5

Whither the South African Mining Industry?*

Peter Leon**
The South African mining industry, a mainstay of the countrys US$357bn economy, the biggest in Africa as well as the basis of the countrys industrialisation, is at a crossroads. Despite having the worlds largest mineral reserves (estimated at US$2.5tn), mineral production in Q3 2011 contracted by 12 per cent while South Africas policy potential, according to the 2011 Fraser Institute survey of the worlds major mining jurisdictions, ranked 67 out of 79 countries reviewed. By contrast, other mining jurisdictions, such as Chile, showed a 12 per cent increase in the value added by mining to gross domestic product (GDP). A significant cause of the industrys decline lies in the regulatory uncertainty engendered by the implementation of the Mineral and Petroleum Resources Development Act 2002 (MPRDA), which came into force in 2004. The MPRDA replaced private ownership of mineral rights with one of state custodianship and conditional state licences. In addition, key provisions of the Act are linked to the MPRDAs socio-economic objectives, in particular black economic empowerment (BEE). These provisions, in turn, are linked to wide ministerial discretion. A combination of an entirely new regulatory regime, combined with the MPRDAs vague and ambiguous provisions, has led to critical licensing delays, well in excess of South Africas peers. At the same time, the promotion of BEE has been flawed, by promoting narrow rather than broad-based black ownership of the mining industry. This, in turn, has become the catalyst behind calls from the African National Congress (ANC)s youth league for the nationalisation of the industry itself. While this has not been supported by the ANC-led government, the state itself has become more interventionist in the industry. This has led to the revival of the state-owned mining company and the opening of its first coal mine. An ANC research committee has investigated the feasibility of mine nationalisation, but its report is yet to be made public. A final decision on the issue is expected by December 2012, at the ANCs quinquennial elective conference. At the same time, the Minister of Mineral Resources has announced or implemented a number of regulatory initiatives to address the industrys problems, including proposed amendments to the MPRDA itself.

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Asked about the historical impact of the French Revolution of 1789, Zhou Enlai, Premier of the Peoples Republic of China from 1949 until his death in 1976, is reputed to have remarked it is too soon to say. When faced with the question as to whether there is an existential crisis in the South African mining industry, one can only observe, similarly, that it is too soon to say. Unfortunately, this question cannot be too easily dismissed, particularly as it refers to a key sector of the South African economy, which accounts for some 5.3 per cent of South Africas GDP1 and provides employment to some 500,000 workers directly, and a further 500,000 indirectly.2 The centrality of mining to South Africas economy is illustrated by the fact that nearly 60 per cent of the countrys export revenue is attributable to mining, mineral and secondary beneficiated products.3 In 2010, Citigroup valued South Africas mineral resources at just under US$2.5tn, the biggest in the world a staggering endowment by any standards.4 Further, South Africa is estimated to possess 89 per cent of the worlds platinum group metals reserves and 13 per cent of its gold.5 In country league tables, South Africas mining industry in 2008 ranked fifth in the world in terms of the contribution of mining to GDP.6 South Africa also possesses significant quantities of hafnium, chromite, zirconium, manganese, vanadium, fluorspar, nickel and phosphate rock.7 Despite its unhappy association with colonialism and apartheid, South Africas mining industr y was the raison dtre of the countr ys
* ** This article is based on developments as of 31 January 2012. Peter Leon is a Partner and Head of Africa Mining & Energy Projects at Webber Wentzel, Johannesburg, South Africa. He is the immediate past Chair of the International Bar Associations Mining Law Committee. The author gratefully acknowledges the research assistance of Carina Wentzel, candidate attorney at Webber Wentzel, in the preparation of this article. Responsibility for the submissions made and conclusions contained in the article lies solely with the author. The author can be contacted by e-mail at peter.leon@webberwentzel.com. This figure relates to the real value added by the mining and quarrying industries to South Africas GDP for the year 2009. Fact Sheet 2: Contribution of the percentage change in real value added by industry to the total real annual economic growth rate (real GDP at market prices), Statistics South Africa, 29 November 2011. Global Competitiveness of the SA Mining Industry (presentation), McKinsey & Company 15 January 2010, at slide 3. National Development Plan: Vision for 2030, National Planning Commission, 11 November 2011, at 124. Metals and Mining Strategy: Royalties, Riches and Taxes, Citigroup Global Markets, 27 April 2010, at 1. T Yager, The Mineral Industry of South Africa, 2009 Minerals Yearbook: South Africa (Advance Release), US Geological Survey, September 2011, at 37.1. Roger Baxter, The Vision Towards Competitive Growth and Meaningful Transformation of South Africas Mining Sector (presentation), McKinsey & Company, 7 March 2011, at slide 16. T Yager, note 5 above.

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industrialisation and contributes significantly to its US$357.3bn economy,8 the biggest in sub-Saharan Africa. 9 According to Citigroup, globally diversified miners with South African operations distributed US$49bn to their stakeholders in 2010, most of which (41 per cent) went to industry suppliers, followed by 18 per cent to employees and communities, 11 per cent to the South African Government in taxes and similar charges, 21 per cent to the mines themselves (principally for capital expenditure) and only seven per cent to shareholders.10 Yet, despite South Africas impressive mineral resource inheritance and the longest-sustained commodities boom in history, between 2001 and 2008 the value added to GDP by South Africas mining sector remained flat.11 To make matters worse, by October 2011, South African mine production had fallen by 12.7 per cent year on year.12 Despite having the worlds largest mineral resources (Russias reserves are nearly a billion dollars less at US$1.6tn), the country is simply not exploiting them: its rate of new investment growth is the lowest of any significant mining jurisdiction.13 According to Canadas Fraser Institute, South Africa continues to slip down the policy potential index, ranking the attractiveness of mining destinations to investors, from 28 out of 47 jurisdictions in the 2002/2003 period, to 67 out of 79 jurisdictions surveyed in the 2010/2011 period.14 This fall represents a precipitous decline in the countrys standing as an investment destination. According to Ernst & Young, there has similarly been a marked decline in the number of South African mining and metals transactions over the last decade, with deal values falling alarmingly from US$13bn in 2001 to US$2.9bn in 2010.15 The South African mining sector is currently in recession after contracting in the first three quarters of 2011.16 Actual mine production was 6.7 per cent
8 9 10 South Africas GDP in 2010. US Department of State website (www.state.gov/r/pa/ei/ bgn/2898.htm), last updated 3 October 2011; accessed 19 December 2011. World Economic Outlook: Recovery, Risk and Rebalancing, International Monetary Fund, October 2010, 89. Calculated by aggregating South African mining companies direct economic value generated and distributed statements (Metals and Mining: Nationalisation Killing the Goose That Lays the Golden Eggs, Citigroup Global Markets, 29 June 2011, at 1 and 3). Medium Term Budget Policy Statement 2011, National Treasury of the Republic of South Africa, 25 October 2011, at 15. Mining: Production and Sales (Preliminary): October 2011, Statistics South Africa, 8 December 2011, at 2. As measured by a countrys valued mineral wealth divided by project growth. Citigroup Global Markets, note 10 above, 10. Fraser Institute Annual Survey of Mining Companies 2010/2011, Fraser Institute, 3 March 2011, at 12. Africa: A Golden Opportunity. A Spotlight on Mining and Metals Transactions, Ernst & Young, 2011, at 7. Horrific Fall in Output for Mining, Factories, Business Day, 9 September 2011; Statistics South Africa, note 12 above, 2.

