Manual 21386545

Manual 21386545
Mining Law and Policy: A comparative analysis of South Africa
and Zimbabwe’s mining laws and policy regimes
TADIOS MUZOROZA
A research dissertation submitted to the Centre for Human Rights Law
Faculty, University of Pretoria, Pretoria, in partial fulfillment of the
requirements for the LLM in International Trade & Investment Law
degree.
Pretoria, May 31, 2010
© University of Pretoria
DECLARATION
I declare that this research report is my own unaided work. It is being
submitted for the LLM in International Trade and Investment Law
degree at the University of Pretoria, Pretoria, South Africa. It has not
been submitted before for any degree or examination in any other
University.
Word count: 24 566 words (excluding References)
Tadios Muzoroza
This 31st
day of May of year 2010
3
ABSTRACT
South Africa and Zimbabwe are both well endowed with mineral resources. Both
countries share a history of colonization by white settlers with Zimbabwe getting its
independence in 1980, followed by South Africa in 1994. Like most countries in SubSaharan Africa, they rely on their natural resources for sustenance. In their case, the
mining industry has therefore contributed significantly to their development.
This study has illustrated the different mineral legislation and regulatory mechanisms in
place for managing this important sector. In addition, to its mining and mineral
legislation, South Africa has developed the Mining Charter and its associated regulations,
to regulate its mining industry. A comparative analysis of the mineral rights and tenure
has been in the two jurisdictions has been made. Zimbabwe’s mineral regime has been
found to be lagging behind not only South Africa, but to most of the region’s regimes.
Issues of adhering to the rule of law and respecting international laws and covenants have
been highlighted especially in the case of Zimbabwe.
Black economic empowerment programmes in the two countries were discussed, with
Zimbabwe again coming short. Recommendations for Zimbabwe following South
Africa’s example were proffered. The same applies to environmental issues and
sustainable development, Zimbabwe need to follow a more coherent path.
Harmonisation of mineral regimes within the SADC region was recommended. Further
recommendations to achieve this goal were put forward.
4
DEDICATION
To my daughter, Fungai and son, Tongai
You have been my inspiration. God bless you
5
ACKNOWLEDGEMENTS
I am greatly indebted to the University of Pretoria, Centre for Human Rights Law Faculty
for showing me the way. Thank you, Dr Rosalind Thomas for agreeing to be my
supervisor, although we never got the chance to meet.
This research would not have been successful without lecturers from the University of
Pretoria, Centre for Human Rights Law Faculty who shared with me their talent,
experience and passion ultimately gearing me for the challenge to critically analyse issues
pertaining to the mining sector. They include Prof. Danny Bradlow and Rafia, you gave
me the exposure to the knowledge I have placed in this research.
Space would not allow me to mention all the individuals who assisted in one way or the
other in conducting the research but I sincerely thank you all for your contribution. To
Emily, thank you for the patience in shepherding our 2009 to 2010 LLM Cohort.
To my whole family I wish to express special thanks for always believing in me and your
invaluable moral support in my endeavours. You are wonderful people.
God bless you.
6
CONTENTS
Page
DECLARATION....................................................................................................3
ABSTRACT.............................................................................................................4
DEDICATION.........................................................................................................5
ACKNOWLEDGEMENTS ...................................................................................6
LIST OF ABBREVIATIONS .............................................................................9-10
CHAPTER 1.............................................................................................................10
1.0 BACKGROUND AND OBJECTIVES OF RESEARCH .............................11
1.1 Introduction..........................................................................................................11
1.2 Miineral Legislation Overview: South Africa.....................................................14
1.3 Significance of Mining Sector in Zimbabwe..................................................14-16
1.4 Mineral Legislation Overview: Zimbabwe..........................................................16
1.5 The Aim, scope and contribution of study...........................................................16
1.6 The Methodology of the Study............................................................................17
1.7 Related Studies and Motivations……………………………………………18-22
1.8.1. Limitations……………………………………………………………… 22-23
1.9 Conclusion……………………………………………………………………. 23
CHAPTER 2..............................................................................................................23
2.0 Mineral Rights and Tenure Regimes…………...............................................23
2.0 Introduction.......................................................................................................23-24
2.1 Legislation governing mineral and tenure rights in South Africa.....................24-25
2.1.1 Important Features of the MPRDA……………………….............................25-26
2.2 Legislation governing mineral rights and tenure rights in Zimbabwe...............26-28
2.3 Mining Titles……………………………………………………………………. 28
2.3.1 Prospecting Rights: Zimbabwe…………………………………………………28
2.3.2.Prospecting Rights South Africa……………………………………………28-29
2.4 Prospecting Licence: Zimbabwe…………………………………………………29
2.5 Exclusive Prospecting Order……………………………………………………..29
2.6 Authority to Prospect…………………………………………………………….30
2.7 Mining Lease: Zimbabwe…………………………………………………… 30-31
2.7.1 South Africa……………………………………………………………………31
2.8 Special Mining Lease…………………………………………………………….31
2.9 Preservation of Mining Rights……………………………………………………32
7
2.10 Security of Tenure………………………………………………………… 33-35
2.11 Conclusion………………………………………………………………………35
CHAPTER 3...............................................................................................................35
3.0 Black Economic Empowerment..........................................................................35
3.0 Introduction............................................................................................................35
3.1 BEE Overview: Zimbabwe…………………………………...........................36-37
3.1.2 Compliance with International Law……………………… .........................37-40
3.1.3 Constitutionality and Regulatory Requirements............................................40-41
3.2 South Africa………………………………............................................................41
3.2 Historical Context……….................................................................................42-44
3.2.1 The Evolution of Black Empowerment.........................................................44-47
3.3.1 South Africa…………………………................................................................47
3.3.2 United States…………….............................................................................47-48
3.3.3 Malaysia……………………………………………………………………48-49
3.4 The Current Context……………………………………………………………..49
3.5 Mining and BEE in South Africa…………………………………………… 49-50
3.5.1 The Constitutional Ground for BEE……………………………………….50-52
3.5.2 The Mining Industry Charter………………………………………………52-54
3.5.3 Human Resource Development……………………………………………….55
3.5.4 Ownership……………………………………………………………………..55
3.5.5 Beneficiation…………………………………………………………………..56
3.5.6 Financing Mechanism…………………………………………………………56
3.6 Conclusion…………………………………………………………………… 56
CHAPTER 4............................................................................................................ 57
4.0 Legislation and Policies Governing Mining and Sustainable Development.57
4.0 Introduction......................................................................................................... 57
4.1 South Africa…………….....................................................................................57
4.12 Constitution of the Republic of South Africa……………………………...58-59
4.1.3 MPRDA…………………………………………………………………...59-60
4.1.4 The Minerals and Mining Policy for South Africa………………………..60-61
4.1.5 Sustainable Development through Mining……………………………….61-62
4.1.6 The National Environment Management Act………………………………...62
4.1.7 Other Legislation pertaining to Environment Management………………62-63
4.2 Zimbabwe………………………. ......................................................................63
4.2.1 Zimbabwe Constitution and Environmental Legislation.............................63-64
4.2.2 Legal and Regulatory Framework…………………………………………….64
4.2.2 Mining Policies………................................................................................64-67
4.3 Conclusion…………………………………………………………………..67-68
CHAPTER 5.............................................................................................................68
5.0 A Case for Harmonising Mineral Law in SADC… .......................................68
5.0 Introduction.....................................................................................................68-69
8
5.1 SADC Protocol on Mining….........................................................................69-70
5.2 SADC Mining Strategy..................................................................................70-71
5.3 Compliance with SADC Protocol on Mining and MSS................................71-73
CHAPTER 6............................................................................................................74
6.0 RECOMMENDATIONS................................................................................. 74
6.0 Introduction.........................................................................................................74
6.1 Recommendations on Mining Law and Policy, Mineral Rights and Tenure…..74
6.2 Recommendations on BEE Policies...............................................................74-75
6.3 Recommendations on Environment and Sustainable Development..............75-77
6.4 Recommendations on Harmonisation of Mineral Legislation in SADC…........77
6.4.1 Harmonisation of Legislation and Policies…………………………………..77
