A controversial new amendment to South Africa’s current mining laws is being processed, taking another step towards nationalising the country’s natural resources and scaring investors away
A NEW law is being pushed through government, which will see substantial changes introduced to the operations of mining companies and other energy enterprises across South Africa.
The new regulation, which is an amendment to the existing Mineral and Petroleum Resources Development Act of 2002, decrees that the state will receive a 20 per cent stake in all new business ventures in the energy sector entirely for free. This would effectively mean that from the start of a new mining venture, companies would operate at a 20 per cent loss by default, handing out a fifth of their own production to the state.
Furthermore, the new law will also enable the government to acquire additional shares of such new business ventures in the mineral mining and oil sector at any price put forward by the mining department, as well as force existing companies to sell part of their production output to local companies instead of favouring international players with more competitive offers.
The law would effectively force production costs to rise up under the premise of providing 20 per cent less yield to investors, while pushing sales prices down on account of having to sell part of the output off to local businesses at lower costs, making the entire future of the mining sector unsustainable, uncompetitive and, ultimately, hostile.
The proposal will have to be considered by the National Council of Provinces before being signed into law by President Jacob Zuma. However, the proposed amendment was finalised in the National Assembly with 226 votes in favour of it and 66 against it.
The government is likely to have started pushing the new law through parliament due to the fact that the ANC is expected to lose several seats to other parties in the upcoming May elections (but is still widely predicted to maintain an overall single-party majority).
The unprecedented change in law is considered to be a major taken step towards the nationalisation of South Africa’s natural resources and follows hot on the heels of the introduction of the “Investment Bill”, which itself empowers the state to expropriate any privately-owned land for mining or agricultural purposes as the government sees fit – if needed even without reimbursement.
Critics say that the move is an alarming move taking the country away from free market economics, and is bound to repel potential investors. However, Mineral Resources Minister Susan Shabangu maintained that by streamlining the legal requirements for mining in South Africa and removing ambiguities and loopholes under the amendment, the new law should serve to rather encourage investment.
“We are on the path of changing the mining and petroleum industry in South Africa, whether you like it or not. Change is painful, change is bitter, especially when you are stuck in the past. This act is about the people of South Africa,” she said.
The opposition Democratic Alliance (DA) have heavily criticised the move in the meantime, with some lawmakers calling it a “Crony Enrichment Bill”. The DA’s Shadow Minister of Mineral Resources, James Lorimer, published a statement saying, “what this Bill seeks to do is put us in a position where the Minister says to potential investors, ‘Here is a mineral prospect, offer me a deal’.”
“Does anyone really think that companies will get that deal unless they are comrades, cronies or cousins, or unless they are contributing election funds to the ANC? Other lowlights of this Bill include the power given to the Minister to block exports of mineral products.”
The DA also accused the ANC of rushing the proposal through the National Assembly while ignoring standard protocol and ignoring public dialogue. However, some experts say that the law can still be challenged as infringing on the South African constitution and hurting the parliamentary process.
With South Africa’s rich mineral resources ranging from platinum and gold to coal and chrome, the amendment is going to effect large sections of the economy for decades to come – if it does make its way into lawbooks.
By Sertan Sanderson, 2014