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lower for the three months ending in October 2011 from that recorded during the same period a year earlier.17 These figures follow Rio Tintos recent announcement that it intended to sell its 57.7 per cent stake in the Palabora Mining Company, allegedly on the basis that its copper operations are not of a scale to suit its investment criteria.18 On completion of the sale, Rio Tintos 37 per cent shareholding in Richards Bay Minerals will be the companys only major remaining South African asset.19 The state of the South African mining industry is in stark contrast to that in the rest of the world. Between 2001 and 2008, Chile, a key mining jurisdiction in the developing world, experienced a 12 per cent growth in value added to GDP.20 During the 2000s, in more stable mineral regulatory regimes, such as Australia, investment in the mining industry advanced by 24 per cent, while average investment growth in South Africa was a relatively pedestrian seven per cent.21 South Africas decline can, to a large degree, be linked to the regulatory uncertainty precipitated in no small part by the architecture, as much as the implementation, of the Mineral and Petroleum Resources Development Act 2002 (MPRDA).22 To be fair, in 2011 the South African Department of Mineral Resources (DMR) announced some steps to address these problems. In February, the Minister of Mineral Resources (the Minister) proposed a series of measures, which, once implemented, should result in improvements to the overall regulatory environment.23 These proposals are addressed in more detail below.

Upheaval of South Africas previous mineral regulatory regime

Most people will agree that it was imperative that South Africas first democratic government, elected in April 1994, develop a new mineral regulator y framework to address the apartheid governments past exclusionary practices against black South Africans. While these, it is worth recalling, were effected across all sectors of the economy, they were almost certainly worst in the mining industry with its terrible legacy of migrant labour, unsafe working conditions, labour repression and economic exclusion. In order to address these and related socio-economic issues,
17 18 19 20 21 22 23 Ibid. Rio Tinto to Sell Out of Palabora, Miningmx, 5 September 2011. Ibid. National Treasury of the Republic of South Africa, note 11 above. Ibid. Also referred to in this article as the Act. Minister Susan Shabangus statement on the new electronic mineral management system and its implications for the regulatory environment, Cape Town, 7 February 2011.

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the MPRDA was passed by Parliament in June 2002 and brought into force on 1 May 2004. Despite the MPRDAs laudable socio-economic objectives, its implementation has, unfortunately, contributed significantly to many of the mining industrys current travails. The MPRDA repealed the Minerals Act 1991 (the Minerals Act) and the common law to the extent that the common law was in conflict with the MPRDA. It thus abolished the property-law-based system of the Minerals Act, and introduced a fundamentally different regulatory regime one of administrative law based on conditional state licences. Accordingly, landowners no longer owned the mineral rights to the mineral resources on their property. These now fall under the public trust doctrine of state custodianship, under which the state, acting through the Minister, holds mineral rights in custody for the benefit of all South Africans, and is empowered to grant, issue, refuse, control, administer and manage rights to minerals.24 The concept of state custodianship is in turn based on South Africas permanent sovereignty over its mineral and petroleum resources. Both concepts, in turn, have been influenced by two United Nations General Assembly resolutions passed during the Cold War:25 the first declaring a nations permanent sovereignty over its non-renewable natural resources26 and the second on the creation of a new international economic order.27 In order to facilitate the introduction and establishment of the new mineral law regime, Schedule II to the MPRDA created transitional arrangements, under which holders of pre-MPRDA old order prospecting and mining rights had an opportunity to apply to convert these rights into new order prospecting and mining rights by 30 April 2006 and 30 April 2009, respectively. Holders of unused old order rights had until 30 April 2005 to apply for new order rights. On any one of these dates, the respective old order rights simply ceased to exist.
24 The objects of the MPRDA include, among others, a recognition of the internationally accepted right of the [s]tate to exercise sovereignty over all the mineral and petroleum resources within South Africa and the need to give effect to the principle of [s]tate custodianship (sections 2(a) and (b) of the MPRDA). These objects are given effect to by section 3 of the MPRDA. 25 Save for certain exceptions, United Nations General Assembly resolutions neither bind its members nor are they sources of international law: its resolutions are purely recommendatory. Such resolutions, of course, may be binding if they reflect rules of customary international law and they are significant as instances of state practice that may lead to the formation of a new customary rule, but Assembly resolutions in themselves cannot establish binding legal obligations for member states (M N Shaw, International Law (5th edn, Cambridge University Press, 2003), 1090). 26 United Nations General Assembly Resolution 1803: Permanent sovereignty over natural resources, 1962. 27 United Nations General Assembly Resolution 3201: Declaration on the establishment of a new international economic order, 1974.

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The case of Holcim (South Africa) (Proprietary) Limited v Prudent Investors (Proprietary) Limited & Others28 demonstrates some of the legal consequences arising from the introduction of the MPRDA. In particular, the case analysed the issue of security of tenure in relation to the MPRDA and its transitional arrangements. In this case, Holcim (South Africa) (Proprietary) Limited (Holcim) operated a limestone quarry under a mining licence granted in 1997 under the Minerals Act. The licence covered a number of contiguous farms. Prudent Investors (Proprietary) Limited and Others (Prudent), in turn, owned several portions of one farm, which fell under Holcims licence. Holcim had commenced mining limestone before the implementation of the MPRDA; it had, however, yet to start mining on Prudents properties. Prudent consequently refused to allow Holcim access to its land on the basis that Holcim had not commenced mining operations on Prudents properties immediately prior to the commencement date of the MPRDA. Prudent contended that Holcim consequently did not possess an old order mining right, but rather an unused old order mining right. Under the MPRDA, an unused old order right is only valid for one year from the date on which the Act took effect. Holcims failure to exercise its exclusive right to apply for a prospecting or mining right under the MPRDA during the relevant period meant that the right had ceased to exist.29 In an important judgment on the legal effect of the MPRDA, the Supreme Court of Appeal (SCA) rejected Prudents argument and overturned the High Courts finding that the MPRDAs transitional arrangements did not provide security of tenure in Holcims case.30 The court a quo had considered the subject-matter preserved by the definition of an old order mining right, as per item 1 of Schedule II to the MPRDA,31 to be primarily the land.32
28 [2010] JOL 26143 (SCA). 29 The appeal thus focused on whether the MPRDAs transitional arrangements provide security of tenure to the holder of a mining licence which, immediately, before the Act took effect, was conducting authorised mining operations on land covered by the licence even though the operations had not been extended to all cadastral units so covered and might not be so extended in the immediate future (ibid, at para 1). 30 The court a quo based its decision, inter alia, on what it perceived to be the essential requirement that mining operations were conducted on the relevant date in respect of the land to which the licence relates. The SCA found that this emphasis did not accord with the definition of an old order mining right, which requires that the operations must be conducted in respect of the authorisation and the rights attaching to it. Consequently, the SCA found it necessary to examine the terms of the relevant licence in order to determine whether mining operations were being conducted in respect of that licence at the relevant time (ibid, at para 18). 31 Item 1 of Schedule II defines an old order mining right as any mining lease, consent to mine, permission to mine, claim licence, mining authorisation or right listed in Table 2 of this Schedule in force immediately before the date on which this Act took effect and in respect of which mining operations are being conducted. 32 Ibid, para 19.

