on effects for regions and for provinces, particularly when volatile economic events dictate the pace of contraction.
3. Government policy on the national management of the social consequences of industrial restructuring is currently under review within the National Economic Development and Labour Council.
4. The Labour Market Commission has recommended the adoption of a social plan approach to structural job losses such as those which are at present a feature of significant parts of the mining industry.
5. The social plan may encompass a wide range of interventions, some in the traditional areas of "active labour market policy", others in the areas of regional/local economic development and rural development. It is an attempt to ameliorate the significant social disruption generated by structural employment loss and, more ambitiously, to create a formulation for future development both of individuals and of communities and localities. Social plans must be stakeholder driven, and firmly rooted in collective agreements and social accords. The following is proposed by the Commission:
1. an amendment to the Labour Relations Act to include specific reference to the negotiation of a social plan;
2. the development of a capacity within Government to advise on the structuring of a social plan and, in partnership with relevant industry training bodies, to facilitate training programmes;
3. the establishment of a Social Plan Fund to support strategies and programmes negotiated between employers and workers facing structural employment decline. State funding should only be provided to augment financial contributions negotiated between employers, unions, municipalities and provincial governments in a partnership to deal with the consequences of employment loss in a community.
6. Substantial benefits would accrue to the country if mines could continue to operate profitably until their reserves have been fully exploited. It may be in the national interest to provide some form of temporary assistance to those mines which have the potential to bring to account their remaining orebodies profitably. These considerations obviously apply particularly in local areas dependent on the mining industry and therefore vulnerable to its contraction.

3.6.2 Intent

Government will endeavour to ameliorate the social consequences of sizeable downscaling and mine closure.

3.6.3 Policy Requirements

3.6.3.1 Views of the employers

1. Existing laws already require extensive consultation with the workforce in the event of significant down-sizing. The downscaling process, in all its aspects, is most appropriately dealt with by collective bargaining.
2. Employers need to be fully informed of existing government programmes that may be of assistance to retrenched workers.
3. Because of the general level of unemployment and because of the remoteness of many mines, retrenched mineworkers often experience difficulty in finding alternative employment. Government has an important role to play, firstly, in co-ordinating counselling, training and other initiatives targeted at the retrenchees through existing government programmes, and secondly, in providing an environment that encourages companies to equip retrenched employees with skills to enhance their prospects of finding jobs outside the mining industry.
4. In addition, Government should facilitate the involvement of affected communities (including municipalities) in any process intended to deal with the consequences of mine downscaling and closure.

3.6.3.2 Views of labour

1. Employers have an obligation to keep the workforce informed of developments that may impact on employment security and to plan, jointly with government and labour, measures to preserve employment or mitigate the consequences of retrenchment.
2. Labour proposes active state intervention to prolong the lives of mines and to protect the interests of workers and communities affected by forces that lead to mine downscaling. Proposals include:
1. targeted assistance from the State to prolong the lives of marginal mines;
2. a Government agency that will manage and co-ordinate processes related to mine downscaling;
3. State stewardship of mines that are scheduled for closure within five years.

3.6.3.3 Other views

1. All spheres of government need to be fully aware of the likely pace, scope and effects of mine downscaling and to co-ordinate activities in this respect.
2. Government needs to ensure that the requirements for environmental rehabilitation are properly met in the case of unplanned downscaling.
3. Alternative economic uses for mine assets and the infrastructure of mining regions need to be investigated and promoted.

3.6.4 Policy Proposals

1. Government has an obligation to assist employers, employees, industry suppliers and mine-linked communities in anticipating and managing the consequences of large-scale job losses.
2. Preserving mining employment
1. Because unemployment in South Africa is so high, every effort will be made to preserve employment in mining for as long as is economically viable and socially desirable. This goal should recognise the benefits of maximum output and foreign exchange generated by the mining industry.
2. Employment will be best protected and promoted by creation of a business climate that recognises the fundamental importance of long-term profitability and hence that encourages investment.
3. Government will investigate whether public assistance should be available for mines and regions faced with downscaling and, if appropriate, to formulate guidelines for such assistance.
3. Dealing with retrenchments and restructuring
1. Government strongly endorses the proposal that social plans capable of cushioning the impact of structural job loss be drawn up.
2. Urgent action towards drawing up social plans is required in those mining sectors and geographical areas where large-scale restructuring is underway or imminent. Legislative and institutional support for the drawing-up of social plans is required.
3. In the short term:
1. Government will develop specific capacity to monitor and forecast trends in employment and output in the mining sector. The implications of this information will be reviewed on a regular basis by a tripartite meeting convened by Government.
2. Government will draw up guidelines for the compilation of social plans on mine downscaling and closure to provide all parties with a check-list and a time frame that can be adapted to their specific needs.
3. Government will develop capacity to initiate and facilitate the drawing-up of social plans (including appropriate and affordable counselling, retraining and adjustment assistance) in consultation with the relevant government departments and with provincial authorities and municipalities.
4. In the medium term:
1. Government will introduce a provision that requires mining companies to notifiy Government in the case of retrenchments that exceed 20% of the workforce in any twelve month period.
2. Government will entrust the Advisory Board contemplated in 6.3.4 below with the task of monitoring restructuring in the mining industry and providing recommendations and options for the Minister of Minerals and Energy.
3. Government will investigate the establishment of Social Plan Trust Funds by companies on a tax-free basis similar to that which applies to the environment rehabilitation funds established by mining companies.

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