South Africa Mine Law Draft Still Flawed, Industry Says

South Africa’s main mining-industry body said redrafted laws failed to address producers’ concerns that the state will force them to sell part of their output at below market prices.

Legislators are processing planned changes to the 2002 Mineral and Petroleum Resources Development Act, which seeks to ensure South Africans derive greater benefit from the nation’s mineral wealth. The Department of Mineral Resources released a new draft of the law yesterday, after companies including Anglo American Plc complained that the proposals would hurt their business and discourage investment.

“It definitely is a better piece of legislation,” Anton van Achterbergh, head of the Chamber of Mines’ legal department, said in an interview in Cape Town yesterday. “However, there are some very important areas in which our concerns have not been addressed. The major one is beneficiation and all the issues surrounding that. It seems to be that the department is intent on some discounted pricing” to encourage local processing, or beneficiation.

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

‘Developmental Imperatives’

The revised law proposes giving the mines minister the right “to designate any mineral, mineral products or form of petroleum for local beneficiation,” and decide what percentage must be made available to processors after taking into account “national developmental imperatives.” It will also require companies to get written permission from the minister to export designated minerals.

“One of the key areas of concern was that the extractive industry has no say whatsoever, that these volume and price determinations will be pushed down their throat and they will just have to live with them,” Mosa Mabuza,deputy director general at the Mineral Resources Department, told lawmakers in Cape Town today. “This recrafting we are putting across has duly considered the submissions that were made. No sectors must be disadvantaged in any form because of this provision of beneficiation.”

Pricing Problem

Companies including BHP Billiton Ltd. and Glencore Xstrata Plc have assets in South Africa.

“The problem is pricing,” James Lorimer, a member of parliament with the opposition Democratic Alliance, said to lawmakers. “If the mining companies were going to get the same price for their commodities as they were going to get from selling them internationally, why would they not sell them locally without some form of government regulation?”

While the mineral resources department undertook to ensure the law wouldn’t force producers to subsidize processors, it never followed through when it revised the text, Van Achterbergh said.

“Nobody disagrees with what they want to achieve,” he said. “The industry is fully supportive of beneficiation. But the department seems to think that access to minerals at a discounted price is crucial for competitiveness in the beneficiation industry, whereas we are strongly of the view that there are far more important factors.”

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 mining chamber, which blames a lack of clear policy, labor unrest and inadequate transportation and power infrastructure.

Industry concerns about how mine dumps would be regulated were addressed in revisions to the law, Van Achterbergh said.

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