Proposed amendment to Minerals Bill gives minister wide discretionary powers

Posted 19 January 2013 Written by Ciaran Ryan
Category Mining

According to the latest Mining and Energy E-Alert from Webber Wentzel, proposed amendments to the Mineral and Petroleum Resources Development Act of 2002 vests the minister with wide discretionary powers.

Interested parties have until 8 February 2013 to make written submissions to the draft Mineral and Petroleum Resources Development Amendment Bill, 2012.

“While the Bill has laudable stated objects ― including to remove ambiguities that exist within the Mineral and Petroleum Resources Development Act, 2002 (the MPRDA); to streamline administrative processes; and to improve the regulatory system ― the substance of the Bill unfortunately belies these objects. This is apparent from some of the amendments discussed below,” says Mining and Energy E-Alert.

“The Bill purports to amend the MPRDA as if the Mineral and Petroleum Resources Development Amendment Act, 2008 (the Amendment Act) is in force, although the Amendment Act has never been brought into effect. It is thus necessary to read the Bill together with the MPRDA and the Amendment Act to understand the import of the proposed changes properly.”

The following are some of the key amendments proposed by the Bill (this list is not exhaustive):

  • Mineral beneficiation and restrictions on export: the Bill requires the Minister of Mineral Resources (the Minister) to initiate the beneficiation of minerals and petroleum in South Africa and grants the Minister broad discretionary powers to do so. For example, the Bill allows the Minister, in her sole discretion, to set the levels required for beneficiation, the percentage per commodity and price that is required for beneficiation, as well as the percentage of raw mineral production to be offered to local beneficiators. The Bill also requires any person who intends to export "designated minerals", a term that it fails to define, to obtain the Minister's written consent prior to doing so.
  • The ownership of tailings created prior to the commencement of the MPRDA on 1 May 1994 (historic tailings):the Bill brings historic tailings, which are currently subject to the common law of ownership, under the ambit of the MRPDA for the first time. It appears that the State will in future hold historic tailings in custody for the benefit of all South Africans, and that third parties will be able to apply for prospecting and mining rights to these tailings. A possible consequence of this amendment may mean that rights to such tailings will fall under the rights of those parties with prospecting or mining rights to the land physically underlying these tailings. This amendment may constitute an unconstitutional expropriation of historic tailings, as it would be difficult for the State to link such expropriation to a public purpose.
  • Free carried interest: the Bill grants the State a right to a free carried interest in all new exploration and production rights in the petroleum industry, with an option for the State to acquire a further interest through a designated organ of state or a state-owned entity. A "free carried interest" refers to a share in the annual profits derived from the exercise of an exploration or production right, without the State being expected to make any contribution towards capital expenditure.
  • Rule by regulation and broad administrative discretion: there are a number of clauses in the Bill (such as beneficiation and restrictions on export, mentioned above) in terms of which the Minister is granted the power to determine important issues by Ministerial regulation. This will in future be done by regulation in the Government Gazette. The Bill also deletes many of the time periods currently provided for in the MPRDA, and replaces these with reference to a "prescribed period" to be determined by the Minister. The Bill does not provide any objective criteria against which the Minister's exercise of discretion may be assessed. There is a strong argument that the discretion afforded to the Minister by the Bill is overbroad and contrary to the rule of law. The rule of law requires that the law be certain, and that the exercise of powers and discretions under the law not be undertaken in an unrestricted manner.

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