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The SCA agreed with Holcims submission that such an interpretation did not take into account the structure of the Act and the reason for the creation of the concept of old order rights in the context of the [t]ransitional [a]rrangements.33 The court found that the MPRDA had introduced a new composite mining right that contains what was previously held separately by means of the mining licence and common-law mineral right.34 The SCA considered the requirement under section 4 that preference be given to any reasonable interpretation of the MPRDAs provisions consistent with its objects.35 The objects of the Schedule, among others, are to: (a) ensure that security of tenure is protected in respect of prospecting, exploration, mining and production operations which are being undertaken and (b) give the holder of an old order right an opportunity to comply with [the] Act... .36 The SCA held that an interpretation of an old order mining right that is dependent on mining operations being conducted on every registered unit of land to which mineral rights attach is contrary to the terms of the [t]ransitional [a]rrangements and inimical to its objects. By contrast, an interpretation which depends on the terms of the mining authorisation that is relied on satisfies both the word and spirit of the [a]rrangements.37 In coming to this conclusion, the SCA made some important legal findings. First, the new mineral regulatory system introduced by the MPRDA and the common law system of privately owned mineral rights are mutually exclusive.38 Secondly, referring to Agri South Africa v Minister of Minerals and Energy; Van Rooyen v Minister of Minerals and Energy, where, under the MPRDA, mineral rights were not exploited by the time of the Acts commencement, they simply disappeared into thin air.39 Were it not for the Acts transitional arrangements, which conferred certain rights on the holders of old order rights, the effect of the Act would have been to extinguish all those rights and to render existing mining operations unlawful.40 The court referred
33 34 35 36 37 Ibid. Ibid, para 21. Ibid, para 27. Ibid, para 28. Ibid, para 42. In reaching this conclusion, the SCA observed that according to Prudents interpretation, Holcim would be required to: (a) convert its old order mining rights; and (b) apply for the processing of its unused old order rights. Both these procedures are materially different, with different consequences and could conceivably lead to the refusal of licences in relation to certain units of land. Thus, if [Prudents] construction of an old order mining right were to be adopted, a miner in the position of [Holcim] might find operations, planned but not executed before the commencement of the Act, held up by red tape, and, perhaps, eventually thrown into disarray by systemic delay or refusal to grant an item 8 application (ibid, paras 3840). 38 Ibid, para 23. 39 2010 (1) SA 104 (GNP) at 109110, para 11, referred to in ibid, para 25. 40 Ibid.

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approvingly to the Free State High Courts decision in De Beers Consolidated Mines Limited v Regional Manager, Mineral Regulation Free State Region: Department of Minerals and Energy and Another, where it held that: [t]he only relevance of previous mineral rights is that they constitute an element of the transitional arrangement in [the Act].41 Accordingly, the SCA found that the Acts transitional arrangements prevented the stultification and total disruption of the South African mining industry An important sector of the economy until existing operations could be regulated under the new Act.42 This was done by continuing the existing rights with respect to such operations in the form of transitional rights called old order rights and affording the holder of such rights the opportunity to comply with the Act.43 Further: [t]here is no indication in the text of the Act or Schedule II of an intention to limit the continuation of such rights to the very land on which the operations are being conducted. Rather the focus in the [t]ransitional [a]rrangements is the seamless continuation of existing mining operations which are tested not according to the physical scale of the operations on the relevant date but by the scope of the licence pursuant to which the operations are being conducted.44 The legal upheaval caused by the introduction of the MPRDA was highlighted earlier in 2011 by the North Gauteng High Courts ruling in favour of Agri South Africas (Agri SAs) expropriation claim against the Minister.45 Agri SA was the cessionary of a claim for compensation from the liquidators of a company, Sebenza Mining (Proprietary) Limited (Sebenza), which had, in turn, originally acquired coal rights under the previous Minerals Act in 2001. Sebenza never used these rights and did not acquire either a prospecting permit or a mining authorisation under the Minerals Act. These rights were accordingly unused old order rights for the purposes of the MPRDA. Once Sebenza was liquidated, its provisional liquidators attempted to sell these rights to a third party in September 2004 (ie, after the MPRDA had commenced). The sale was cancelled as the parties received legal advice that it was void owing to the introduction of the MPRDA (which extinguished all privately owned mineral rights). The liquidators accordingly lodged a claim for compensation with the DMR, which was, predictably, rejected.
41 42 43 44 45 (1590/2007) [2008] ZAFSHC 40 (15 May 2008), referred to in ibid, para 25. Ibid, para 26. Ibid. Ibid. Agri SA v Minister of Minerals and Energy (Centre for Applied Legal Studies as amicus curiae) [2011] 3 All SA 296 (GNP) (28 April 2011).

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The DMR has long argued that the MPRDA did not bring about any expropriation of common law privately owned mineral rights, as all it did was regulate the use of mineral rights.46 The court made short shrift of this argument, however, finding that [i]n sum the holders of mineral rights have, since the enactment of the MPRDA not one of the competencies that the law conferred upon them [under the common law]47 and that Agri SAs coal rights had been legislated out of existence.48 The court held that the mere enactment of the MPRDA brought about an uncompensated expropriation of unused old order rights.49