6.4.2 Promotion of Foreign and Indigenous Investment……………………….77-78
6.4.3 Value Addition………………………………………………………………78
6.4.4 Emerging Markets………………………………………………………. 78-79
6.4.5 Communication Strategy…………………………………………………….79
6.4.6 Avoiding the Dutch Disease……………………………………………...79-80
6.5 Conclusion………………………………………………………………….80-81
7.0 REFERENCES............................................................................................81-85
8.0 BIBLIOGRAPHY.......................................................................................86-87
9
LIST OF ABBREVIATIONS
Abbreviations
ANC
African National Congress
BEE
Black Economic Empowerment
BIT
Bilateral Investment Treaty
FDI
Foreign Direct Investment
DRC
Democratic Republic of Congo
EIA
Environment Import Act
GNU
Government of National Unity
GOZ
Government of Zimbabwe
GDP
Gross Domestic Profit
ICSID
Convention of the Settlement of International Disputes
IEEA
Indeginisation Economic Empowerment Act
IEER
Indeginisation Economic Empowerment Resolution
MSS
Mining Sector Strategy
MPRD
Mineral and Petroleum Resource Development Act
NEED
National Economic empowerment and Development
NEP
New Economic Plan
NEMA
National Environmental Management Act
NWA
National Water Act
OCF
Our Economic Future
PGM
Platinum Group of Metals
RBZ
Reserve Bank of Zimbabwe
RDP
Reconstruction and Development Programme
SADC
Southern Africa Development Countries
SDM
Sustainable Development through Mining
SMME
Small Medium and Micro Enterprises
TNC
Trans National Cooperation
USA
United States of America
USD
United States Dollar
UNCTAD
United Nations Conference on Trade and Development
10
CHAPTER 1
1.0 Background and Objective of Research
This Chapter is gives summary of the development of mining legislation and policy in
South Africa and Zimbabwe. It is shown that the two countries are well endowed with
mineral resources. The significance of the mining sector to the economies of the two
countries is highlighted flagging the contribution made to the respective country’s
Growth National Product (GDP). A comparative analysis of the mineral rights and
mining tenure regimes is given showing that although Zimbabwe has a progressive
mineral law regime; it still lags behind that of South Africa and expectations of
international norms and standards. Important features of the legislation are highlighted
showing their significance to the mining industry and whether they give investor
confidence.
Country profile: Zimbabwe
11
Population:
12.6 million
Urban Population:
36%
Major Ethnic and Linguistic Groups:
Shona - 82%
Ndebele, other African tribes - 16%
Religions:
Syncretic - 50%
Christian - 25%
Traditional beliefs - 24%
Muslim, other - 1%
Population Growth Rate:
0.83%
Life Expectancy:
39 years
Infant Mortality:
66 per 1,000 live births
Under Five Mortality:
123 per 1,000 live births
Maternal Mortality Rate:
700 per 100,000 live births
GNP Per Capita:
$480
Percentage of Literate Adult Males:
94%
Percentage of Literate Adult Females:
87%
Sources: http://www.care.org/careswork/countryprofiles/109.asp
Accessed 31 May 2010
12
Country Profile: South Africa
Population:
42.8 million
Urban Population:
57%
Major Ethnic and Linguistic Groups:
Black - 75%
White - 14%
Indian, other - 11%
Religions:
Christian - 68%
Animist, traditional beliefs - 29%
Muslim - 2%
Hindu - 1%
Population Growth Rate:
0.01%
Life Expectancy:
46.6 years
Infant Mortality:
61 per 1,000 live births
Under Five Mortality:
71 per 1,000 live births
GNP Per Capita:
$2,900
Percentage of Literate Adult Males:
87%
13
1.0 Introduction
1.1 Significance of the mining sector in South Africa
South Africa is one of the world's and Africa's most important mining countries in terms
of the variety and quantity of minerals produced. It has the world's largest reserves of
chrome, gold, vanadium, manganese and Platinum Group Metals (PGM's). South Africa
is the leading producer for nearly all of Africa's metals and minerals production apart
from diamonds (Botswana and the DRC), uranium (Niger), copper and cobalt (Zambia
and the DRC) and phosphates (Morocco).1
The country's mineral industry can be broken down into five broad categories - Gold,
PGM, Diamonds, Coal and Vanadium. Combined, these produced a sales revenue (2000)
of ZAR51.6 billion (approx. US$ 7.4 billion), representing 6.5% of the country's Gross
Domestic Product (GDP). As a result of an increase in secondary and tertiary industries
as well as a continuing decline in gold production, mining's contribution to South Africa's
GDP has declined over the past 10 years (in 1991, mining's contribution to GDP was
8.4%) . However, this may be offset by an increase in the downstream or beneficiated
minerals industry, identified by the Government as a growth sector in South Africa.
Furthermore the price of gold has recently taken a peak.
1.2 Mineral Legislation Overview: South Africa
Mining legislation in South Africa dates back to as far back as the late 1800s with the
promulgation of the Mines, Works and Machinery Ordinance 54 of 1903. This
culminated into the Minerals Act 50 of 1991 which replaced the Mining Rights Act 20 of
1967, as well as the Mines and Works Act 27 of 1956.
1
http://www.mbendi.com/indy/ming/af/sa/p0005.htm
14
There were certain specific changes from the Mines and Works Act of 1956, and some
new concepts were introduced in the Minerals Act 1991.2 The Minerals Act of 1991 was
designed to simplify the granting and operation of mineral rights.
The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) was
accented to on the 3rd of October 2002 and came into operation on 1 may 2004 together
with the MPRDA Regulations GN R 527 promulgated there under. Although the
MPRDA repeals the Minerals Act 50 of 1991 in its entirety, a transitional period existed
in terms of which the holder of a used or unused old order right is given an opportunity to
comply with the provisions of the MPRDA.3
1.3 Significance of the mining sector in Zimbabwe
The Republic of Zimbabwe, is a land-locked nation in Southern Africa (See country
profile above) surrounded by Zambia to the north, Mozambique to the east, South Africa
to the south, and Botswana to the west. The geology of Zimbabwe is richly endowed
with mineral wealth and is known to have vast resources of over 40 different minerals
almost as wide a range as produced in South Africa.4 Of the 40 known metals and
minerals that it is home to; gold, platinum and chrome form the principal endowments.
The country’s gold reserves are among the largest in Africa, while it hosts the second
largest platinum reserves in the world.5 The mining industry contributes about 4.5% of
the GDP and employs about 5% of the workforce.6 Significant kimberlites have recently
been discovered in Marange located in the eastern part of Zimbabwe.
2
The Role of the Department of Minerals and Energy, GDACE Mining & Environmental Impact Guide,
Chapter 11: The Role of the DME
3
Ibid 2
4
John Holloway & Associates, The mining Annual Journal Ltd 2000 Zimbabwe 1, Mining Annual Review
2000
5
Zimbabwe Mining Report Q1 2010, http://www.researchmarkets.com/reports/1204377
6
The Mineral Industry of Zimbabwe by Philip M. Mobbs: US Geological Survey Minerals Yearbook 2005
15
The mining industry has contributed significantly to the development of the country.
Most of the towns and cities in Zimbabwe owe their origins to mining activities (Svotwa,
et al., 2001). The Reserve Bank of Zimbabwe (the country’s central bank; RBZ)
estimates that in 2004, the mining industry contributed over 38% of the nation’s foreign
currency earnings.7 However the mineral sector is subject to uncertainty caused by
Government policies and this is despite the formation of a Government of National Unity
(GNU). The government’s often violent land redistribution programme which began in
2000 quickly decimated the commercial farming sector, which had been the nation’s
major source of exports and foreign exchange. The pun from being a bread basket to
being a basket case is often used in the public media as a result of the economic decline.
By 2003, the value of mineral exports had surpassed that of agricultural goods.8
In the past, Zimbabwe was the world’s third largest gold producer, after South Africa and
Ghana, producing around 25 tones of gold each year. In recent years, however, lax
regulations, failure to monitor mining activities, and illegal gold mining and smuggling
have sharply cut output to around 6.75 tones.9 However, industry experts believe that the
country’s gold sector could rise remarkably should there be political certainty in the
country. For one, the country’s infrastructure remains in reasonable shape when
compared to other nations, such as Angola or the Democratic Republic of Congo (DRC),
that have been ravaged by decades of civil war. In addition, there remains a well-skilled
workforce in the country. Zimbabwe also has the world’s second largest reserves of
platinum after South Africa. PGMs have witnessed a sharp increase in output after recent
developments of the Mimosa and the Ngezi platinum mines in the south and west,
respectively.10
7
Zimbabwe Mining Report Q3 2009
Ibid 5
9
Zimbabwe Chamber of Mines
10
Ibid 9
8
16
1.4 Mineral legislation Overview: Zimbabwe
The Mines and Minerals Act was enacted in 1961 and a number of amendments have
been made since then. All minerals are vested in the President and one requires rights to
work mineral deposits through an application to the Mining Commissioners.11 Mining
activity is open to both local and foreign individuals and companies.
Zimbabwe's general mining policy is to sustain development of the country's mineral
resources and create employment opportunities. There is no prioritization of minerals for
exploration and development. Environmental issues in mineral exploitation are given due
attention at project inception and development stages.
1:5 The aim, scope and contribution of the study
The focus of the thesis is on the comparative study of mineral legislation, policy and
regulatory regimes of South Africa and Zimbabwe and how flexible they are in
promoting and encouraging sustainable development and foreign direct investment (FDI)
into the respective countries. The principle objective of this comparison is to find good
practices and shared experiences of these two African countries. In addition, this thesis
comments any bad examples observed that the analysed countries should respectively
avoid or resolve. Furthermore references will be made to other countries with advanced
systems and legislation guiding the mining industry.
Below are listed objectives to be achieved by this research:

to compare mineral rights and tenure regimes in Zimbabwe and South Africa and
recommend any necessary adjustments that will improve their competitiveness.

to identify the black empowerment policies or indigenization policies within the
mineral sectors in Zimbabwe and South Africa and the need to have a coherent
11
Zimbabwe Mines & Minerals Act 1996 (Revised Edition), Chapter 21:05, Mines and Minerals
Amendment Bill, 2007
17
indigenization and mining code or mineral policy. Issues pertaining to
expropriation and the rule of law are discussed in the context of international law.

to clarify the importance of environmental laws on sustainable development and
mining to the Zimbabwean and South African economies and how the problems
and challenges facing the sector are given due attention by the responsible
authorities.

to look at the compatibility of mining laws and policies in SADC with the SADC
Protocol on Mining and how these could be adjusted to suit the overall regional
agenda. Factors aligned to the promotion of foreign direct investment (FDI) are
highlighted.

Recommendations pertaining to the afore mentioned objectives are proferred.
1.6 The Methodology of the Study
The research overall is qualitative and descriptive, supported by various pieces of
legislation and policy documents and lessons learnt from other jurisdictions. Thus a
comparative analysis of these policy and regulatory systems is proffered in an attempt to
meet the thesis objectives.
The first phase looks at the various legislative and policy impact study of South Africa
and Zimbabwe frameworks. Zimbabwe’s legal and policy regime although not properly
documented compares favourably with that of South Africa and the region. Nevertheless
the country is still lagging behind its neighbours, especially in view of its perceived
political risk and legal uncertainties. This uncertainty relating to the rule of law is given
due attention.
The second phase attempts a comparative analysis of empowerment legislation and
regulation and why due care and regard need to be given to avoid investor fatigue and
capital flight.
18
A descriptive analysis on the harmonization of mining legislation and regulation, and
compliance with the SADC Protocol is proffered. It is expected that this harmonization
will lead to an increase in FDI to the SADC region as it improves the investment
regulatory environment.
1.7 Related Studies and Motivations
The performance of the Zimbabwean economy has impacted negatively on all its sectors,
and mining is no exception. Given its high mineral potential, the country has not lived up
to its level of attracting foreign direct investment in the sector. The sector is faced with
the following challenges and problems: decline in mineral production, negative growth,
decline in the flow of new investment, reduction in the GDP contribution from the sector,
employment creation, underutilization of capacity, and most seriously, loss in
competitiveness.
Otto (1998) in his paper entitled “Mining Policy, Legislation and Regulation” clarifies
the importance of having a stand-alone mineral policy document as opposed to
interpreting policy from diverse sources of information. Such a policy document is a
useful regulatory tool that serves two important functions both to the investor and the
government.
Elizabeth Bastida, Thomas Walde, and Janeth Warden-Fernandez (eds.), International
Comparative Mineral Law and Policy: Trends and Prospects (The Hague: Kluwer Law
International, 2004). This book, a mining compendium is a compilation of more than
sixty papers. The book reflects a range of approaches and experiences in mineral-rich
countries on mineral law and policy. The book is divided into three chapters but it is the
articles in chapter one that is relevant to my research work. The various authors discuss
the past and current trends in legal regimes applicable to the exploration and exploitation
of mineral from both international and comparative perspectives. It was clear from the
articles in this chapter that there is a growing consensus that foreign direct investment in
mining activities is attracted by a competitive legal and investment framework.
19
Otto James and Cordes John, The Regulation of Mineral Enterprises: A Global
Perspective on Economics, Law and Policy (Westminster, Colorado: Rocky Mountain
Mineral Law Foundation, 2002): This book explores a broad range of issues that affect
the mining industry globally. It covers topics such as mining policy, mineral taxation and
environment and sustainable development. The discussion of the increasing importance
of a mining code as a central source of regulation in chapter three is what makes the book
relevant to my thesis project. The author in this chapter focuses on the trends in national
mining regulation system in developed, developing and transitional economies. Of
particular relevance is the framework of questions that should often be considered in
analyzing a mining law from exploration and development to mining and mine closure.
Articles and Journals
Elizabeth Bastida, “A Review of the Concept of Security of Tenure: Issues and
Challenges”, 2001, Journal of Energy and Natural Resources Law, Volume 19, No. 1.
This article discusses security of tenure as a key criterion that any Investor will consider
before deciding to invest in a foreign mining project. The author reviews the various
interpretations that have been given the concept over the years. The author contends that
the implementation of the concept by some Latin American countries contributed
immensely in helping to attract foreign direct investment to their mining sector. The
author further argues that the increasing concerns for stricter environmental regulation,
sustainable development and the social impacts of mining pose serious challenges to the
concept. The article therefore calls for the need to balance these challenges with the
concept in order not to undermine the competitiveness of the mining industry in the
countries faced with these challenges.
Elizabeth Bastida et al., “Mining Investment and Policy Development: Argentina, Chile
and Peru”, CEPMLP Internet Journal, Volume 16, Article 10.
20
This article provides an overview of the law and policy developments that have taken
place in the mining industry of Chile, Peru and Argentina within the last two decades.
Like the article by John Williams, the authors also discuss the Latin American Mining
Law Model and highlighted the historical reasons behind the model. Unlike John
Williams, the article concludes by analyzing the challenges that these countries are likely
to face in the changing context of mineral sector governance within the concept of
sustainable development.
John P. Williams, “The Latin American Mining law Model”, in Elizabeth Bastida,
Thomas Walde and Janeth Warden-Fernandez (eds.), International and Comparative
Mineral Law and Policy: Trends and Propects (The Hague: Kluwer law International,
2005) 741-757.
The author of the article describes the so-called “Latin American Mining Law Model”
Which he defines as the distillation of the key features of the legal and regulatory
framework for minerals exploration and mining in such countries as Chile, Peru, Mexico,
Bolivia among others. The author delves into some major features of the model and
admits that although the model has not been enthusiastically embraced worldwide, it
inspired changes that made the mining laws of many mineral-rich countries more
responsive to the needs of the mining industry globally.
Robert Pritchard, “Safeguards for Foreign Investment in Mining”, in Elizabeth Bastida,
Thomas Walde and Janeth Warden-Fernandez (eds.), International and Comparative
Mineral Law and Policy: Trends and Propects (The Hague: Kluwer law International,
2005) 73-97.
This article contends that private investment in mining especially by multinationals
depends on a competitive legal and investment framework of the host country. Pritchard
is of the view that the most adverse fears of foreign investors is the change of the legal
regime in favour of the host country especially after the investor has initially been
encouraged by the host state to commit its capital.
21
The author therefore discusses the key legal safeguards which multinationals in particular
generally look for before investing their funds in a mining activity in any country. These
include legal and fiscal guarantees as well as international arbitration mechanisms to
enforce the performance of these guarantees.
Thomas Walde, “Investment Policies and Investment promotion in Mining Industries”
(1991) 6 ICSID/Foreign Investment Law Journal, 1 (Spring) 94-113
This journal discusses stability of contract terms as key criterion to be considered by
investors before a decision is made as to whether to invest in a mining project in any
country. The author emphasized this is very essential for most long term investments in
mining in order for the investor as well as his sponsors to be assured that the expected
benefits of the investment will be realized. The author further argues that the stability of
the investment terms and conditions covers not just the proprietary rights and title but
