In his speech opening next week’s Mining Indaba in Cape Town, Minister of Minerals and Energy Gwede Mantashe should address some of the burning issues outlined by Webber Wentzel’s team of mining experts.
Minister of Minerals and Energy Gwede Mantashe’s positive opening speeches at previous Investing in African Mining Indabas have failed to make any impact on the long-term decline in the sector. Latest figures from Stats SA show that in the year to November 2022, South African mining output fell by 9% year on year – and 2022 is shaping up to be the fifth successive year of declining mining output from South Africa.
Turning this trend around will take considerable effort. Webber Wentzel’s team of mining experts has again identified a number of aspects that the Minister should identify in his speech and, more importantly, act upon if the sector is to set a new path. The greatest short-term priority is to address the country’s energy shortage.
Energy
As the minister is responsible for both the energy and mining portfolios, greater policy and coordination is needed between the two sectors. Whilst the recent and proposed amendments to regulations regarding licensing thresholds are welcomed, Government could further facilitate miners’ ability to procure clean power from independent power producers, and large-scale private energy projects should be designated as Strategic Integrated Projects under the Infrastructure Development Act, which would speed up permitting.
Greater investment is needed in the electricity transmission network, to overcome capacity restraints. The minister should make it possible for mining companies to situate their renewable plants in the most favourable areas, and wheel that power through the grid to their mines.
The Integrated Resource Plan, which only takes South Africa’s power planning to 2030, needs to be updated with climate change in mind and to look beyond 2030, as a matter of urgency. The minister should expedite the passage of the Electricity Regulation Amendment Bill into law. This will separate Eskom transmission from Eskom into a new Transmission System Operator and create a new Central Purchasing Authority. This separated entity will enable funding for transmission and distribution development in South Africa and not be encumbered by Eskom generation's poor performance.
Regulation
Delivery of the long-promised mining cadastre system, and one which allows open access, should be top of the minister’s agenda, as it will have many benefits. It will improve communication channels between applicants for rights and government, increase efficiencies in the process of applications for rights, help to address the continuing problem of overlapping applications for prospecting and mining rights and prevent inadvertent sterilization of exploration opportunities. The deadlines for granting mining permits should be met and the granting of section 11 approvals for transfers of rights needs to be accelerated.
A focus on strengthening administrative processes and expediting the processing of permitting applications is often mentioned by the minister and a tangible and practical action plan in this regard would be welcomed.
In the Exploration Strategy published last year the minister hinted at a review of the ownership provisions in the Mineral and Petroleum Resources Development Act and Mining Charter, which introduces continuing uncertainty. Setting higher ownership targets is not the only way to bring benefits to local communities. Other important ways to address transformation are through the Just Energy Transition (JET), enforcing high ESG standards and ensuring the sustainability of host communities.
We would urge the minister to follow through with what is envisaged in the Exploration Strategy, which is to convene a forum with critical social partners, including mining players, to review what has and has not worked in the legislation and charter, and try to find consensus on a better way forward. A redraft of the charter, taking a holistic view of ESG goals, should be part of these discussions.
Tax
Improve the incentives in the Carbon Tax Act for mining companies to invest in carbon offset projects. There has been an increased focus worldwide in providing tax incentives to companies for their efforts in helping countries to reach their net-zero goal. South Africa needs to move in the same direction.
Address the inefficiencies in delivering fuel levy refunds to qualifying users of distillate fuel (diesel). The Customs and Excise Act, which governs these refunds, lacks the same mechanisms as the Tax Administration Act to speed up the processing and payment of refunds, and to adequately give effect to the rights of taxpayers. This is giving rise to unnecessary disputes with SARS and delayed payments of refunds. Finalising the issue of logbooks is essential to facilitate the payments of diesel refunds.
Satisfy the long-running plea from the industry for flow-through of tax benefits or tax breaks to shareholders in respect of capital investment that ultimately funds new exploration/mine development, decarbonisation and energy.
Health, safety and environment
The industry would also welcome hearing from the minister when NEMLAA4, which was signed into law in June 2022, will be promulgated, and when the replacement financial provisioning regulations will be finalised.
The minister needs to address with urgency the health and safety implications resulting from a lack of regulatory guidance, particularly in relation to tailings dam breaches (especially where mining companies have long since responsibly divested their interest in such operations to new owners) and to ensure continued compliance with applicable regulations by new owners.
Regulatory consistency and transparency is needed in the investigation of, and subsequent enquiries into, mine accidents across different regions. Guidance should be provided into differentiating between mine accidents and non-work-related deaths, together with possibly invoking joint inquests and inquiries.. Practical recommendations to avoid repeat incidents should be given to employers immediately and shared with industry without blame seeking.
The Minister needs to champion the roll-out of the Just Transition Framework in the coal value chain, identified as a key at-risk value chain. We would like to be assured that the minister will maintain the momentum on the country’s JET frameworks, or drive this as part of the core value chain, to ensure that communities and the most vulnerable are not left behind.
We look forward to publication of the amendments to the Mine Health and Safety Act with many expected changes likely to have a positive impact and bolster the focus on safeguarding employee health and safety. Where areas of concern or confusion have been raised in comments submitted by industry and the role players, we hope that these will be considered and the amendments will be fair, balanced and clear.
Other issues
While some mining companies have indicated an interest in running portions of the rail network, they would like to hear that long-term contracts (15 years or more), rather than the two-year concessions offered in the first round of bid invitations, are available, to incentivise investment.
There is a need for greater state effort to promote human rights and improve service delivery to mining communities, to reduce the pressure and dependency on mining companies to provide basic services.
We would urge the minister to conduct community awareness programmes to clarify for mining communities the roles of mining companies and government, to mitigate the risk of socio-economic-based unlawful protests against mining companies. SAPS also needs to be capacitated to respond quickly and effectively to illegal mining and violent protests. The proposed establishment of a dedicated Minerals and Precious Metals Theft Unit within the SAPS, as contemplated in the Artisanal and Small Scale-Mining Policy published for implementation last year, is welcomed and the scope should perhaps be broadened to cover community unrest.
