MINERAL AND PETROLEUM RESOURCES DEVELOPMENT AMENDMENT BILL 15 OF 2013

1. MINERAL AND PETROLEUM RESOURCES DEVELOPMENT AMENDMENT BILL 15 OF 2013 Parliamentary Portfolio Committee on Mineral Resources 30th JULY 2013

2. PRESENTATION OUTLINE Introduction Objects of the Amendments Proposed Amendments Environmental Management DMR /DEA 2008 Agreement MPRDA Amendment, 2008 NEMA Amendment Act Current Agreement IPIC Process

3. PRESENTATION OUTLINE NEMA Amendment Bill, 2013 Stakeholder Engagement Progress to Date Way forward Concluding remarks

4. INTRODUCTION The Mineral and Petroleum Resources Development Act,2002: Promulgated in 2002 and vested custodianship of mineral resources with the State. Gave effect to the internationally accepted right of the State to exercise sovereignty over all its mineral and petroleum resources. 10th anniversary in 2012 – ideal opportunity to review the Act. In the first decade of promulgation, the Act has created an enabling environment for growth and transformation in the mining industry.

5. INTRODUCTION CONT... The mining regulatory framework has achieved the following milestones: Foreign Direct Investment in the mining industry grew considerably from R112 billion to R389 billion, from 2004 to 2010. Employment in the mining industry grew from 448 909 to 513 211 from 2004 to 2011. Gross sales of primary minerals have appreciated from R98.5 billion in 2000 to R370.7 billion in 2011. The number of mines has increased from 993 in 2004 to 1592 in 2011.

6. INTRODUCTION CONT... Gross fixed capital formation has increased significantly from R18 billion in 2004 to R69 billion in 2011 (Data source: South African Reserve Bank). Notwithstanding tremendous progress to date on the reform of the mining industry through the MPRDA, the first decade since promulgation of the Act has provided the benefit of jurisprudence on the basis of which inherent weaknesses must be addressed. A draft Bill has been developed to address the short comings in the regulatory framework.

7. INTRODUCTION CONT... The draft Bill, 2012 was presented to ESEC on 26 October 2012. On 27th November 2012 presented to the Inter Ministerial cluster. On the 5th December 2012 presented to Cabinet & approved for public consultations. It was gazetted for public comments on the 27th December 2012. By the 8th February 2013 DMR had received 80 inputs and comments from stakeholders. On the 29th of May 2013 the draft Bill was approved by Cabinet for submission and tabling in Parliament.

8. OBJECTS OF THE AMENDMENTS To improve the efficiency and efficacy of the legislation in achieving the primary object of creating a mining and minerals regulatory regime that conforms to regulatory best practice. To enhance provisions which promote mineral and petroleum resources development in a sustainable and equitable manner for the benefit of all South Africans

9. OBJECTS OF THE AMENDMENTS CONT… To streamline administrative processes to ensure proper alignment with NEMA and the National Water Act in particular. To augment and substantially increase the socio- economic development impact through mining. Make provision for an application process by invitation. Make provision for implementation of the beneficiation strategy.

10. OBJECTS OF THE AMENDMENTS CONT… Provide for State’s active participation in the exploitation of petroleum resources. Make provision for certain minerals to be declared strategic to guarantee amongst others security of energy supply. Enhance provisions relating to the regulation and implementation of Social and Labour Plans. Provide for partitioning of rights and enhanced sanctions.

11. PROPOSED AMENDMENTS: APPLICATION BY INVITATION (Sec 9) The draft Bill repeals the first come first served principle in favour of an application process by invitation. The Minister is empowered to invite applications for a defined period through a Gazette in respect of specified minerals and land. This process will ensure coordinated quality approvals by the Department that meaningfully contribute towards the fulfillment of the objects of the Act.

12. PROPOSED AMENDMENTS: PARTITIONING OF RIGHTS (Sec 11) Section 11 is amended to provide for partitioning of rights. This is done to allow right holders to dispose of portions of their rights subject to the requirements of the Act. The draft Bill provides for public entities to finance exploration, prospecting and mining projects through mortgage bonds without Minister’s consent.