extends to taxation, import and export regulations and foreign exchange regulations
among others.
Vilhena, F.C., Main Issues for Formulating Mining Policies Towards Attracting Foreign
Investment, in The Mining Industry: Old Threats and New Challenges, CEPMLP,
University of Dundee Annual Mining Seminar, 10-14 June 2002.
One major issue that any legal framework for mining should address is how to resolve
conflicts between mining and other land uses. These conflicts may cover such issues as
when exploration and mining activities will prevail over other uses of the land and the
rights of way and to easements over third parties’ land. Vilhena makes it clear that if a
country is to attract and sustain investment in the mining sector, then its mining law must
define the rights of landowners and other occupiers, ensure that investors in the mining
industry recognize these rights in negotiating land access and creates an effective and
practical mechanism to enforce such provisions in the law. This paper is particularly
useful in the area of land access and compensation which is one of the key features that
will form the basis of my comparison of Ghana’s new mining law to the Latin American
Mining law Model.
22
1.8.1 Limitations
The research is aimed at highlighting the disparities of mining legislation and policy of
Zimbabwe and South Africa. However yearning gaps with regard to other legislation like
tax, royalties and beneficiation has not been considered as this was beyond the scope of
this thesis. This presents an opportunity for further research into these areas.
Mining law being a very specialized field, an attempt to study this field without adequate
supervision presented challenges.
1.9 Conclusion
Mining plays a very significant role in South Africa and Zimbabwe given the rich mineral
endowments of the two countries. Its contribution to the fiscus was acknowledged as
well as the decline in mineral production in the two countries, particularly Zimbabwe.
The evolution of mining laws and policies in South Africa and Zimbabwe was
highlighted and is important in addressing the challenged bedeviling this industry
CHAPTER 2
2.0 Mineral Rights and Tenure Regimes
2.0. Introduction
Mining law comprises the study of the general legal framework applicable to mineral
development, covering not only aspects of mineral tenure but also the fiscal terms, the
investment regime, environmental and social requirements, and health and safety
23
regulations.12 Ownership of mineral rights (more appropriately ‘‘mineral interest’’) is an
estate in real property. It is the right of the owner to exploit, mine, and/or produce any or
all of the minerals lying below the surface of the property.13 The five elements of a
mineral interest are:
1. the right to execute any conveyances of mineral rights
2. the right to receive bonus consideration
3. the right to use the surface as is reasonably necessary to access minerals
4. the right to receive delay rentals and
5. the right to receive royalty
The owner of a mineral interest may separately convey any or all of the above listed
interests.14
Tenure has been defined, as conditions on which property is held; tenant’s rights, duties
etc.15 Mineral tenure regimes deal with the legal problems and terms related to
ownership and the acquisition, holding or transfer and termination of rights by private
individuals, entitling the holder to conduct exploration and exploitation of minerals.
Mineral tenure regimes often entail a legal distinction between land and subsoil rights,
with the state usually owning or controlling minerals in the subsoil.
2.1 Legislation governing mineral and tenure rights in South Africa
Until 30 April 2004, the right to prospect for and to mine was primarily regulated by the
Minerals Act, No. 50 of 1991 (‘the Minerals Act’).16 The Minerals Act vested the right
to mine a particular mineral in the holder of the mineral rights in respect of the relevant
mineral in relation to the land in question. Mineral rights constituted an element of
ownership of land.
12
Mineral Tenure Regimes in the Context of Evolving Governanance Frameworks: A case study of
selected Latin American countries by Ana Elizabeth Bastida, Centre for Energy, Petroleum, & Mineral Law
& Policy, University of Dundee, Scotland
13
Wikipedia
14
Ibid 13
15
Chambers Concise Dictionary, New Edition
16
24
Regulation of South Africa's mineral and petroleum industry changed fundamentally
from 1 May 2004, the date on which the Mineral and Petroleum Resources Development
Act, No. 28 of 2002 (‘the MPRDA’)17 came into operation. The commencement of the
MPRDA radically transformed the law governing rights to mineral resources in South
Africa and has caused a significant increase in the transactions in this sector (fig ) The
new legislation creates a ‘‘use it or lose it’’ principle that was absent from South Africa’s
minerals dispensation. The industry has seen a huge upsurge in foreign companies
seeking a foothold in the lucrative South African mining sector as well as the number of
black Economic Empowerment companies given an opportunity to acquire a stake in the
wealth of South Africa’s natural resources.(fig) The MPRDA endorsed the view that
South Africa’s mineral and petroleum resources belong to the nation, and accordingly
established the State as the custodian of South Africa’s mineral resources., through the
Minister of Minerals and Energy.18 The State therefore has the power to grant, control,
administer, the MPRDA Act extinguished private ownership of mineral rights and
replaced it with a system of State grants of the right to prospect and mine. South Africa's
mineral (and petroleum) resources were placed under the State's custodianship.
2.1.1 Important Features of the MPRDA
A key element of the MPRD Act is the change from a legal framework within which
mineral rights formed an inherent element of immovable property, which encompassed
the right to prospect and mine (subject to regulation by the State), to a system where the
State will grant the right to prospect and mine.
Another important feature of the MPRD pertains to the issue of minerals ownership.
The Act attributed to the State the ownership of minerals in the subsoil.19 In terms of
Section 2(a), the Act recognises the state’s right to exercise sovereignty over, inter
alia, all mineral resources. In this sense, mineral resources are considered to be the
17
18
19
Government Gazette, Republic of South Africa, Vol. 448 Cape Town, 10 October 2002 No. 23922
MPRDA, s
MPRDA, s3 (2) (a) and (b).
25
‘common heritage of all people of South Africa whereby the State is custodian
thereof…’20 Unlike its predecessor which was based on privately owned mining rights,
the Act confers the state with the authority to issues licences to private operators to
access and mine these resources.21 Although mineral rights are vested in and controlled
by the state, non- minerals are nonetheless vested in the landowner.22 Under the
MPRDA, mineral rights are considered limited real rights,23 the allocation of which is
determined through an administrative system. Such system is however qualified by
various provisions restricting the exercise of administrative discretion within a
framework of reasonableness and procedural fairness.24 To this end, limitations of the
administered system are reflected under the MPRDA (as in Sections 13-36) by reference
to stipulated objective criteria in the granting of such rights.25 The MPRDA also affects
changes to mineral rights as recognised under the common law. The right to use of the
surface by mineral rights holders seems now to derive from statutory provisions rather
than common law principles.26 Section 4 of the Act explicitly provides that MPRDA
provisions shall prevail in the event of conflict with common law principles.
2.2 Legislation governing mineral and tenure rights in Zimbabwe
5
In Zimbabwe, all mining activities come under the Mines and Minerals Act (Chapter
21:05 (1996), amendments, and associated regulations (hereinafter MMA). The Ministry
of Mines is responsible for the mining sector. This law is considered to be liberal and
one of the most rational pieces of legislation in Africa (John Lee 2004). In addition to the
Environmental Act, Mining, Management and Safety Regulations and Explosives
20
Ibid 17
Walde, T., Mining Law Reform in South Africa: Draft comment, Vol 12-2 article, Online Journal
CPMLP (2002) http://www.dundee.ac.uk/cpmlp/journal/html/vol12-2html - last visited 25/02/2010
22
Dale, M., Comparative International & African Mining Law as Applied in the Formation of the New
South African Mineral Development Legislation in International and Comparative Mineral Law and
Policy, 827 (Bastida, E., Walde, T., and Warden-Fernandez, J., ed., The Hague: The Kluwer Law
21
International, 2005) [hereinafter, Dale III]
23
24
MPRDA, s. 5(1).
Cawood, F. T., New South African Mineral and Petroleum Resources Development Act: Shaping a
New investment Environment to Reflect a Diverse Society, vol. 22 JENRL 130, 131 and
132 (2004).
25
26
Dale 111, 833
MPRD, s.5 (3)
26
Regulations (1989), other legislation involving environmental issues include the
following Acts:

The Hazardous Substances and Articles Control Act, 1972, administered by the
Ministry of Health also deals with the use and control of hazardous substances on
mines.

The Mining (Health and Sanitation) Regulations, 1977 administered by the same
Ministry makes provisions for adequate hygiene in and around mines.

The Mining (Alluvial Gold) (Public streams) Regulations, 1991 deals with small
scale gold panning and places restrictions on the miner and the minimum distance
he/she can work from a river-bank.

The Water Act (1976) makes provision for the prevention of water pollution and the
preservation of water resources and is controlled by the Ministry of Lands,
Agriculture and Water Development.

The Natural Resources Amendment Act (1975) deals generally with the
conservation of natural resources and is administered by the Natural Resources
Board.

The Atmospheric Pollution Prevention Act (1971) is the responsibility of the
Ministry of Health and is concerned with the prevention and control of air pollution
by gases, dust, fumes, and smoke.

The Forest Act (1949) is designed to protect forests and trees and is controlled by
the Forestry Commission.

The Parks and Wildlife Act (1975) is administered by the Department of National
Parks and Wildlife and deals with the preservation of plants and animals, including
specially protected animals and indigenous plants.

The National Museums and Monuments Act (1972) provides for the protection of
sites of historic or cultural interest.
Zimbabwe does not have a comprehensive mineral policy despite its heavy dependency
on the minerals industry since colonial rule. Although policy thrusts are attempted within
the Act, a real drafted policy document, addressing salient issues mapping the direction
27
of the mineral development, is long overdue. Such policies will facilitate marketing of the
country as they will stipulate the intent, the long-term strategy, and goals in the
development of the sector.
2.3 Mining Titles
2.3.1 Prospecting Rights: Zimbabwe
Under sections 63-70 MMA, mineral prospecting in the country is open to anyone,
although one has to be registered as an approved prospector. This registration is valid for
five years and also renewable for the same period of time.
2.3.2 Prospecting Rights: South Africa
The Minister must grant a prospecting right if the applicant has access to financial
resources and has the technical ability to conduct the proposed prospecting operation
optimally in accordance with the prospecting works programme, the prospecting will not
result in unacceptable pollution, ecological degradation or damage to the environment,
the applicant has the ability to comply with the Mine Health and Safety Act and if the
applicant is not in contravention of any relevant provision of the MPRDA.27
The Minister must refuse to grant an application for a prospecting right if all the
requirements of Section 17(1) are not met, if the grant will result in an exclusionary act,
prevent fair competition or result in concentration of the mineral resource in question
under the control of the applicant. The Minister may request the applicant to give effect
to the Black Economic Empowerment (‘BEE’) objective set out in Section 2(d) MPRDA.
The MPRD Act stipulates that the prospecting right, when granted, is subject to the
MPRD Act, any other relevant law, and the terms and conditions stipulated in the said
right, and that:
27
Section 17 (1) MPRDA
28

a prospecting right is valid for the period specified in the right, which period may
not exceed five years.

a mining right is valid for a period specified in the right, which period may not
exceed 30 years.
The aforesaid are maximum periods. The period for which the right will be granted must
be justified by the prospecting-or mining works programme submitted in support of the
application.
2.4 Prospecting Licence:
Zimbawe
This is granted for the sole purpose of searching and prospecting for any mineral. The
discovered areas of potential exploration interests can then be pegged into blocks, thereby
constituting a claim in the eventual discovery of any deposit. The licence allows for
drilling and excavation and exclusivity after giving a prospecting notice.28 These rights
are valid for two years and renewable at the discretion of the Minister.29 These rights can
not be transferred, mortgaged or disposed under any circumstances.
2.5 Exclusive Prospecting Order (EPO)
Despite the word prospecting, this permit is granted to carry out detailed exploration
work for any mineral. The licence confers the exclusive right to prospect for specified
minerals in any defined area in Zimbabwe. These rights can be granted up to six years.
The particular requirements that should accompany the application include:
28
29
Sections 20,26,Parts VI, VIII,IX and XIX of the Mines and Minerals Act
Mbendi – Zimbabwe: Mining, www.mbendi.co.za/indy/af/zi/p0005.htm
29

Program of prospecting operations

Surface rental charge of 2c/ hectare / month

Limitations on the aerial extent but these can be waived depending on

Financial and operational capacity

Geographic location

Need for geological mapping, geophysical and geochemical investigations of the
area, especially in remote areas.
These exploration rights can be transferred, mortgaged or disposed with the permission of
the Minister.
2.6 Authority to Prospect
This authority is granted to allow prospecting on reserved ground. The prospecting
licence and EPO include the right to drill and excavate under certain conditions.30 It was
enacted to utilise or harness the most efficient use of a resource, be it agricultural or
mining, in an area in the best interest of the country.
2.7 Mining Lease
Zimbabwe
This lease is gives the holder the exclusive right to mine the minerals detailed in its
application and other minerals discovered after notifying the mining authority of such
discovery. It is transferable subject to approval by the Mining Affairs Board. The
requirements are very basic and include:

Particulars of mineral being mined

Sketch plan showing position and aerial extent

Financial status of the applicant to meet dues, for example rentals

Mining operations should be on a substantial scale
30
Article 41 (5) and Part VI of the Mines and Minerals Act
30
Any breach is punishable by cancellation or penalties. The mining lease does not require
a detailed evaluation of the project because it also tries to cater for small scale operators.
There are no strict requirements of a technical and economic plan as well as an
Environmental Impact Assessment (EIA). The validity is not clearly specified, but it is
approximately 20 years.
2.7.1 South Africa
Section 23(1) of the MPRDA provides that the Minister must grant a mining right if the
mineral can be mined optimally in accordance with the mining work programme, the
applicant has access to financial resources and has the technical ability to conduct the
proposed mining operation optimally, the financing plan is compatible with the intending
mining operation and the duration thereof, the mining will not result in unacceptable
pollution, ecological degradation or damage to the environment, the applicant has
provided financially for the prescribed social and labour plan, if the applicant has the
ability to comply with the Mine Health and Safety Act, if the applicant is not in
contravention of any relevant provisions of the MPRD Act and that the grant of such
right will further the objects set out in Section 2(d)(BEE) and (f) (Social Development) in
accordance with the Charter and the prescribed social and labour plan.
2.8 Special Mining Lease
This mining right is granted to investment wholly or mainly in foreign currency, that is
FDI in excess of US$100 million. In short, this is earmarked for large mining projects as
deemed by the Board. The requirements are quite detailed and exclusive.
These requirements are as follows:

Feasibility study

Financing plan

Marketing plan

Proposals of efficient economic exploitation and treatment of ore
31

Economic evaluation of proposed mine plus detailed forecast of capital investment,
operating cost, and projected revenue and profits. These include DCF valuation.

Detailed mineral resource and reserve estimate reporting distinguishing between
probable and proven reserves.

Environmental impact assessment carried out

Any insurance details of liability arising from mining operations and damage to the
environment

Extent of use of local goods and services for the development and operation of the
mine

Manpower requirements, that is the number of expatriate staff and any training for
locals
It is valid for 25 years and renewable for periods not exceeding 10 years. The Special
Mining Lease is more detailed than the Mining Lease because it tries to provide a policy
concept of the mining sector.
South African legislation does not provide for special mining leases.
2.9 Preservation of Mining Rights
The above mining rights can be reserved through three broad categories and inspection
certificates are issued on these bases:

Minimum work requirement

Through production output

Through capital expenditure incurred
There is also the possibility to obtain ‘‘protection certificates’’ for certain deposits, which
determines that a protected block shall not, during the period of protection, be liable to
forfeiture for any failure to take out an inspection certificate.31
31
Section 217 of the Mines and Minerals Act
32
All mineral rights are vested in the State through the President of Zimbabwe.32 These
rights are immediately transferred to private holders upon registration of a claim. Once
these rights are transferred, it is up to the holder to commence mining operations, dispose
of the claims or just hold onto the rights indefinitely. The current Mines and Minerals
Act has no specific provision for titleholders to inform or seek permission from the
Government or Ministry of Mines to dispose of claims.
In order to ensure that the country remains competitive for foreign direct investment,
there is need to have clear and unambiguous legislation which gives investors a basis to
plan and make concrete decisions and commitments on their future investments in
Zimbabwe.
2.10 Security of tenure
Legal certainty and the exploitation rights are the prime requisite of any investor. Thus
mining legislation should ensure that once a mineral right is granted, the right can not be
suspended or revoked except on specified grounds that are clearly set out in law.
Furthermore the law should provide reasonable assurances guaranteeing the continuity of
the operations over the life of the project.
According to Omalu and Zamora (1998), the first phase of security of tenure is that there
should be reasonable legal entitlement for extraction rights after successful completion of
the exploration phase. They argue that exploration risk should only be assumed if there is
a reasonably safe expectation of obtaining subsequent mining rights. The situation is
complicated by the fact that the Government has a legitimate interest in safeguarding
public interests. For instance, the rational use of mineral resources, environmental and
social protection, integration of a mining project into economic development and land use
32
S2 of MMA
33
planning.33 In the case of Zimbabwe mining rights can be cancelled if the mining
authority considers that the miner ‘‘is using wasteful mining methods or metallurgical
processes’’, and/or has ‘‘failed within a reasonable period after commencing mining
operations, to declare any output from his mining location’’ or others.
The question of security of tenure in national mineral policy frameworks should address
the link from an exploration right to a mining right. Companies will hesitate to invest in
costly exploration unless there is reasonable assurance that if they discover a deposit,
they will be able to mine it. Companies expect a reasonable level of government
oversight and the need to first comply with legitimate government requirements (such as
submission of an environmental impact assessment) before being granted the right to
mine. The policy should clearly state the government’s position on security of tenure
during the transition from exploration to mining.
The second phase of security of tenure involves the certainty of rights obtained and
conditions under which the rights obtained - in the exploration and the mining stages may be revoked or lost, transferred to an eligible third party and mortgaged to raise funds
or for other legitimate purposes. This also deals with the element of discretion in the
implementation of the mining law. For a mining regime to be successful in attracting
foreign investment, it must be designed to minimise corruption and processing time by
eliminating or minimizing discretion.34 In the situations where there is decision-making
either by an administrative body or a judicial body, the law has to provide for
transparency and accountability.35 In Bolivia, Chile and Peru, the mining concessions are
real property rights which are mortgageable and decision making is the domain of a
judicial body. In South Africa and Zimbabwe, mining concessions are not real property
rights but they can be pledged as security and are transferable.
33
M K Omalu and A Zamora: Key Issues in mining Policy: A brief comparative survey as a background
study on reform of mining law, Heinonline, 17 J. Energy Nat. Resources L. 27 1999
34
Id 2
35 Id 28
34
2.11 Conclusion
A mutually acceptable mineral investment regime has to strike the necessary balance
through law, regulation or contractual undertaking. The balance should be struck between
a company's legitimate expectation and its desire to avoid bureaucratic intervention on
the one hand, and on the other hand, a country's reasonable concern over the impact of a
large scale mining operation.36 In South Africa and Zimbabwe, a prospecting concession
entitles the holder to first priority for a grant of an exploration concession for the
discovered minerals. The concession holder is guaranteed the ability to maintain a
concession indefinitely, provided that he complies with non-discretionary statutory
obligations.
CHAPTER 3
3.0 Black Economic Empowerment
3.0 Introduction
The issue of Black Economic Empowerment (BEE) has featured prominently in recent
years in South Africa and Zimbabwe. Having achieved political independence, these
countries were confronted with the monumental challenges of transforming a colonial
economy that was controlled by a white settler minority and transnational corporations
(TNCs) based in Europe or the USA. The legacies of a long history of racialised
capitalism in South Africa and Zimbabwe are clearly visible. In the absence of socialist
policies of redistribution and nationalization of productive assets, these independent
states had to look at other measures of ensuring a more equitable distribution of wealth
and ownership over productive resources.
This Chapter highlights some of the critical issues that these two countries have to
confront to ensure that the benefits of Black Economic Empowerment will not be limited
36
Id 28
35
to small business elites but also become meaningful for the underprivileged; does not
result in expropriation and discourage foreign direct investment (FDI) or result in capital
flight.
3.1 BEE Overview: Zimbabwe
In 2008, the Zimbabwe Government gazetted the Indigenisation and Economic
Empowerment Act 2007, (Chapter 14:33) (IEEA).37 This was followed by the
Indigenisation and Economic Empowerment (General) Regulations, 2010 (IEER),
Gazetted on the 29th January, 2010, with an effective date of 1st March 201038, have
generated heated debate. The furore which accompanied the publication of these
Regulations lies, in part, in the extremely tenuous political, ideological and economic
justifications for such a policy. These pieces of legislation requires identified businesses
and public companies (including mining companies) with an asset value of or above
$500,000 (United States Dollars (USD)) to (must), within 5 years, ‘‘…cede a controlling
interest of not less than 51% of shares or interests therein to indigenous Zimbabweans’’
unless a lesser share, in order to achieve other socially or economically desirable
objectives, a lesser share of indigenization or a longer period within which to achieve the
indigenization is justified.39
An ‘‘indigenous Zimbabwean’’ is defined in the enabling Act, IEEA (Chapter 14:33) as:
Any person who, before 18th April, 198040 was disadvantaged by unfair discrimination on
the grounds of his or her race, any descendant of such person, and includes any
company, association, syndicate or partnership of which indigenous Zimbabweans form
the majority of members or hold the controlling interest.41
37
IEEA 14 of 2007. www.indigenisation.gov.zw/indigenisationact.pdf
Statutory Instrument 21 of 2010 (S.I. 21 of 2010), Section 1(2) of the Regulations.
39
Section 3 (a) S. I. 21 of 2010
40
The date of Zimbabwe’s independence
41
Section 2(1). The Act was first gazetted as a Bill in June 2007 and passed through Parliament in
October, a few months ahead of the general elections in which ZANU PF lost its majority in parliament.
