SA lags resource economies on investment
Mining laws to be cut to win investors
February 7, 2007
By Justin Brown
Cape Town - South Africa's mining laws, which have been blamed by critics for costing the country billions of rands in new projects, would be amended this year to remove all obstacles to investment in the mining sector, minerals and energy minister Buyelwa Sonjica said yesterday.
Sonjica, who was speaking at the Mining Indaba, did not elaborate, but department of minerals and energy deputy director-general Abe Mngomezulu told Business Report the changes were mainly on technical, beneficiation and environmental issues.
Peter Leon, a partner at Webber Wentzel Bowens and the vice-chairman of the mining law committee of the International Bar Association, said Sonjica's statement would put local mining back on top of the preferred list of global mining investment destinations.
Sonjica, who took a far more conciliatory tone in her speech than her predecessors, Lindiwe Hendricks and Phumzile Mlambo-Ngcuka, said South Africa was attracting a lot less mining investment than other major resources economies.
Last year the Chamber of Mines criticised the government for introducing laws and regulations that were reducing mining investment by as much as R10 billion a year.
The chamber has repeatedly argued that the extra red tape involved with complying with the Mineral and Petroleum Resources Development Act, water licences and environmental legislation all served as a substantial brake to the development of new projects and mines.
The chamber has also argued that the government, especially the department of minerals and energy, lacked the capacity and skills to implement the new laws and regulations. This resulted in slow processing of applications for mining and prospecting permits as well as water licences and the approval of environmental impact assessments.
The chamber said the decline in mining investment had been due to the consolidated effect of the new laws and regulations, which the mining industry views as onerous, as well as poor government machinery.
Sonjica said the government was perplexed by the decline in mining investment in South Africa, despite booming commodity prices.
But she argued that the discrepancy in the investment fortunes of the South African mining sector and that of Australia stemmed from that fact that Australia was close to the booming economies of China and India, and was not due to excessive government interference.
"Australia's deposits are characteristically closer to its export harbours. That is not the case in South Africa," she added.
Leon said that countries such as Australia, Ghana and Tanzania were doing much better than South Africa in attracting investment because of the clarity of their regulatory regimes.
"South Africa desperately needs to catch up and [yesterday's] announcement should be lauded. It is a big step in the right direction," he said.
Alluding to recent modest investment in the sector since the beginning of 2005, Sonjica said this implied the return of positive, albeit somewhat tentative, investor sentiment towards the mining sector.
The government would drive hard to increase the amount of value added to metals and minerals produced in this country, the minister said.
Royalties for beneficiated products would be significantly less than those charged on exported ores. Submissions to the national treasury regarding the second draft of the royalty act in this regard had closed at the end of last month.
This year beneficiation baseline definitions would be gazetted to remove uncertainty for those aiming at the required level of beneficiation.
Real fixed investment in mining fell by 4.2 percent a quarter between the fourth quarter of 2002 and the fourth quarter of 2004. The declining trend was reversed from the start of 2005 to the third quarter of last year, during which period investment in mining expanded by 1.4 percent a quarter on average.
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