20 ways to kickstart investment in South African mining

South Africa has again slipped down the latest rankings of the world’s most attractive mining destinations in the Fraser Institute’s Annual Survey of Mining Companies 2021. It is now one of the ten least attractive mining investment destinations, out of 84 surveyed.

Honourable President Ramaphosa & Minister Gwede Mantashe:Here are 20 ways to kickstart investment in South African mining

According to the Minerals Council South Africa, this is the industry’s worst performance since 2009. This is an early indication that South Africa could again miss out on the resources super cycle.

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Webber Wentzel’s team of mining experts recommends that President Cyril Ramaphosa and Mineral Resources and Energy Minister Gwede Mantashe, in their upcoming addresses at the Mining Indaba, announce concrete steps on the following top priorities. Several of these issues have been raised over a number of years, but there has been no visible progress.

  1. Develop a regulatory system that encourages and incentivises investment in prospecting activities and is efficient.
  2. Do away with cumbersome administrative processes that dissuade investors from investing in South Africa and ensure policy consistency.
  3. Review the Mineral and Petroleum Resources Development Act and Mining Charter to bring local ownership requirements in line with international best practice and ensure that ownership becomes truly broad-based rather than benefiting a select few.
  4. Establish a forum for business, government, communities and labour to address Environmental, Social and Governance (ESG) issues in a co-ordinated way, rather than having a separate approach to each element.
  5. Lighten the onerous regulatory and reporting burden on mining companies where these laws overlap with corporates’ ESG actions. Rely instead on the power of stakeholder pressure to enforce ESG compliance, especially in relation to safety/health and decent wages/working conditions.
  6. Sign NEMLAA4 into law (it is sitting on your desk) to address some of the teething issues experienced with the One Environmental System and to provide environmental regulatory certainty.
  7. Improve the incentives in the Carbon Tax Act for mining companies to invest in carbon offset projects.
  8. Apply regulatory consistency in the investigation of mine accidents and the way inquiries are held, allowing inspectors to focus on practical safety and recommendations which can be given to employers immediately, and shared with industry without blame seeking. Further, encourage the inspectorate to work within the existing structures to ensure that, when appropriate, inquests and prosecutions are run to completion to ensure fair and transparent accountability.
  9. Establish a proper, functioning cadastral system to administer the granting of rights and permits. The deadlines for granting mining permits should be met and the granting of section 11 approvals for transfers of rights needs to be accelerated.
  10. Smooth the path for mines wishing to procure clean power from independent power producers. Large-scale private energy projects should be designated as Strategic Integrated Projects under the Infrastructure Development Act, which would make it quicker for them to obtain environmental and land permits and licensing or registration with the National Energy Regulator of South Africa.
  11. Update the Integrated Resource Plan, which only takes South Africa’s power planning to 2030 – it needs to be updated with climate change in mind and to look beyond 2030, as a matter of urgency.
  12. Immediately increase investment in the electricity transmission network to overcome capacity restraints, which are particularly acute in the Northern Cape, site of the country’s best solar resources.
  13. Resolve the problems besetting the Transnet rail network, which are costing both the private sector and the fiscus billions of rands in lost opportunity and revenue.
  14. Review the process of granting concessions to the private sector to run portions of the rail network. The envisaged two-year concessions (offered in the latest bid invitations) are far too short to incentivise the huge investment needed to address vandalism, restore the lines to operability and to operate the lines. These concessions should be for 15 years or longer to attract private sector investors.
  15. Address the inefficiencies in delivering fuel levy refunds to qualifying users of distillate fuel (diesel). The Customs and Excise Act, which governs these refunds, lacks the same mechanisms as the Tax Administration Act to speed up the processing and payment of refunds. This is giving rise to unnecessary disputes with SARS and delayed payments of refunds.
  16. Satisfy the long-running plea from the industry for flow-through shares (where some of the capital investment incentives are passed onto shareholders) to help fund mining exploration and development.
  17. Step up state efforts to improve service delivery around mining communities to reduce the pressure and dependency on mining companies to provide basic services (water, sanitation, education, jobs, infrastructure, health care etc).
  18. Establish a community engagement forum which includes local community representation, mining company representation and government involvement to mitigate the risk of unlawful protests following a breakdown of communications between the parties.
  19. Establish an administrative dispute resolution mechanism to deal with disputes between mining companies and local communities to avoid unlawful protests, the undue halting of mining operations and to alleviate the burden on courts tasked with adjudicating such disputes often on an urgent basis.
  20. Conduct community awareness programs educating mining communities on the exact obligations owed to them by mining companies and obligations owed to them by government in order to mitigate the risk of socio-economic based unlawful protests against mining companies. Also strengthen and capacitate local SAPS to enable swift and effective responses to illegal mining and violent protests.
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