There is little doubt that such a bill would not be passed by the current parliament where the two MDC
factions have majority seats.
38
36
3.1.2 Compliance with International Law
The United Nations Conference on Trade and Development (UNCTAD) considers taking
of property as lawful as long as it fulfils three basic criteria: it must be for a public
purpose, be non-discriminatory and give rise to the payment of compensation.42 It
appears the IEER might be lacking in this regard.
Zimbabwe’s attitude towards indigenization, it may be argued, is discriminatory in terms
of race as it focuses on firms held, predominantly, by non-indigenous investors.43 In
Mike Campbell (Pvt) Ltd and Others v Republic of Zimbabwe (‘Campbell’),44 a majority
of the Southern African development Community (SADC) Tribunal, in its first
substantive decision, held when examining Zimbabwe’s land reform policy, that:
‘Since the effects of the implementation of Amendment 17 will be felt by the Zimbabwean
white farmers only, we consider it, although Amendment 17 does not explicitly refer to
white farmers, as we have indicated above, its implementation affects white farmers only
and consequently constitutes indirect discrimination or de facto or substantive
inequality.’
In the same vein, following Zimbabwe’s formalization of the expropriation of foreignowned farmland through the Land Acquisition Act,45 the Convention of the Settlement of
Investment Disputes (the ICSID Convention) tribunal found that Zimbabwe’s policy of
state sponsored land invasions violated the ‘just compensation’ provisions of the
Netherlands–Zimbabwe Bilateral Investment Treaty (BIT). The tribunal similarly
42
World Investment Report 2003, FDI Policies for Development: National and International Perspective,
United Nations Conference on Trade and Development (UNCTAD)
43
Tony Leon, Creeping Expropriation of Mining Investments: An African Perspective; Journal of Energy
& Natural Resources Law: Vol 27 No4 2009
44
Mike Campbell (Pvt) Ltd and Others v Republic of Zimbabwe (2/2007) (2008), Southern Africa
Development Community (SADC) Tribunal Windhoek, Namibia,
(www.saflii.org/sa/cases/SADCT/2008/2.pdf).
45
Bernardus Henricus Funnekotter and others v Zimbabwe, ICSID Case No ARB/05/6, Award, dated April
15, 2009, at para. 97 (Zimbabwe conceding that ‘‘Land Acquisition Act and the Constitution of
Zimbabwe…is tantamount to expropriation’’) (‘‘hereinafter Funnekotter’’).
37
rejected Zimbabwe’s plea of necessity that there should be a discount from fair market
value in the case of large-scale nationalizations for public policy reasons.46
Investors faced with IEER requirements may have treaty rights similar to those at issue in
the Funnekotter arbitration. UNCTAD reports that, as of June 1, 2009, Zimbabwe has
similar investment protection treaties in force with the People’s Republic of China,
Denmark, Germany and Switzerland.47 These treaties protect investors who are nationals
of the signatory countries against expropriation, as well as unfair or discriminatory
treatment.48 They further provide investors with recourse to international arbitration
against Zimbabwe to claim for violations of those rights.
IEER still leaves open the possibility of reducing the quota of required local ownership
for mining investments.49 The Zimbabwe Chamber of Mines (ZCM) is in the process of
negotiating lower quotas for the mining industry.50 They proposed a compromise in the
government’s drive to force foreign firms to give 51 percent stakes to locals, saying 15
percent local shareholding for mines was enough.51 ZCM posit that to make up equity
regard should be given to social responsibility programmes like building of schools,
hospitals, roads and all developments which take place around mining communities.
46
Ibid 42
UNCTAD, Zimbabwe, Total Number of Bilateral Investment Treaties Concluded, 1 June 2009, available
at http://www.unctad.org/sections/dite_pcbb?docs/bits_zimbabwe.pdf
47
48
See, e.g. Agreement between the Government of the Republic of China and the Government of the
Republic of Zimbabwe on the Encouragement and reciprocal protection of Investments of May 21, 1996,
Arts. 3,4 (hereinafter ‘‘PRC-Zimbabwe BIT’’); Agreement between the Government of the Kingdom of
Denmark and the Government of the Republic of Zimbabwe concerning the Promotion and Reciprocal
Protection of Investments of October 25, 1996, Art. 3,5 (hereinafter ‘‘Denmark-Zimbabwe BIT’’);
Agreement between the Government of Zimbabwe and the Federal republic of Germany concerning the
Encouragement and reciprocal Protection of Investments of September 29, 1995, Arts. 2,3,4 (hereinafter
‘‘Germany-Zimbabwe BIT’’); Agreement between Swiss Confederation and the Republic of Zimbabwe
concerning the Promotion and Reciprocal Protection of Investments of August 15, 1996, Arts. 4,6
(hereinafter ‘‘Switzerland-Zimbabwe BIT’’).
49
MacDonald Dzirutwe, Zim releases shock foreign ownership rules, Moneyweb News report, dated
February 10, 2010, available at http://www.talkzimbabwe.com/news/117/ARTICLE/6030/2010-0216.html.
50
Golden Sibanda, High Expectations as Chamber of Mines meet, The Herald, Zimbabwe, May 27, 2010,
accessed at www.theherald.co.zw
51
Zimbabwe miners offer compromise on local ownership law, accessed at
http://www.zimbabwesituation.com/may20_2010.html
38
In any event, even a lower quota would require nationalization of a likely significant
shareholding in the Zimbabwean mining operations of foreign mining companies.
Zimbabwe’s pressure on the mining industry is perceived as consistent with a broader,
global pattern of nationalization of mining investments. A well known example of such a
program is the Venezuelan migration of mining interests, moving foreign held equity in
mining ventures into joint venture companies with the Venezuelan government.52
Several investment arbitrations against the Venezuelan government concerning mining
investments are currently pending.53 The foregoing occurrences indicate a pattern of
increasing pressure from host governments on natural resource investments. This is a
reminder of the need for careful political risk planning.
The most widely debated legal risk for mining investors, and the risk of most
newsworthiness, is the risk of expropriation. However, legal risks are by no means
confined to that; the most pervasive legal risk is the risk of adverse change of law. This
is the reason for the widespread use of the so-called ‘‘change of law’’ clause in financing
documents, under which bankers require borrowers to indemnify them against the
financial consequences of changes in law or other government requirements.54 The
Fraser Island case in Australia, Murphyores v Commonwealth of Australia (1976) 136
CLR, serves to remind investors of the risk of failing to fully appreciate the seriousness of
these concerns.55
52
See,e.g. Venezula targets migration of mining firms to joint ventures, CONAPRI News Report, dated
October 4, 2007, available at
http://www.conapri.org/english/articleDetailIIV.asp?articleid=29474&CategoryId2=15048.
53
See, e.g., Vanessa Ventures Ltd. v Bolivarian Republic of Venezuela, (ICSID Case No.
ARB(AF)/04/6);Gold Reserve Inc. v Bolivarian Republic of Venezuela (ICSID Case No. ARB(AF)/09/1).
54
Elizabeth Bastida et al, Safeguards for Foreign Investment in Mining, International Comparative Mineral
Law & Policy, Kluwer Law International, The Hague, 2005.
55
Ibid 46
39
3.1.3 Constitutionality and Regulatory Requirements
While there is a presumption that a gazetted Act is valid, all legislation passed by
Parliament must receive presidential assent before becoming law.56 When a Bill is
passed to the President for assent, such assent must be given or ‘‘withheld’’ within 21
days. If the assent is withheld, and the Bill is returned to Parliament it does not become
law unless a motion to this effect is approved within six months by two-thirds of the
members of the House of Assembly. The IEEA was passed by Parliament in October
2007, but Presidential assent was only given on the 15th January, 2008 well outside the 21
day period.57 The Act must be registered with the High Court as soon as possible after
assent.58 It should then appear in the next publication of the Government Gazette.59 It
did not, being gazetted as law only on 7th March, 2008.
It is not open to the President to give assent after the 21 day period, as any executive
action in violation of the Constitution is void and the IEEA is invalid on this basis, but
again this is subject to the interpretations of the courts. It should be noted that all
legislation emanating from Parliament must comply with the tenets of the Constitution.
If it does not, then in terms of Section 3 of the Constitution60, the Supreme Court can
strike down the law as being unconstitutional. In the circumstances it can be argued that
the President of Zimbabwe acted unprocedurally and ultra vires to his powers under the
constitution.
Alternatively the Regulations must conform to the enabling Act. The IEEA, in Section 3,