Other factors contributing to the mining industrys decline: lack of regulatory certainty and maladministration
As is well known, in resource-rich developing economies with ambitious transformation and development goals, such as South Africa, investors require regulatory certainty as well as administrative efficiency. This, in turn, requires that laws and policies are clear, definite and consistently applied, particularly in the high-risk, capital-intensive, mining industry owing to the significant capital outlays required before mining operations actually commence. Further, investors are always wary of corruption in developing countries, particularly as a lack of legal certainty may allow get-rich-quick opportunists to manipulate the legal system, as well as those who regulate it, for their own ends. There are, unfortunately, many examples of legal uncertainty in the South African mineral regulatory regime. The MPRDA, the backbone of this regime, is fraught with vague and ambiguous provisions, as is illustrated below. So too is the Mining Charter, an ancillary document aimed at providing a framework for the promotion of Black Economic Empowerment (BEE) in the mining industry. This has recently led South Africas National Treasury, unusually, to criticise South Africas mining regulatory and administrative regime as both opaque and inefficient.50 In this regard, it is relevant that the DMR can take substantially longer to process prospecting and mining rights than regulators in competitor mining
Ibid, para 66. Ibid, para 50. Ibid, para 57. Peter Leon, Compensation for Expropriation of Old Order Mineral Rights, De Rebus, July 2011, at 47 and 54. The DMR has noted an appeal with the SCA against the decision. If this decision is upheld on appeal, however, all holders of unused old order mineral rights who have lodged claims for the compensation with the DMR, will be entitled to just and equitable compensation in accordance with section 25(3) of the Constitution of South Africa for the expropriation of their mineral rights. 50 National Treasury of the Republic of South Africa, note 11 above. 46 47 48 49

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jurisdictions.51 Previous DMR statistics have shown that over 90 per cent of mining right applications have taken more than a year to process; some up to five years.52 This is illustrated by the fact that during the 2009/2010 financial year,53 the DMR received approximately 20,163 applications for, among others, prospecting and mining rights. Of these applications, 5,805 were granted, 3,653 rejected, with 16,190 pending,54 a less than optimal picture given a 25 per cent success rate. Last year the situation was no better. According to the DMRs annual report for 2010/2011, in processing licensing applications, the DMR failed to meet its target of complying with prescribed timeframes a staggering 90 per cent of the time. Instead, only 1,387 of 3,798 applications received were processed on time, resulting in a 36.5 per cent adherence to the prescribed timeframes: a 53.5 per cent variance between the objective and the reality.55 On a slightly more positive note, the same report indicated that double granting of mineral rights had only taken place in less than one per cent of cases since the implementation of the MPRDA.56 As mentioned earlier, the MPRDA itself is replete with uncertainties. For example, the holder of an old order mining right, wishing to convert it into a new order mining right, must comply with the BEE objectives espoused in the Mining Charter.57 The processing of such an application is subject to wide ministerial discretion. For example, it is within the Ministers discretion to determine whether or not an applicant has furthered the objectives of the MPRDA, specifically the advancement of its BEE and socio-economic welfare objectives.58 This lack of an identifiable standard consequently places
51 McKinsey & Company, note 2 above, slide 25. 52 Ibid. 53 As at 31 March 2010. Annual Report 2009/2010, Department of Minerals and Energy, at 76. 54 The applications were accepted but not yet granted. Ibid. 55 Formula: number of applications received that were processed on time (1,387)/ total number of applications (3,798) = % (36.5 per cent). Annual Report 2010/2011, Department of Mineral Resources, at 81. 56 Ibid, 77. 57 For example, the requirement that 26 per cent ownership of a mining companys assets or equity be transferred to Historically Disadvantaged South Africans by 2014. 58 Item 7(2), Schedule II to the MPRDA, provides: [a] holder of an old order mining right must lodge the right for conversion together with a prescribed social and labour plan and an undertaking that, and the manner in which, the holder will give effect to the object referred to in section 2(d) and 2(f) [of the MPRDA]. Section 2(d) provides that the object of the MPRDA is to substantially and meaningfully expand opportunities for historically disadvantaged persons, including women, to enter the mineral and petroleum industries and to benefit from the exploitation of the nations mineral and petroleum resources. According to section 2(f), it is also intended to promote employment and advance the social and economic welfare of all South Africans.

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applicants at a significant disadvantage, as it makes it difficult to determine whether or not they have complied with the Act itself; a pivotal point of the rule of law.59 Self-evidently, if key requirements of a mineral regulatory regime are vague, subjective and indeterminate, it is unsurprising that the licensing process itself operates at such a glacial pace. These issues, as well as an inefficient and seemingly erratic administrative system, can best be illustrated by three recent examples: the recently resolved legal dispute between Kumba Iron Ore Limited, the DMR and Imperial

59 The fundamental nature of this legal principle was recently highlighted in Democratic Alliance v The President of the Republic of South Africa [2011] ZASCA 241 (1 December 2011), which concerned the validity of the Presidents decision to appoint the National Director of Public Prosecutions. The Democratic Alliance (the DA) contended, inter alia, that the appointee, Menzi Simelane, was appointed contrary to section 9(1)(b) of the National Prosecuting Authority Act 32 of 1998, which specifies that the proposed candidate must be a fit and proper person to hold such a position (the requirement) (para 4). The SCA ordered that the Presidents decision was inconsistent with the Constitution and invalid (para 124). The SCA held, inter alia, that: [s]ection 1(c) of the Constitution states that the Republic of South Africa is founded amongst other values on the supremacy of the Constitution and the rule of law (para 57); further, Chapter 3 of the Constitution requires that all spheres of government must adhere to constitutional principles (emphasis added; para 58); furthermore, [t]he rule of law is a central and founding value Accountability, responsiveness and openness are constitutional watchwords To ensure a functional, accountable constitutional democracy the drafters of our Constitution placed limits on the exercise of power. Institutions and office bearers must work within the law and must be accountable. Put simply, ours is a government of laws and not of men or women (para 66). The SCA referred to a number of previous decisions of the Constitutional Court, in particular Pharmaceutical Manufacturers Association of SA & Another: In re Ex parte President of the Republic of South Africa 2000 (2) SA 674 (CC) (2000 (3) BCLR 241), paras 8485: In S v Makwanyane Ackerman J characterised the new constitutional order in the following terms: We have moved from a past characterised by much which was arbitrary and unequal in the operation of the law to the present and a future in a constitutional State where State action must be such that it is capable of being analysed and justified rationally Arbitrariness, by its very nature, is dissonant with these core concepts of our new constitutional order. The SCA also cited Chief Justice Mahomed in his address to the International Commission of Jurists on 21 July 1998: if [the legislature] does make laws which transgress the constitutional mandate or if it refuses to defer to the judgment of the court on any challenge to such laws, it is in breach of its own mandate. The court has a constitutional right and duty to say so A democratic legislature does not have the option to ignore, defy or subvert the court (I Mahomed, The Independence of the Judiciary (1998) 115 SALJ 658 at 662663).

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Crown Trading 289 (Proprietary) Limited (ICT),60 the conditional and recently aborted US$110m acquisition of ICT by ArcelorMittal61 and the 2010 regulatory saga with Lonmin,62 which placed South Africa under an unfavourable international media spotlight shortly after its successful hosting of the FIFA 2010 soccer World Cup.

A flawed BEE policy

The original Mining Charter was substantially amended, with the industrys agreement, on 13 September 2010 (the revised Mining Charter), despite the fact that the MPRDA makes no provision for its amendment. The intention
60 Kumba Iron Ore Limited (Kumba), the majority shareholder in the Sishen Iron Ore Company (Proprietary) Limited (Sishen), held a 78.6 per cent undivided share in an old order mining right over the iron ore and quartzite mined at the Sishen mine. ArcelorMittal South Africa Limited (Amsa) held the residual 21.4 per cent undivided share in the same right (the residual share). Under the MPRDAs transitional provisions, Sishen duly converted its share into a new order right. Amsa inexplicably failed to do so and thus its residual share ceased to exist. Sishen immediately applied for a mining right for this residual share; however, it then transpired that ICT had lodged a competing application for a prospecting right over the entire Sishen mine. Despite concerns over the validity and lawfulness of ICTs application, ICT, most of whose shareholders have links to the governing African National Congress (ANC), was granted a prospecting right, in part, by the DMR Deputy Director-General on 30 November 2009 in relation to the residual share. In essence, ICT was granted a prospecting right that differs materially from the one that it applied for. Kumba launched an internal appeal on 1 March 2010, which was rejected by the Minister. On 21 May 2010, Kumba lodged an application for judicial review. On 15 December 2011, the North Gauteng High Court held, inter alia, that Sishen was the exclusive holder of a converted mining right in relation to iron ore and quartzite (with effect from 5 May 2008, alternatively 18 June 2008) (at para 1.1); the decision to accept or grant a mineral right application lodged after this date in respect of the residual share (or any other share or shares) by any individual (including ICT) was void ab initio (para 1.2); and the whole of the prospecting right granted in favour of ICT is to be set aside and its registration with the Mineral and Petroleum Titles Registration Office cancelled (para 2.2). The courts full judgment was released on 20 December 2011 (case number: 28980/10) (Stage Set for Govt to Enter Amsa, Kumba Fray, Miningmx, 15 December 2011). 61 Amsa Confirms ICT Deal is Dead, Miningmx, 6 October 2011. 62 Lonmin lodged an appeal against the DMRs decision, first, to accept Keysha Investments application for a prospecting right over a portion of property already subject to Lonmins mining operations and, secondly, its decision subsequently to grant the right. (See Annual Report and Accounts for the Year Ended 30 September 2010, Lonmin PLC, at 9). A decision from the Director-General is still pending. Once all internal avenues have been exhausted, and in the absence of a favourable decision, the matter would proceed to judicial review. The company continues to assess the merits of its compensation claim for the purported expropriation of its mineral rights (as well as its claim against a former director for breach of his statutory and common law duties). (See Final Results Announcement for the Year Ended 30 September 2011, Lonmin PLC, 14 November 2011, at 11.)

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behind both the original and the revised Mining Charter was to champion the governments BEE policy, which itself is an attempt to deracialise the economy by requiring mining companies, inter alia, to divest equity in favour of black South Africans: 15 per cent by 2009 and 26 per cent by 2014, supposedly at fair market value. According to the Ministers 2011 Budget vote address to Parliament, black ownership achieved in the mining industry in 2009 was approximately 8.9 per cent, well below the target of 15 per cent.63 Public hearings on the revised Mining Charter were recently held before the Parliamentary Portfolio Committee on mineral resources. It emerged that there is a real dispute as to the actual level of black ownership of the mining industry: the DMR advised the Portfolio Committee that black ownership in the mining industry was a paltry nine per cent (well below the 2009 15 per cent target). It also indicated that, owing to the slow pace of transformation, the DMR is looking at beefing up the penalty provisions that may be imposed on mining companies for non-compliance to serve as a deterrent and to ensure there is greater compliance.64 The Chamber of Mines, however, claimed in the same hearing that black ownership among its members averages 28 per cent and so already exceeds the Charters targets.65 The South African Mining Development Association (SAMDA) disputed the figures presented by the Chamber of Mines, claiming that none of the targets set by the Mining Charter had actually been reached.66 These vastly different figures of black ownership in the South African mining industry could possibly be attributed to the methodology used to calculate the level of black ownership. The promotion of BEE in the mining sector has, ironically, become a catalyst for the populist support for the nationalisation of South Africas mines. This is because both the original and revised Mining Charters promote a form of narrow BEE, or crony capitalism, resulting in the enrichment
63 Strongly Conflicting Views on SAs Mining Charter Progress, Mining Weekly, 19 August 2011. 64 State Eyes Tougher Mining Penalties, Fin24, 24 August 2011. 65 Black Mine Ownership Targets Met: Chamber, Fin24, 24 August 2011. 66 SAMDA comments on the broad-based socio-economic empowerment charter for the South African mining and minerals industry August 2011, Parliamentary Committee on Mineral Resources: Public Hearings on the Mining Charter, 26 August 2011. In its submissions, SAMDA asserted that it was extremely concerned that transformation in the mining industry has not been met and the mining charter targets have not been achieved by the majority of the industry (at 1). SAMDA relies heavily on the independent research conducted by KIO Advisory Service in 2010 and 2011. The 2010 research indicates that the gross value of black shareholdings (HDSA market cap) within the top 25 mining companies is 4.53 per cent of the total market capitalisation and in 2011 the gross ownership percentage is indicated as 4.53 per cent of the total market capitalisation (at 15).

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of the well-connected few, as opposed to the economic empowerment of workers, as well as poor and marginalised black communities, who should be the principal beneficiaries of BEE. The Congress of South African Trade Unions (Cosatu) in 2010 called for the revision of BEE itself, stating that the current BEE policy is based on the view that empowerment means giving millions of rands worth of shares to a few individuals, while they leave the overwhelming black majority as disempowered as ever. Instead of making a rich elite minority even richer, BEE should benefit the workers, including the unemployed and poor communities.67 An example of the promotion of narrow BEE can be found in the fact that, while the revised Mining Charter requires that BEE transactions ascribe to the aspirant goal of bringing about meaningful economic participation (ie, by including workers and communities as beneficiaries), confusingly, it requires that these beneficiaries are vested with effective ownership, which entails their holding direct ownership, voting rights, economic interest and management control of mining entities. This seemingly precludes broadbased share schemes with communities and workers as their beneficiaries, as such schemes tend to be in the form of a trust, which holds shares in a mining company, and collectively exercise the voting rights attaching to the shares on behalf of the community.68 The underlying pressure for real socio-economic change and the governments apparent failure to respond to this challenge adequately are important contributors to the industrys current problems. According to Empowerdex, during the period 2004 to 2008, of all the BEE transactions conducted in the mining sector, only [seven] per cent of the mining sector transactions involve[d] employee share schemes directly and only 10 per cent involve[d] community schemes.69 Politically connected and already empowered individuals seem to be the primary beneficiaries of a policy that was originally intended to benefit a broader class of previously disenfranchised black South Africans. This is illustrated by ArcelorMittals recently aborted US$110m acquisition of ICT,70 conditional, inter alia, on ICT retaining its prospecting right over
67 BEE Policies Should Be Replaced Cosatu, Miningmx, 18 August 2010. 68 The definition of meaningful economic participation, however, specifically states that transactions can be concluded with non-operational BEE partners, for example, ESOPs and communities (being communities not usually involved in the management or control of a mining company). Effective ownership may thus require that such entities be afforded a greater opportunity to participate in a mining companys operations. The Mining Charter does not provide guidance on the manner in which the participation of non-operational BEE partners would be assessed. 69 A Summary of the BEE Transactions in the Mining Sector: 20042008, Empowerdex, 27 October 2009, at para 6. 70 Miningmx, note 61 above.

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ArcelorMittals forfeited residual share to the Sishen iron ore mine.71 ICTs shareholders include a former ANC employee and partner of Deputy President Kgalema Motlante, Prudence Mtshali, while 50 per cent is held by Jagdish Parekh, a key executive of the Gupta group of companies. The Guptas, in turn, are reputed to be benefactors of President Jacob Zuma and his extended family. A further example of crony capitalism in the mining industry is the fact that a politically connected company, Keysha Investments, controlled by Sivi Gounden, the erstwhile Director-General of Public Enterprises, was granted a prospecting right for associated minerals on a portion of Lonmins mine in the Marikana area in Rustenburg in May 2010. The DMR argued that in March 2009, when Keysha Investments lodged its application for this prospecting right, no prior applications had, at that time, been made regarding associated minerals over this property, and thus the Department therefore had no choice but to process the Keysha application in terms of the first come, first served provisions of the [MPRDA] and to grant it.72 The political connectivity in this case raises questions as to how Keysha Investments was aware of Lonmins alleged failure to apply for new order rights for associated minerals. The majority of South Africans who were disadvantaged by the racist economic policies of the past are simply not benefiting from the governments key empowerment policy. A flawed BEE policy will continue to fuel discontent among the historically underprivileged majority in South Africa. This is likely to strengthen the hand of those stoking the fires of nationalisation. This was illustrated recently by a poll among urban black South Africans which demonstrated 45 per cent support for mine nationalisation.73

Spectre of mine nationalisation

As the demand for effective socio-economic transformation increases, so too does the demand for mine nationalisation. Indeed, the resource nationalism trend appears to be gathering pace in Southern Africa as a whole. Namibias mining and energy minister, Isak Katali, announced at the end of April 2011 the Namibian Governments intention to declare copper, coal, gold, uranium and zinc, as strategic minerals and thus subject to additional national protection.74 This means that exclusive exploration and mining rights to all these strategic minerals will in future
71 Ibid. 72 Statement: Lonmin PLC Did Not Lose Mining Rights, Business Day, 10 August 2010. 73 Just over a third of metro adults feel that SAs mines should be nationalised, TNS Research Surveys, 7 April 2011. 74 Namibias Strategic Minerals, Mining Journal, 28 April 2011.

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be held by Namibias state-owned mining company, Epangelo Mining Company Limited (Epangelo). Consequently, investors will be required to partner with Epangelo should they wish to acquire rights to any of these strategic minerals in Namibia.75 While initially concerned about this, mining companies operating in Namibia appear to have been reassured by Katalis subsequent statement that the governments reforms would only apply prospectively: existing exploration and mining licences would remain unaffected.76 Their confidence may have been somewhat attenuated, however, by the Namibian Governments announcement that Canadian Afri-Can Marine Minerals Corporation, which owns the rights to Namibias second largest copper deposit in Haib, must enter into a joint venture with Epangelo. The Namibian Government has made no secret of the fact that it wishes Epangelo to participate in the projects development.77 This comes on top of the publication of Zimbabwes Indigenisation and Economic Empowerment Regulations, on 25 March 2011. Under these regulations, non-indigenous mining companies with an asset value of or above US$1 are required to dispose of at least 51 per cent of their shareholding to designated entities originally within six months from the date of the publication. Seemingly aware of what this had done to skittish investor sentiment in Zimbabwe, President Robert Mugabe in his opening of Parliament address in September, merely called for compliance with the countrys laws and emphasised that investment in Zimbabwe remains safe.78 At odds with President Mugabes reassurances have been Indigenisation Minister Saviour Kasukuweres various public assertions that Zimplats, which is 87 per cent owned by Impala Platinum,79 Zimbabwes largest foreign investor, could lose its mining licence if it failed to comply with Zimbabwes new legislation.80 Fortunately, an agreement was reached in late 2011 between the parties,81 under which Impala Platinum agreed to sell ten per cent of its Zimbabwean operations to a community trust. It also agreed to make a US$10m donation to facilitate the administration of the awarded shares.82
75 Ibid. 76 Mining Companies Welcome Clarification on New Namibian Policy, Mining Weekly, 11 May 2011. 77 Epangelo Mining Wants In On Haib Copper, The Southern Times, 5 September 2011. 78 Mugabe Says Foreign Firms to Abide by Stakes Plan, Mining Weekly, 6 September 2011. 79 Zimplats Wrangle Descends into Farce, Miningmx, 7 September 2011. 80 Zimplats, Zimbabwe Reach Deal, Business Day, 13 September 2011. 81 Ibid. 82 This is the first step made by the company to ensure that it complies with local legislation vis-a-vis the transfer of a majority stake in the mining company to indigenous Zimbabweans. Implats Agrees to Sell 10% of Zim Division, Business Day, 14 October 2011; Zimplats Submits Revised Ownership Plan Minister, Mining Weekly, 18 November 2011.

