BizNis Africa
Latest News
National Lotteries Commission to host 2017 Stakeholder Indaba
The National Lotteries Commission (NLC) is hosting its two...
Deloitte Millennial Survey 2017 reveals shared work space trends
South Africa is on the cusp of a work...
Digital Africa innovation competition to tackle tech transition challenges
For the 40th birthday of Proparco, the subsidiary of...
Afreximbank appoints new Director of Banking Operations
The African Export-Import Bank (Afreximbank) has announced the appointment...
Five million critical jobs needed in Africa to be created in Nigeria
Nigerian business leader Aliko Dangote told investors “Agriculture, agriculture,...
Transforming companies can help drive gender equality
Global and national development requires that we provide opportunities...
Large Corporates drive activity in South African commercial property sector
Despite the country’s struggling economy, there has been a...
AfricaBuild Lagos 2018 Fairtrade to be held at Landmark Centre
The Nigerian economy is out of recession. Due to...
Sasol announces new ZAR21 billion BBBEE ownership structure
Sasol Limited has announced its proposed new Broad-Based Black...
CEOx1Day links South Africa’s top CEOs with MBA students
The global initiative CEOx1Day, has once again attracted South Africa’s...

Noor Kapdi, Dentons South Africa Managing Partner

The recent Fraser Institute survey of mining globally has seen South Africa drop to 74th place out of 104 mining jurisdictions, down from last year’s 66 .

We now rank behind the likes of the Democratic of Congo and Zambia, which has regained its place in the top 50.

This is a pretty pass for a country with such rich mineral resources, and one that was once a global leader in mining.

It is common cause that one of the primary drivers of South Africa’s unattractiveness as mining destination is the regulatory uncertainty that has prevailed since 2012, when the current Mineral and Petroleum Resources Development Act (MPRDA) was amended.

The robust instrumentation of our constitutional democracy and rigorous scrutiny to which the Bill was subjected resulted in it being passed by the National Assembly late in 2016. It is currently before the National Council of Provinces.

Regulatory certainty critical

The need to give both the minerals, mining and petroleum, hydrocarbons industries regulatory certainty has now become critical. Certainty is the only thing that will reverse the current investment freeze which is currently impeding progress in both industries. The urgency is real, given the sustained lacklustre performance of the South African economy. Mining remains a bedrock of the economy, a major contributor to GDP and a significant provider of employment. Nursing this once vibrant industry back to health is of critical importance. Doing so will require certainty and the ability of the actors  to reinvent an industry with enhanced efficiencies supported by greater reliance on technology and modernisation.

By contrast, our petroleum sector is embryonic and offers has significant potential, in particular the promise of the development of a natural gas economy. We know that large, commercially viable gas fields exist off the coasts of Mozambique and Madagascar, and the protagonist for “following the rift” believe that  that mineral-rich South Africa might also have similar reserves. We already know that significant shale gas deposits exist in the Karoo though, of course, whether they are safe to exploit remains highly controversial. This emerging industry will only grow if sufficient capital is committed to exploration, and that will not occur until investors know what the regulatory environment is.

The National Development Plan recognises the potential importance of gas in creating an economy that uplifts the people of this country.

Based on conversations with clients, it seems that the current provisions in the amended act are acceptable. These include a 20 percent carried interest for the automatic state interest in discoveries, which interest can be increased at a market-related rate. This setting aside of a state interest in petroleum discoveries has become commonplace, and 20 percent is considered conservative.

Differences between mining and petroleum sectors undermines legislation

But it is the profound difference between these two industry sectors that undermines this legislation. Mining in South Africa is a mature industry with an established infrastructure in all senses of the word, and is well known to the global investment community. It also has a dark history, and the need to control the country’s abundant mineral resources arguably shaped the history of the country, particularly since 1948. In a real sense, the repressive power structures and damaged social fabric that still characterise South Africa are, in many respects, a product of the mining industry’s history.

In other words and nobody in the industry can deny this basic premise—mining needs far-reaching transformation. Agreeing on the details of how best to achieve this will continue to be tricky, as evidenced by the ongoing disagreement about and resistance to the proposed terms of the Mining Charter.

By contrast, the petroleum/hydrocarbon industry barely exists. It thus has no history to rewrite; its requirement is a sensible, progressive regulatory framework that will stimulate massive investment to enable growth, sustainable access to lower cost cleaner energy  and, ultimately, job and wealth creation.

Thus, once we have returned certainty to the minerals and petroleum industries, and hopefully reignited investor interest, we do need to consider whether it makes sense to regulate these two industries separately, in line with their different needs. Care would need to be taken to do so in a way that does not reintroduce uncertainty into the market, but actually reinforces that certainty.

Leave a Reply

Ver peliculas online
%d bloggers like this: