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Cape Town - The election of President Cyril Ramaphosa and his appointment of Gwede Mantashe as new mineral resources minister has brought a wave of optimism to the South African mining industry, according to Warren Beech, head of the mining practice at international law firm Hogan Lovells in SA.
"There is a real optimism in the local mining industry. We see it in transactions happening at the moment. Real transactions are taking place on the commercial side. This will have a positive impact and projects that were on hold, could be relooked at," Beech told Fin24.
"The most positive aspect is that both Ramaphosa and Mantashe are committed to getting both the Mineral and Petroleum Resources Development Act (MPRDA) and the Mining Charter sorted out."
He explained that for several years following the international economic downturn the local mining sector was in a bad state, along with the industry in the rest of the world.
In South Africa the situation was made worse by policy and regulatory uncertainty, particularly around the Mining Charter, and amendments to the MPRDA. A feeling that changes to the MPRDA were not coming quickly enough contributed significantly to investor concerns.
Beech emphasised that the Mining Charter cannot be looked at in isolation.
In the case of the MPRDA, several proposed changes have not been passed into law, while some of the changes have been passed into law but have not yet come into force.
Uncertainty brings negative consequences
"The negative consequences of policy and regulatory uncertainty raise the question about why the process to finalise the new Mining Charter and mining legislation amendments stagnated.
"Basically, the relationship between the mining industry and former mining minister Mosebenzi Zwane hit a roadblock. There was no communication, and this was not a healthy situation," said Beech.
"Once Zwane was removed, parties started talking to each other. Both Ramaphosa and Mantashe said the Mining Charter will be addressed within three months. There are now consultations in genuine partnership with industry."
Court ruling on empowerment issue
Furthermore, the high court has recently granted a declaratory order on the “once empowered always empowered” rule for black economic empowerment (BEE) ownership transactions related to the mining industry.
Beech regards the high court's declaratory order as generally in favour of the mining industry. However, it was not a complete victory for the Chamber of Mines, as the ruling applies only under certain conditions.
Beech regards the court's order as interesting from a timing perspective.
"The recent court order probably put the industry in a better position at the negotiation table. However, the process is going well and the timeline for delivery is positive," said Beech.
"The only position which would have been better is if a new Mining Charter process was started, rather than using the suspended Mining Charter 3 as a basis. This means that there will be amendments, rather than a redraft."
Key message
In Beech's view, the real key message about what is currently happening in the SA mining industry is that progress is being made regarding the new Mining Charter and legislative changes.
Beech sees the two key matters to address in the negotiation process as firstly ownership, and how to deal with it. The second issue is the procurement element in the Mining Charter, because entry level requirements are very high. This would be a concern for international and local companies.
If those two concerns are addressed adequately, Beech believes most investors will be satisfied to a large extent.
He pointed out that, if all goes well, there has been an undertaking to publish a final version of the Mining Charter by May this year.
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