With the pending amendments to the Minerals and Petroleum Resources Development Act (MPRDA), government is likely to participate more in the mining industry, which professional services firm BDO South Africa MD Bert Lopes believes might not necessarily be detrimental.
“Increased government participation is not a problem, as long as it creates an environment that makes it easier to mine,” he says.
Lopes states that greater participation in the industry could be a successful option for government, as it can ensure that operating conditions for mines are conducive to increasing production and employment.
Government needs to tackle issues such as stabilising the cost of labour and ensuring reliable power supply from State-owned power utility Eskom,” he adds.
Lopes notes that, traditionally, mining companies have had to deal with challenging operating conditions and high demands to comply with the requirements set out by the Department of Mineral Resources (DMR), such as those contained in the Mining Charter.
To increase the return from mining, government also expects mining companies to pay royalty taxes based on the minerals they mine.
The biggest challenges facing mining companies have to do with how they deal with the “human” demands from both labour and, more importantly, the surrounding communities in the areas where they mine. They are expected to teach their workers useful skills, such as training them to be a diesel mechanic, an electrician or a plumber, which creates opportunities for them to return to their communities and uplift them, explains Lopes.
Meanwhile, BDO audit partner Fred Bruce-Brand says each mining company operating in South Africa has to adhere to a ten-year plan, starting in 2004 and running to the end of 2014, looking at how it has progressed in terms of meeting the goals set out in the Mining Charter. “This will culminate in an audit that will look at, among other things, whether a company has achieved the milestone of 26% black economic-empowerment (BEE) ownership by the end of this year,” says Bruce-Brand, adding that the BEE scorecard is an important issue that the DMR will focus on.
“With these new amendments, the social demands on mines will increase. This aspect is so important that, even if it were not stipulated in the Act, communities and labour would continue to demand more from mines because whole communities depend on them,” notes Lopes.
One of the major challenges facing mining companies is the uncertainty caused by the legislation that regulates the industry.
“Mining companies need to have certainty in terms of what the regulation environment is going to be like in the long term so that they know the requirements they will have to comply with when they develop a new mine and execute mining projects,” says Bruce-Brand.
He adds that mining companies need to know the exact extent of government’s participation in the industry and the role it will play. Companies also need assurance of security of tenure for mines.
“Mine owners must be informed of these changes in good time so that mine operations can be well planned. This is why mine companies are pushing for the MPRDA Amendment Bill to be signed as soon as possible to enable full production at full capacity.
“At the moment, they are sitting in a vacuum waiting for things to happen, and they cannot make any business decisions,” concludes Bruce-Brand.