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Further amendments to the plan were announced on 18 November 2011.83 South Africa itself is now in the midst of a serious debate around mine nationalisation. A recent source of populist pressure for the nationalisation of the countrys mining industry stems from the ANCs Youth League (ANCYL). More than two years ago, while the world was battling the global financial crisis, Julius Malema, the recently suspended ANCYL President, called for the nationalisation of South Africas mines.84 This call began an intense and very public debate within the Tripartite Alliance, the ANCs electoral partners. In a documentary entitled Mining for Change: a Story of South African Mining released in June 2011, Malema argued that the countrys mines must be nationalised to return mineral wealth stolen by the white colonists to the black majority. This call for full-scale nationalisation, unaccompanied by any compensation,85 became a central aspect of Malemas successful campaign for re-election as the ANCYL President in June 2011. What followed in the wake of Malemas nationalisation proposal was an intense debate both in the media and eventually within the ANC itself, which has been at pains to emphasise that nationalising the mining industry is not the policy of the ruling party or of the government. The issue is strongly opposed by many sectors of South African society including, at one point, the National Union of Mineworkers (NUM). The NUMs initial position was one of concern that a change in ownership could potentially result in the exploitation of workers.86 James Motlatsi, former NUM president, went as far as to caution that nationalisation without compensation was unworkable, as it would put the retirement funds of numerous workers at risk and could lead to international retaliation through a boycott of South African exports.87 It now appears, however, that the NUM has reversed its initial position, by voicing its support in favour of nationalisation. This is subject to any policy being informed by the countrys developmental needs.88 At Malemas instigation, the ANC discussed the issue of nationalisation at its third national general council (NGC) meeting in September 2010. Although, contrary to ANC practice, the matter had not been previously discussed by either its Economic Transformation Committee or its national Executive Committee, it was decided that the matter of mine nationalisation would be the subject of further research and a final decision delayed until
83 Mining Weekly, note 76 above. 84 ANC Rejects Call to Nationalise Mines, Mail & Guardian, 2 July 2009. 85 We are not going to buy what has been stolen from us: Julius Malema quoted in ANC youth leader targets mines in new film, Reuters, 8 June 2011. 86 NUM to Canvass Workers Views on Nationalisation, The New Age, 4 May 2011. 87 Mine Nationalisation Without Compensation Will Spark Revolution Motlatsi, Mining Weekly, 1 April 2011. 88 NUM Explains its Nationalisation Stance, Miningmx, 19 August 2011.

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the ANCs December 2012 elective conference, which will be preceded by its June 2012 policy conference. In February 2011, the ANCs most important decision-making body, its National Working Committee, appointed a research team to investigate and report back by November 2011, on the feasibility of mine nationalisation. The three-person research team, led by Paul Jourdan, has conducted a detailed inquiry, involving extensive case studies of Botswana, Brazil, Chile, China, Finland, Malaysia, Nigeria, Norway, Sweden Venezuela, Zambia and Zimbabwe.89 While the report was submitted on schedule, its contents remain unknown. This is because of the subsequent request that the report is redrafted into plain language to ensure that its findings can be understood by rank and file members of the ANC, as well as provide additional detailed country-specific case studies.90 Leaked media reports suggest that the report may recommend some form of windfall profits tax, modelled on Australias resource rent tax91 for the mining industry; restrictions on the export of unprocessed minerals (which will be subject to export duties)92 to encourage domestic beneficiation and a substantially increased role for the state mining company, possibly modelled on Codelco, the Chilean state-owned copper producer.93 Contradictory statements that nationalisation is a question of how, not if, as well as statements that nationalisation will never happen, have been confidently made by key participants in the debate. On the one hand, Minerals Minister Susan Shabangu has gone on record as saying that whether South Africa should nationalise its mining industry was a dangerous question
89 According to the Sunday Times, the research team examined: the effective use of mining licences; local beneficiation strategies; royalties; various forms of ownership, including joint ventures; and passive nationalisation, which entails public control but private management of mine production. In particular, the team examined: the 50:50 joint partnership between the Botswana Government and De Beers; the failed nationalisation of Zambias copper industry; and how Sweden has successfully implemented a state-owned sovereign wealth fund. Study Due Soon on State Mines, Sunday Times, 16 October 2011. 90 ANC Tells Researchers to Simplify Mining Report, Business Day, 29 November 2011. 91 ANC Warms to Chile Mines Policy, Miningmx, 11 December 2011. 92 ANC draft documents indicate that an export tax to ensure the security of supply of commodities is currently being considered. To support the South African manufacturing industry, the government is also encouraging producers to increase local mineral beneficiation (ANC Targeting Export Taxes, Pension Funds in South Africas Economic Plan, Bloomberg, 23 November 2011). 93 News reports suggest that this model has been particularly well received by the ANC due to the fact Chile and South Africa share similar challenges and it accommodates both public and private participation in the mining industry. Other features of the Chilean model include: the identification of strategic minerals; state participation in resource asset ownership; joint ventures with the state; and, for the purposes of benefiting the countrys Copper Stabilisation Fund, the imposition of a supertax during particular boom periods (Miningmx, note 91 above).

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to ask in searching for the answer to South Africas evil triplets of poverty, inequality and unemployment.94 On the other, Cosatu has asserted that nationalisation will happen; the only remaining question is how. According to Cosatu economist Chris Malekane: [i]f you say business needs certainty to make investments this is the certainty you need to have, that what is being discussed now is models.95 Despite the Ministers commendable attempt to quell concerns regarding the mine nationalisation issue, the ANCs decision to defer the mine nationalisation issue until 2012, coupled with an apparent shift by the NUM (and Cosatu) in favour of nationalisation, creates a real cloud of uncertainty, which will continue to hang over the industry as we await the decision of the ANC conferences in 2012, potentially increasing the countrys sovereign risk profile. This in turn may diminish South Africas success in attracting foreign direct investment. According to Fred McMahon, Fraser Institute Vice-President for international research, the key to attracting investment is clarity since: [m]iners have for a long time had to deal with uncertainty under the ground, now they have to deal with human uncertainty above the ground.96 In the meantime, Malema has been suspended from the ANC for five years, having been found guilty of dividing the party and bringing it into disrepute.97 He has also been removed from his post as ANCYL President. Unsurprisingly, Malema has appealed his suspension,98 but whether he is ultimately successful is unlikely to affect the nationalisation debate itself. Some commentators have speculated that this decision may mark the end of Malemas political career, with damaging consequences for his nationalisation proposals.99 This does not seem likely. In any event, Cosatu has made it clear that its demands for change within the mining industry remain.100 Malema himself has previously dismissed the suggestion that the issue will disappear should he be suspended from the ANC.101 With the nationalisation genie out the bottle, one can only but agree with him. While outright nationalisation of South Africas mining industry seems very unlikely,
94 Mine Nationalisation Wrong, Dangerous Question to Ask Shabangu, Mining Weekly, 2 August 2011. 95 Costau: Nationalisation is a Given, IOL, 4 August 2011. 96 Uncertainty the Big Killer for Mining Investment, Mining Weekly, 3 March 2011. 97 Zero Nationalisation, Mining Weekly, 18 November 2011. 98 Malema Submits Appeal, Business Day, 25 November 2011. Malema will remain on full pay until his appeal has been disposed of (Julius Malema On Full Pay Until Appeal, Miningmx, 10 November 2011). 99 Malemas Demise Will Change Mining Debate, Miningmx, 28 August 2011. 100 Ibid. 101 Julius Malemas Hearing Cuts To the Heart of the ANCs Internal Conflict, The Guardian (blog: Alex Duval Smith), 1 September 2011.

