South Africa Won’t Force Mines to Process Ore, Shabangu Says

Feb. 4 (Bloomberg) -- South African Mineral Resources Minister Susan Shabangu reassured mining companies that the state won’t use new laws to unilaterally restrict ore exports or force them to process part of their output within the nation.

Legislators are processing amendments to the 2002 Mineral and Petroleum Resources Development Act, which seeks to ensure South Africans get more benefit from the nation’s mineral wealth. Proposals include giving the minister the right “to designate any mineral, mineral products or form of petroleum for local beneficiation.”

Anglo American Plc is among companies that complained that the proposals would hurt their business and discourage investment. The Chamber of Mines, the main industry body, expressed concern that the state will force companies to sell part of their output at below market prices.

“No mining company is either required to beneficiate or is forced to subsidize the manufacturing industry,” Shabangu said in an address to the Investing in African Mining Indaba conference in Cape Town today. The government is confident the law “provides a predictable, stable and globally competitive mining legislation that promotes investment, inclusive growth, development and transformation.”

South Africa is the continent’s largest coal and gold producer and the world’s biggest supplier of platinum and chrome. With elections due this year, the government is pressing the mining industry to do more to help reduce a 24.7 percent unemployment rate.

Industry Contraction

Companies including BHP Billiton Ltd. and Glencore Xstrata Plc have assets in South Africa. The government will negotiate with companies before designating minerals to be made available to local processors, Shabangu told reporters.

“The minister’s reassurances aren’t substantiated by what is contained in the law,” Peter Leon, head of Africa mining and energy projects at law firm Webber Wentzel, said in an interview at the conference. “The legislation will have to be amended further for industry concerns to be addressed.”

The local mining industry shrank by an average of 1 percent a year, adjusted for inflation, during the 2001 to 2008 global boom in commodities, compared with the average 5 percent growth of the top 20 mining economies, according to data compiled by the chamber, which blames a lack of clear policy, labor unrest and inadequate transportation and power infrastructure.

Legislative Proposals

Shabangu said she expects amendments to the law will be passed before the current Parliament adjourns ahead of elections that must be held by the end of July.

The legislation also proposes compelling energy companies to cede 20 percent of all new oil and gas ventures to the state, a provision Shabangu said was “non-negotiable.” The state will also have the right to buy a further 30 percent at market-related prices.

On Jan. 29, Faith Bikani, the chairwoman of Parliament’s Mineral Resources Committee, suggested that provisions covering oil and gas could be split and incorporated into a new law more suited to the energy industry’s state of development.

“We are not moving into that space,” Shabangu said. “If we do that it’s going to create regulatory uncertainty once more. The key for us is about centralizing and ensure we create harmony. We have to create a seamless regulatory framework.”

South Africa imports about 70 percent of its oil needs, processing the remainder of its fuels from coal and gas. Companies including Exxon Mobil Corp. and Royal Dutch Shell Plc criticized an early draft of the amended law in parliamentary hearings in September, saying it lacked clarity and would deter investment.

South Africa plans to move ahead “decisively” with exploration of shale gas, with final regulations for the industry due to be released soon, Shabangu said.

The government aims to complete a review of the Mining Charter, which seeks to increase black ownership in mining companies, by November, the minister said.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net