13. PROPOSED AMENDMENTS: CHANGE OF OWNERSHIP (Sec 11) Section 11 is amended to make provision for the Minister to consent to the transfer of rights. The proposed provision requires mining companies to request the Minister’s consent prior to the transfer of any interests in unlisted companies. The draft Bill further requires mining companies to request the Minister’s consent prior to the transfer of any controlling interests in unlisted companies. The purpose of these provisions is to discourage the dilution of BEE ownership in mining companies

14. PROPOSED AMENDMENTS: SLP’s (Sec 23) Draft Bill provides for SLP’s as follows: Submission and approval within the prescribed timeframe. Review of the approved SLP within a five year period for the duration of a mining right. Holders’ contribution is linked to the size of the operation. The objects of the Act are amended to include labour sending areas. The concept of “labour sending areas” is defined.

15. PROPOSED AMENDMENTS: BENEFICIATION (Sec 26) Draft Bill requires mining operations to set aside a certain percentage of their production for local beneficiation. Developmental pricing conditions are to be determined by DMR in consultation with relevant departments. Restrictions on exports are introduced subject to fulfilment of beneficiation requirements. Minister is empowered to designate certain minerals for beneficiation purposes.

16. PROPOSED AMENDMENTS: BEE (Sec’s 1, 17, 28) Draft Bill requires not merely the extent of the holder’s compliance with the Amended Charter but actual compliance from right holders. Emphasis is on “effectiveHDSAownership”, which marks a shift from the vaguely defined definition of BEE. Definition of this Act has been revised to expressly incorporate the Amended Charter into the ambit of the Act. BEE requirements have been extended to prospecting right applications.

17. PROPOSED AMENDMENTS: STATE PARTICIPATION (sec’s 80 & 84) The Draft Bill provides for State’s active participation in the petroleum industry; The State has a right to a free carried interest with an option to acquire a further interest. Free carried interest is defined as a share in the net profits. The State is afforded a right to appoint two Directors in the Management Board of a production operation.

18. PROPOSED AMENDMENTS: SANCTIONS (Sec 99) The draft Bill provides for enhanced sanctions. The sanctions are linked to a percentage of the annual turn over of the right holder consistent with the Competition Act. Provision is also made for administrative fines which will be payable to a designated fund and used to promote exploration activities and matters incidental thereto. These sanctions should serve as sufficient deterrent to right holders and encourage compliance with the Act.

19. ENVIRONMENTAL MANAGEMENT Sec’s 39, 40, 41 & 42) Prior to 2008 mine environmental management was provided for under the MPRDA. Section 39 provided for the process for approval of mine environmental management plans and programmes (EMP’s). Section 40 provided for consultation process with State departments on approval of EMP’s. Section 41 provided for financial provision for EMP’s. Section 42 provided for management of residue deposits and stock piles.

20. ENVIRONMENTAL MANAGEMENT CONT… Section 43 provided for mine closure. Applicants had to comply with these provisions in order to be granted rights and permits and in addition comply with the requirements of NEMA . The requirement to comply with two pieces of legislation proved cumbersome and further contributed towards non compliance with NEMA. Macsand Judgment reinforced the view that holders of mining rights must comply with all other relevant prescripts.

21. DMR/DEA 2008 AGREEMENT In 2008 DMR and DEA concluded an agreement on a single mine environmental management system. In terms of the agreement mine environmental management was to be regulated by NEMA. DMR would be responsible for the full implementation of the mine environmental management function for the first 18 month period.

22. MPRDA AMENDMENT ACT,2008 To give effect to the agreement amendments were effected to both the MPRDA and NEMA. Sections 39, 40, 41 and 42 of the MPRDA (dealing with mine environmental management) were repealed and transferred to NEMA. Consequential amendments were made throughout the Act to cross reference same with NEMA. It was agreed that section 43 (dealing with mine closure) should remain within the MPRDA due to its technical nature.

23. NEMA AMENDMENT ACT Amendments were also effected to NEMA to incorporate MPRDA provisions. Section 24 of NEMA details amendments relating to mine environmental management; and Section 14(2) provides for a window period for deferment of the coming into operation of the amendments to both NEMA and the MPRDA until the expiry of the 18 month period from the date of commencement of either of the Amendment Acts.

24. CURRENT AGREEMENT In 2010, Minister of Mineral Resources adopted the “Strategy for Sustainable Growth and Meaningful Transformation of South Africa’s Mining Industry” The Strategy identified amongst others a fragmented licensing mechanisms as one of the key binding constraints to the global competitiveness of the industry; Consequently, Minister DMR and Minister DEA agreed on modalities to streamline licensing requirements for mining.

25. IPIC PROCESS To this end the Interdepartmental Project Implementation Committee (IPIC) was formed; The Committee comprises representatives from DMR, DEA and DWA; (IPIC) Task teams have been established: Appeals and Legislative Amendments TT, Coordination of Timeframes TT, Capacity TT, Enforcement TT, Joint Planning TT and Communication TT”.

26. IPIC PROCESS The Enforcement task team deals with the enforceability of legislation to ensure greater compliance; The task team on Appeals and Legislative Amendments was tasked with the streamlining of the MPRDA as amended, NEMA as amended and the National Water Act to ensure alignment; The Processes and Timeframes Task Team has worked on streamlining of time frames and processes between the respective pieces of legislation;

27. IPIC PROCESS CONT… The Capacity task team looked at issues relating to capacity to ensure effective implementation; The Communication Task Team has developed a comprehensive communication strategy for the project. The Joint Planning Task Team is responsible for alignment of mining and sensitive areas such as biodiversity and NEMA protected areas.

28. IPIC PROCESS CONT… This approach reinforced the legislative amendments that were effected; It provided for the DMR to be the competent authority to implement mine environmental management requirements in terms of NEMA; And further provided for DEA to be the appeal authority on mine environmental management; DWA continues to regulate the licensing of water use.

29. NEMA AMENDMENT BILL 2013 DEA has finalised the Draft NEMA Amendment Bill 2013; The objectives of the Bill are amongst others: to accord appropriate designation to the Minister of Mineral Resources as competent authority to implement Environmental Management Legislation, and to provide for designation of mineral resources enforcement inspectors; This Bill has gone through the IPIC process and is consistent with the overall goal of creating an integrated licensing regime.

30. STAKEHOLDER ENGAGEMENTS DMR has consulted with DEA, DWA, NT & the Competition Commission. Consultations were held with MIGDETT stakeholders (UASA, CHAMBER, NUM, SOLIDARITY & SAMDA). Consultation with communities in Limpopo, Mpumalanga, Northern Cape and North West provinces were held in 2011. Consultations were also held with interested and affected parties (petroleum sector, environmentalist, legal fraternity and the mining industry).

31. PROGRESS TO DATE The draft Bill was certified by the Office of the Chief State Law Adviser on the 7th June 2013. The JR 159 letters has been submitted to the relevant heads of Parliamentary houses. Rule 241 notice was also published on the 30th May 2013. The draft Bill has been submitted to the Parliament Legislation and Proceedings Unit.

32. WAY FORWARD Both the MPRDA and NEMA amendment Bills have been subjected to the IPIC process and exchanged between the respective departments to ensure that they are consistent with the integrated licensing approach adopted by the respective departments. The work of IPIC is a continuous exercise and serves as a mechanism to enhance working relations between the departments consistent with the principle of co-operative governance to ensure the realisation of the integrated licensing regime.

33. CONCLUDING REMARKS The proposed amendments to the MPRDA will; Strengthen the architecture of the mining and minerals regulatory framework and direct a shift towards local mineral value addition. Contribute towards national developmental imperatives. Streamline licensing processes. Provide for State participation in the petroleum sector.