South African Mining Law Won’t Deter Investment, Government Says

South Africa said it’s winning over business to proposed new regulations for the mining and energy industry and doesn’t expect the changes to deter investment.

“We have had a robust engagement with the mining and petroleum industry,” Musa Mabuza, deputy director-general of policy and promotion in the Department of Mineral Resources, told a parliamentary committee today in Cape Town. “We are comfortable with the views they are expressing. We have the confidence that we are converging on the major issues.”

Planned changes to the 2002 Mineral and Petroleum Resources Development Act would allow the country to force mine operators to process some output locally and give the state stakes in new oil and gas projects. South Africa would be able to appoint two directors to companies with new energy projects and declare some minerals strategic to secure their supplies.

Businesses would need the minister’s permission to transfer controlling stakes in unlisted mining companies under the plans, while proposals also include abolishing the petroleum regulator.

The amendments to the law threaten to scare off investors, said opposition Democratic Alliance lawmaker James Lorimer.

The assertion that companies are comfortable “seems to be at odds with their reaction in public, which was by no means welcoming,” he said. “If we don’t make it attractive for miners to come and mine here, they will go somewhere else.”

South Africa received 80 responses to the plans published in December. The country is the biggest producer of platinum and chrome, and companies with South African assets include Anglo American Plc, BHP Billiton Ltd. and Glencore Xstrata Plc.

Draft Law

The draft law doesn’t specify what level of mining output would have to be set aside for local processing, or what size stake the state would take in oil and gas ventures, details that Mabuza said would be addressed when regulations are published.

“There is not a fundamental policy shift in what is being proposed,” Andre Andreas, the department’s chief director of policy development, told lawmakers. “It’s simply looking at where there is a need to tweak certain provisions.”

Foreign energy companies are increasingly interested in exploring South African waters as new technology boosts their ability to find and pump hydrocarbons from under the seabed. South Africa had proven oil reserves of 15 million barrels in January 2011, according to Oil and Gas Journal. The cabinet gave approval on May 29 for the law to be submitted to Parliament.

“In the South African context competitive growth and transformation are not mutually exclusive,” Mabuza said. “They are mutually reinforcing. We have got to make sure that our law is able to be as globally competitive as possible, while it sufficiently considers our development needs. I’m very confident that we have a globally competitive piece of legislation.”

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