South African Parliament to Adopt Mineral Law Changes Next Year

Amendments to South Africa’s mining and oil laws to ensure the country benefits more from its natural resources need refinement and won’t be adopted until next year, Faith Bikani, the acting chairwoman of Parliament’s mineral resources committee said.

Proposed changes to the 2002 Mineral and Petroleum Resources Development Act include giving the state the right to a free 20 percent stake in all new energy ventures as well as compelling some mining companies to sell part of their output to local processors. Miners Anglo American Plc and BHP Billiton Ltd. have said the measures will hurt business, discourage investment and may violate South Africa’s constitution and its international trade obligations.

“We would have loved to pass the bill before the end of this year but Parliament is adjourning next week and with a lot of work left to deliberate on, it’s not going to be possible,” Bikani, a ruling African National Congress lawmaker, told reporters in Cape Town today. “We also have to take into account the fact that we don’t want any legal challenges when we are done with it.”

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.

Development 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 would also compel energy companies to cede 20 percent of all new oil and gas ventures to the state, which will have the right to buy a further 30 percent at market-related prices. A proposed change to the law introduced at a committee hearing today would give the state the option to enter into output-sharing agreements with oil companies.

There was a lack of clarity about how the new provision would work, said Hendrik Schmidt, a lawmaker with the opposition Democratic Alliance.

“The concern that has still not been addressed is once that agreement has been concluded for a 20 percent free carried interest, what is the issue with regards to the cost in generating the revenue to which the state is entitled,” he said in an interview.

Oil Imports

South Africa imports about 70 percent of its oil needs, processing the remainder of its fuels from coal and gas. The country had proven oil reserves of 15 million barrels in January 2011, located to the south and off the west coast near the Namibian border, according to Oil & Gas Journal. While Irving, Texas-based Exxon Mobil Corp. and Royal Dutch Shell Plc in The Hague have stakes in offshore blocks, extraction is yet to take off.

“We are not done yet going through the details,” Bikani said. “There are quite a lot of changes that we need to take into consideration. We need to go back and do some research. Some of the definitions and objectives in the bill need to be defined more clearly.”

Before it's here, it's on the Bloomberg Terminal.