The keynote address by South Africa’s minerals and energy minister, Gwede Mantashe, at this year’s Investing in African Mining Indaba conference covered a range of important industry topics.
Here is the reaction from some of Webber Wentzel’s Mining Sector experts to the key issues raised by the minister:
Jonathan Veeran and Manus Booysen, specialists in mining regulation responds:
Positively, the minister was open and honest in his opening address. He contrasted global growth of 3.3% in 2020 and 3.4% in 2021 with SA’s GDP growth of below 1%. He immediately referred to the problems resulting from power outages and that mining production fell by 3.1% year on year in November 2019.
His opening did not paint a rosy picture and acknowledged electricity constraints. It is encouraging to note that the minister is being realistic about the precious position of the South African economy.
On policy and regulation, he acknowledged the need for certainty to attract investment and said that government is committed to work with the sector. He acknowledged that mining companies have spent R600 million on social and labour plan implementation.
However, he did not make any suggestions on how companies can maximise the effects of their CSI spending and rehabilitation provisioning to help communities long-term. Proposed amendments to Nema allow for rehabilitation provisioning to be used to help near mine communities to develop agro-processing, possible some form of beneficiation and other ancillary industries during the life of mine which would ensure the longevity of communities and reduce dependence on mining operations.
We believe the minister could use regulation to create longevity in communities after mines close.
Regulation should allow for co-operation among several different companies in a region. This is partly because smaller companies do not have the scale to make a meaningful contribution on their own. Mining companies need to realise that co-operation is important and risks can be mitigated by, for example, insurance or a more structured regulatory framework.
We welcomed the minister’s comments on introducing the legislation on oil and gas but we are concerned that the new legislation is not congruent with the previous draft agreed with the industry. The country cannot afford slow regulation on oil and gas as the South African coast is very prospective. We also need a regulatory regime that encourages exploration, not one that imposes onerous compliance, as it will detract from investment.
On self-generation of electricity, we are encouraged by the minister’s comments, but we await to see the details. In an environment of weak commodities prices and slow growth, mining companies may find it difficult to fund self-generation projects. It will not be easy for a mining company, unless it is large and long-term, to put up an economically sustainable energy generation facility.
It is also positive that the minister anticipates competition in the electricity industry which will have a positive effect on prices. But these are long-term plans, while the problems facing Eskom are immediate. We are disappointed he said nothing about the immediate way forward and action being taken on Eskom.
Jason van der Poel, specialist in power and energy responds:
The current Integrated Resource Plan does not cap the amount of distributed generation that may be produced up to 2022. From 2023 to 2030, it is capped at 500MW per year. Distributed generation refers to projects between 1 and 10MW.
As the law stands, under schedule 2 of the Electricity Regulation Act, the only electricity generation projects that are exempt from the requirement to apply for license under the Electricity Regulation Act are projects of no more than 1MW, whether or not connected to the national grid.
Section 10(2)(g) of the Electricity Regulation Act allows the Minister of Mineral Resources and Energy to grant deviations from the Integrated Resource Plan. In May 2019, Jeff Radebe, the last Minister of Energy, wrote a letter to NERSA granting deviation from the existing IRP 2010-2030 for licensing of operation for generation facilities between 1 and 10MW.
The minister has said that together with NERSA, his Department is in a process to gazette a revised schedule 2 of the Electricity Regulation Act to enable self-generation and facilitate municipal generation options under Distributed Generation. We are encouraged by the minister’s comments, but we await details.
Several mining companies will need electricity generation facilities. Under current law, these will require a ministerial deviation from the IRP, which the minister, to date, has appeared reluctant to issue. The RFI for emergency power is encouraging and we await to see the procurement process that emerges from the RFI responses from the market.
A key issue will be generally how fast government can move to harness generation capacity that is ready to be engaged and whether the minister will use his powers under the Electricity Regulation Act to expedite approvals that may be needed by generators that can provide electricity very quickly.
Merlita Kennedy, dispute resolution and community issue specialist responds:
In addressing the issue of the social licence to operate, the minister did not go far in his comments as he did last year, when he said there had to be meaningful engagement with communities in granting rights, impacts and benefits. This year he said companies must take communities seriously on whose land they mine.
The minister seemingly issued a veiled threat relating to mining communities. He said they are important and should not be seen as the enemy – if they are treated as “foreign agents” there will be disruptions. According to SAPS figures, there are about 35 protests taking place every month, rooted in socio-economic concerns in mining communities.
The minister did not go far enough to address this challenge. On social and labour plans, he commended the companies that complied with their plans. However, 91% of communities recently interviewed by ActionAid SA said they were not aware of such plans.
Lizle Louw, labour and employment law specialist responds:
It is positive that the minister was forward-looking in acknowledging the impact of 4IR in the industry. He said he does not view it as a destroyer of jobs and that he recognises reskilling of employees in the industry is needed.
More initiative and input will be needed from the government on this issue, rather than complete reliance on and responsibility shifting to the mining industry. For example, government could provide incentives such as tax breaks to companies who reskill to prepare for 4IR and consequently ensure long term gainful employment or implement joint training programmes. Government, industry and labour should be preparing now for 4IR and the retention of jobs in that environment.
Kate Collier, specialist in occupational health and safety responds:
The significant drop in the number of fatalities that the minister mentioned, to 51 in 2019 from 81 in 2018, is certainly encouraging. We do however remain mindful that this is but one factor in assessing improved health and safety conditions of employees in the mining industry.
The drop in the number of incidents (in the broader sense) should not necessarily be relied upon too heavily to demonstrate improvement in the absence of clear comparable data such as lost time injury frequency rates across sectors or for types of injuries.
Other factors such as possible lower numbers of employees, fewer shifts worked and possible increases in near misses could lead to lower injury numbers being observed for reasons other than actual increased safety performance.
Ultimately, the industry continues its focus on removing the risks to which employees may be exposed and safety statistics should be a tool in this process rather than the goal.