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what is much more likely is a series of regulatory intrusions, as previously discussed, with their genesis in resource nationalism.102

State-owned mining company

Although it seems improbable that the ANC (and in all likelihood the next government elected in 2014) will embrace a policy of mine nationalisation, it is clear that the Zuma administration is much more assertive about the exploitation of the patrimony of South Africas treasure trove of mineral resources. This first became evident with the 2008 resurrection of the state-owned mining company, African Exploration Mining and Finance Corporation (Proprietary) Limited (African Exploration). On 26 February 2011, African Exploration duly opened its first coal mine at an initial cost of R130m in South Africas eastern Mpumalanga Province. President Zuma, on this occasion remarked that [the] role of the state cannot merely be confined to that of a regulator... [it] must actively participate in the mining industry to ensure that [the] national interest is protected and advanced. As an indication of the companys future intentions, African Exploration has applied for 123 prospecting and mining rights in South Africa.103 So far it has been granted 27 prospecting rights and one mining right.104 Although the mining industry has, rather surprisingly, not opposed the creation of a state-owned mining company, it has insisted that it operate at a level playing field with the private sector. Until recently, the scales were tilted in the other direction. Shortly after African Exploration was resuscitated in October 2008, the then Minister, Buyelwa Sonjica, purported to exempt it from the key licensing provisions of the MPRDA, something that the industry could have challenged legally but did not.105 In fact, African Explorations exemption was only withdrawn by the current Minister in March 2011, nearly three years later.106
102 ANC draft documents indicate that an export tax to ensure the security of supply of commodities is currently being considered. To support the South African manufacturing industry, the government is also encouraging producers to increase local mineral beneficiation (ANC Targeting Export Taxes, Pension Funds in South Africas Economic Plan, Bloomberg, 23 November 2011). 103 Internal Question Paper no 34, question 3098, 29 October 2010. 104 Ibid; State Mining Boss Gifted Hefty Bonus, Miningmx, 27 September 2011. 105 Notice 1081 in Government Gazette No 31485 of 10 October 2008 purported to exempt African Exploration from the provisions of sections 16, 20, 22 and 27 of the [MPRDA] in so far as it relates to any activities to prospect, mine and the removal of any mineral for accumulating and stock piling for purposes of security of supply and purposes incidental thereto. 106 Notice 220 in Government Gazette No 34115 of 14 March 2011.

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There are several fundamental problems with the notion of a state-owned mining company: (i) it sets the state up in competition with the private sector; (ii) it makes the state both player and referee in a situation where African Exploration benefited from a key regulatory exemption for nearly three years and was granted rights on this basis; and (iii) it may presage further advantages, by, for example, granting it a free carry or interest in new prospecting or mining rights. Some of these concerns could be addressed by the introduction of an independent industry regulator on the Brazilian and Ghanaian model,107 as well as by ensuring that African Exploration competes for rights on the same basis as the private sector and is not unfairly advantaged by taxpayer-funded subsidies.

Positive signs from the Department of Mineral Resources

In the midst of all these concerns, the Minister has announced (and in some cases is already implementing) a series of measures, which should result in the general improvement of South Africas mineral regulatory environment. First, the DMR introduced a seven-and-a-half-month moratorium (which only ended in mid-April 2011)108 on all new prospecting right applications, while conducting an internal audit into those that had been granted. To this end, a DMR internal audit highlighted several problems: inconsistencies in the grant of rights, clear instances of bureaucratic inefficiency, as well as a lack of transparency in the granting of prospecting rights. In particular, the Minister has highlighted the detrimental effect these shortcomings have had on the development of the mineral complexes in the Mpumalanga and Limpopo regions.109 Next, the DMR introduced a new electronic mining cadastre system (the new mining cadastre), in mid-April 2011. The new mining cadastre system should add greater transparency to the process of applying for prospecting rights, mining rights and permits, though not, according to the Minister, at
107 The Ghanaian Minerals Commission (established under the Ghanaian Constitution and the Minerals Commission Act) is a government agency responsible for the regulation and management of the countrys mineral sector. Its functions include making recommendations regarding national policies; advising the Minister of Lands and Natural Resources and monitoring the implementation of policies and the operation of mineral regulating bodies or establishments. It ensures legislative compliance through effective monitoring. Its vision is to make Ghana the leading destination of mining sector investment in Africa through creating a congenial atmosphere in which all stakeholders work as partners in a safe environment to achieve one common goal: sustainable development through mining. (www.ghana-mining.org; accessed 29 November 2011). 108 The moratorium was extended in relation to Mpumalanga. 109 Address by Minister Susan Shabangu, note 23 above.

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the cost of efficiency. An electronic real-time mining title system should not only enhance transparency, but should limit opportunities for corruption, as well as insider dealing in the licensing process, while promoting administrative efficiency and good governance. Of concern, however, is the fact that use of the new mining cadastre is apparently optional, as parties may still submit an application for the grant of a right, physically.110 Unless the DMR actually uploads all physical applications to the new mining cadastre, it will do little to enhance the transparency of the application process itself. The new system has also experienced substantial teething problems, which have still not been fixed, several months after the new system was launched.111 Finally, both the former Director-General of the DMR as well as the Minister, have publicly acknowledged ambiguities in the MPRDA that need to be clarified, with administrative discretion identified as an area of particular concern.112 To this end, the Minister has highlighted a number of gaps in the law, such as the difficulty in awarding rights in relation to associated or mixed minerals, as well as limiting the scope of unbridled administrative discretion in the MPRDA. Further, South Africas National Planning Commission has recognised that the major constraints impeding [the] accelerated growth and development of South Africas mining sector must be addressed by, inter alia, ensuring certainty in respect of property rights and a predictable, competitive and stable mining regulatory framework, to be achieved through major amendments to the MPRDA.113 These amendments were originally due for adoption by Parliament in 2011. According to the Minister, this has now been delayed until late 2012.114 This invites the somewhat cynical observation that such a delay may allow next years ANC policy conference potentially to influence any fundamental regulatory reform in South Africa.115

Conclusion
This is a critical time for South Africas mining industry. South Africas precipitous decline in the 2011 Fraser Institute rankings, a flawed BEE policy driving populist pressures for mine nationalisation coupled with the increased assertiveness of African Exploration do not, at first sight, create a pretty picture. At the same time, the DMRs introduction of a new mining
110 Notice 349 in Government Gazette No 34225 of 18 April 2011. 111 New Mine Licences Furore, The New Age, 20 April 2011. 112 Mineral Resources Minister Susan Shabangu announces measures to bring stability to South Africas mining sector, Pretoria, 17 August 2010. 113 National Planning Commission, note 3 above, 126. 114 Internal Question Paper 36, question number 3406, 4 November 2011. 115 Revised MPRDA At Least a Year Away, Miningmx, 28 November 2011.

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cadastre system, the audit of rights by the DMR and the prospect of significant amendments to the MPRDA next year may well presage a significantly better future for the mining industry. As I began with Zhou Enlais reputed remarks on the French Revolution, it may, in the current circumstances, be apt to end with Dickenss on the same subject: It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going the other way [...].116

116 C Dickens, A Tale of Two Cities, Book 1, Chapter 1.