The Damaging Mining Bill Could Come Out Even Worse
The Mineral and Petroleum Resources Development Amendment Bill of 2013 (the Bill) has been sent back to Parliament for more consultation and possibly extensive change. The current Bill is so damaging to an already struggling mining sector that the industry was widely expected to welcome a rethink. Instead, the Chamber of Mines has expressed dismay at the delay in the Bill's adoption. Though this response seems surprising, the chamber has reason to fear that a new bill may be even worse.
The current Bill was rushed through Parliament in the final weeks before the May 2014 election, raising concerns that a lack of consultation over several last-minute changes might be unconstitutional. After the election, the newly appointed mining minister, Ngoako Ramatlhodi, asked President Jacob Zuma not to sign the Bill into law. It thus remained in limbo until mid-January 2015, when Mr Zuma decided to send it back to Parliament.
The Bill contains a raft of damaging provisions. To begin with, it gives the mining minister a broad discretionary power to ‘designate' any mineral product as needed for local beneficiation. The minister may also prescribe the percentages required for this purpose - and these percentages may be set at any level (from 10%, say, to 70% or more).
Under the Bill, the stipulated percentages must be supplied at ‘mine gate or agreed' prices. Mine gate prices, though not defined in the Bill, would apparently be based on production costs, but not transport ones. These prices are likely to be lower than the export prices many mining companies need to help cover high input costs. Yet it is only after the specified percentages have been locally supplied that mining companies will be allowed to export the remainder of their mineral products.
It makes little sense for the Bill to seek more local beneficiation when Eskom cannot meet existing electricity demand, especially from big industrial users. In addition, as the National Planning Commission and the Industrial Development Corporation have warned, South Africa lacks the skills, transport logistics, and low input costs needed to compete with manufacturing behemoths in China and elsewhere. Moreover, even if reduced mineral prices were to succeed in boosting manufacturing jobs - which seems unlikely - they are sure to cost mining jobs along the way.