Comment from Peter Leon: SA improved in Fraser Institute's Annual Survey of Mining Companies Survey

3 March 2019

South Africa's improved rankings in the Fraser Institute's Annual Survey of Mining Companies 2018's (Survey) Investment Attractiveness, Policy Perception Index (PPI) and Best Practices Mineral Potential Indexes is commendable and largely encouraging, but more can be done to ensure South Africa is able to attract investment.

On the Investment Attractiveness Index, South Africa improved its ranking from 48 out of 91 global mining jurisdictions surveyed in 2017 to 43 out of 83 jurisdictions surveyed in 2018, and now ranks second in Africa after Botswana (which ranks 32).   

On the more important Policy Perception Index (PPI), however, South Africa's performance is still below average (56 out of 83 jurisdictions) albeit significantly better than last year (84 out of 91 jurisdictions).  

The improved performance is certainly owing to Government's decisions to withdraw the Mineral and Petroleum Resources Development Amendment Bill (Bill) and the publication of Mining Charter III (Charter).  While both actions have instilled the mining sector with some certainty, South Africa will continue to perform poorly until the issues surrounding the Bill, the Charter and general administration of the Department of Mineral Resources are resolved.

First, the Bill needs to be formally withdrawn.  It has been six months since Mineral Resources Minister Gwede Mantashe announced plans to withdraw the Bill, yet there have been no further steps to formally do so.

Second, in spite of the extensive public participation and negotiation process which preceded the publication of the Charter, it still contains a number of provisions that are cause for concern.  Key among these are: onerous re-empowerment obligations for the renewal and transfer of existing mining rights;  the BEE Shareholding top-up requirements for pending applications; the absence of provisions for the amendment of existing mining rights; and the Minister's unlimited ability to review and revise the obligations imposed under the Charter from time to time.  

Finally, South Africa should follow the approach adopted by Botswana (which ranks 12 on the PPI and has a score of 94.77 per cent) and amend the Mineral and Petroleum Resources Development Act, 2002 (Act) to promote greater certainty and predictability, in particular the manner in which the Act is administered.  Vague and open requirements create breeding grounds for abuse, corruption and unnecessary delays.   

If the mining sector is to truly become the "sunrise industry" that President Ramaphosa and Minister Mantashe wishes it to be, the government will have to become more proficient in how it regulates the industry.

Issued by Peter Leon, co-chair and partner, Herbert Smith Freehills, 3 March 2019