The mining team at legal firm Webber Wentzel has weighed in on President Cyril Ramaphosa’s keynote at the recent Mining Indaba 2023 where he highlighted many important aspects in which government can help to boost mining investment in South Africa.
The Mining Team says that President Ramaphosa expanded on the solutions to the challenges identified earlier to delegates by Gwede Mantashe, Minister of Mineral Resources and Energy.
The team notes:
The president’s address covered more of the details that potential investors expected to hear, and he made a firm commitment to “remove all impediments and create an environment that will drive sustained growth in mining”. The overall message was that the South African government has made strides in arresting challenges faced in mining and that it desires to work with the private sector to eradicate these challenges.
The president addressed energy constraints, the acceleration of economic reforms, safety, and security (which includes illegal mining and infrastructure) and the slow pace of the government’s structural reform programme.
Secure supply of electricity/decarbonisation
To realise South Africa and its mining sector’s growth objectives, the president put the achievement of a secure supply of electricity at the top of his list of four actions. We believe he is correct to prioritise electricity security in this manner because of the huge impact the electricity crisis is having on the country and, in particular, the mining sector.
The president referred to the National Action Plan to improve performance of our existing power stations: to add new generation capacity to the grid as quickly as possible, and to import 100MW more electricity capacity from neighbouring countries than the current 300MW being imported. He referred to the success of the renewable energy IPP procurement programme and agreements for 25 new projects that will soon be proceeding to construction.
He referred to the removal of the licensing threshold, enabling new generation by private power producers, and the rate at which the mining sector is generating its own electricity. The Minerals Council SA has said there are 89 embedded power generation projects, with a focus on renewable energy solutions, contributing to South Africa’s decarbonisation process.
We support these measures, especially the president’s recognition of South Africa’s abundant renewable energy resources, but would recommend that the Presidency also urgently apply its mind to unblocking grid constraints. In the recently closed Round 6 of REIPPPP, only 860MW of a targeted 5 200MW of projects was awarded to preferred bidders because of a shortage of grid capacity.
Not a single wind project was awarded preferred bidder status.
We are indeed seeing large volumes of private power capacity being worked on in the country, but more can be done to unblock constraints to bringing these projects on-stream in the shortest possible space of time, including a clear system for grid capacity allocations and urgent grid capacity development.
We will listen to this week’s upcoming state of the nation address (today 9 February) for further indications of steps to be taken in this regard.
Regulatory reform
The president said government was accelerating economic reforms to improve the operating environment. This included reducing timeframes for environmental authorisations, exempting energy projects from some environmental authorisations, and speeding up the registration of new projects and grid connection approvals.
He also said government would continue to work to reduce backlogs in prospecting and mining applications which has been a problem for the mining industry over many years. Ramaphosa said that over the past 18 months, the backlog had been cut by 42% and he promised it would be eliminated in the “short- to medium-term”.
The president said the DMRE is in the process of buying an “off the shelf” cadastral system which could be adapted to South Africa’s needs. This is an essential step to ensuring a speedy and transparent system of granting licences.
On logistics, the president referred to the partnership between Transnet and Mincosa and said opening up “key routes” to third-party operators would bring much-needed investment for upgrading, maintenance and rehabilitation.
Illegal mining/security
The president referred to the multi-disciplinary Economic Infrastructure Task Teams established by the SAPS that were operating in 20 hotspots and had already made a number of arrests. Transnet has developed relationships with the industry and private security to address cable theft and vandalism on the freight rail network.
Given increased safety and security threats in abandoned and operational mine sites, more consideration should be given to increasing security awareness, training, capacity building, and governance.
Making SA more attractive to investors
Ramaphosa highlighted that South Africa presents a particularly attractive destination for investors looking for opportunities in the green energy transition and the African Continental Free Trade Area.
This is an important, positive message. South Africa’s laws are considered some of the most progressive in the world, and already ensure adequate consideration of E, S and G risks, impacts and opportunities. Our Just Transition Framework was commended at COP27 and is being used as a benchmark for other developing countries to contextualise their own transition journeys. Our policy landscape is progressing as international developments drive action.
ESG
Ramaphosa said the implementation of Social and Labour Plans must be improved, as “mining must be at the forefront of social development”. Basically, the president stated that if the mine has water, the community should have water. If the mine has roads, the community should have roads. If the mine has a hospital, the community should have a hospital.
There is certainly an obligation on mining companies to implement their SLP’s and there is already a mechanism to monitor implementation in the SLP regulations. When implementation is lacking, government has the means to identify and deal with the defaulting parties. International frameworks and expectations similarly require businesses to recognise and protect against adverse human rights impacts in their operations and value chains.
However, it is the responsibility of the State to protect and promote basic and fundamental human rights. The United Nations’ Guiding Principles on Business and Human Rights expressly acknowledge the State’s duty to protect human rights. These obligations are similarly imposed on government under our Constitution, such as the duty to provide access to sufficient food, water and healthcare services (in section 27 of the Constitution).
While the social obligations of mines vis-à-vis their host communities cannot be gainsaid, government cannot superimpose its constitutional and international obligations on to the mining sector. The interplay between these obligations, and when mining companies can and should step in, must be carefully considered and balanced