indicates that its purpose is an ‘‘endeavour’’ to ensure that ‘‘fifty one per centum of the
shares of every public company and any other business shall be owned by indigenous
56
Section 51 (1) of the Constitution of Zimbabwe (As Amended on 29 February 2009)
Eric Block, Death Sentence for Economy, The Zimbabwe Independent, Thursday, 18 February 2010
accessed at http://www.theindependent.co.zw/opinion/25391-death-sentence-for-economy.html
58
Section 53 of the Constitution of Zimbabwe
59
While the Act must be registered in the High Court as soon as possible after assent, there do not appear to
be any time limits indicating when the Act must appear in the Gazette. An Act does not, come into
operation unless so gazetted.
60
Supreme law, ‘‘This Constitution is the supreme law of Zimbabwe and if any law is inconsistent with
this Constitution that other law shall, to the extent of the inconsistency, be void.’’
57
40
Zimbabweans’’, as defined. Section 3, as read with section 4, then particularizes specific
business dealings which will not be approve and may not be concluded unless the law
pertaining to the 51% requirement has been met. The most remarkable aspect of these
sections is that they contain no provisions for the implementation of the law pertaining to
the 51% requirement.
The cancellation of African Consolidated Resources’ mining license around the
publication of the IEER does not bode well for investors.61 This appears to violate the
provisions of the Declaration of Rights in Zimbabwe’s Constitution, namely:
1. the protection of freedom from discrimination (section 23);
2. the protection of freedom of association (section 21); and
3. the proscription against compulsory acquisition of property (section 16).
It can not be therefore, overemphasized that without the rule of law and a market-oriented
legal system a market economy just does not operate efficiently and this increases the
costs and risks of investment, not only in mining but in all sectors.
3.2 South Africa
3.2 Historical Context
The history of the apartheid state can be described as institutionalised disempowerment
of the black population. Black South Africans were discriminated against in
employment, skills development, in ownership and control of business as well as in
access to basic social and physical infrastructures.62 They were legally barred from any
political participation. The oppression was extreme, and in many cases basic human
rights were denied. One of the most important aims of the apartheid legacy was to
suppress black entrepreneurship in order to defend and support the interests of white
61
Govt cancels ACRs diamond licence, Zimbabwe Guardian News Report, dated February 16, 2010,
available at http://www.talkzimbabwe.com/news/117/ARTICLE/6030/2010-02-16.html.
62
Naledi, draft document – The evolution of ‘‘Black Economic Empowerment’’ in South Africa: From the
lenses of business, the tripartite alliance, community groups, and the apartheid and post-apartheid
governments (1985 – 1999), Omano Emma Edigheji, 2000, p 15
41
economy. The Groups Areas Act decided where black people were allowed to live and
the Influx Control Act denied them the right to move freely around the country. Blacks
were regarded as temporary residents in the ‘white urban areas’, with the only purpose to
provide labour for white industry and commerce. The Native (Urban Areas)
Consolidation Act of 1945 only allowed small businesses, selling the daily essentials of
living, to operate in the urban black townships. The authorities controlled the allocation
of all business sites in the area.63
In 1963 black businesses were further limited by the ‘one-man business’ policy that was
introduced. This policy hindered black people to run more than one business and
prevented them from forming partnerships with the objective of initiating larger business
ventures. The 1963 legislation also blocked the establishment of black controlled
financial institutions, wholesale businesses and manufacturing industries in white areas.
A decree in the legislation stating that local authorities, not blacks, were to erect all
buildings necessary for business activities, gave the authorities further control over black
business.
Another policy designed to protect white business and limit black entrepreneurship was
the ‘job reservation’. The job reservation created a white monopoly by restricting blacks,
until 1979, from jobs in certain skilled trades and from holding positions above a certain
level. The technical and managerial skills necessary to operate businesses was severely
constrained in the black population.64
The Bantu Education system introduced in 1953, this deliberately underdeveloped the
capacity of blacks and prepared them for lives of subordination. Science and Maths were
practically excluded from the Bantu Education. The black universities were structured to
mainly produce social scientists, teachers and lawyers. A number of professions,
especially in the natural sciences, were closed to black people and the vast majority was
63
Abelueki Consulting, draft document – Towards an Economic Empoweremnt Strategy in South Africa,
2000, pg 6
64
Id 63
42
denied the opportunity of higher education.65 The Land Act of 1913 prohibited blacks
from purchasing land outside the ‘native areas’. The land allocation to the rural
population was disproportionately low. This affected black people in many ways.
It did not only curtail development of the farming sector, it excluded them from the
financial market by denying them the means to provide sound security for loans.66
The effect of the apartheid politics was disastrous for black business and for the human
capital essential to self-fulfillment, social development and economic advancement in a
modern society. In 1996 these figures were facts; - Whites, 13 percent of the population,
held 80 percent of the professional positions and 93 percent of management positions in
private business. Less than 7 percent of South African Ph.D. holders were black. Very
few black South Africans had higher education in Business, Finance, Engineering and the
sciences, as they needed a special government permit to attend white universities where
these skills were taught. In 1996 adult literacy in South Africa was about 73 percent, but
80 percent of the black people were unable to read beyond the fifth grade level.67
South Africa has one of the most unequal distributions of income in the world. This is
caused by the extremely low levels of black participation in the economy. In 1994, a
black person’s income was 13 percent of a white person’s income. A Coloured person’s
income amounted to 27 percent and an Indian income to 40 percent of a white person’s
income.68 For many black South Africans the only difference in their existence today,
compared to the era of apartheid, is that their legal status has improved.
Though the apartheid system has been abolished in South Africa, race and colour still
determine the economic and social structure of the society. In his nation address in 2000,
President Thabo Mbeki described the status thus: ‘‘…South Africa is two nations in oneone white, affluent and privileged and the other black and disadvantaged.’’69 The
65
The impact of black economic empowerment initiatives, Accountancy and Finance Update, 1997
Id 63
67
Ford, Christopher A., Challenges and Dilemmas of racial and Ethnic Identity in American and PostApartheid South African Affirmative Action, UCLA Law Review, Vol. 43, August 1996, No. 6 pg 1973
68
Women lose out in Africa’s richest nation, The Star, 31 October 2000
69
A long way towards combating racism, Enterprise, October 2000
66
43
previous race ideology, the President pointed out, has led to that distribution of wealth,
income, intellectual resources, land and opportunity for personal advancement are
skewed in favour of whites in South Africa. He summarised by stating that the aim of the
whole system was that whites should always remain the dominant group and the black
majority the dominated.70
3.2.1 The Evolution of Black Economic Empowerment
For many, there is a considerable lack of clarity as to what the concept of black economic
empowerment really is. Different people and constituencies define it in different ways
and assign it different meaning. The definition also varies over time. Black economic
empowerment (BEE), Affirmative Action, National Economic Empowerment and
Development (NEED) are different terms used from the late 1980’s and onwards to
describe mainly the same thing.
In the late 1980’s, white business regarded black economic empowerment as a
mechanism to create a black middle class with interests in the economy. The initial
thought was that by partly re-arranging the racial composition of the ownership structure
of the economy, the market economy and political stability would be ensured. Corporate
social responsibility programmes and black advancement initiatives were introduced to
achieve black economic empowerment. The creation of a small influential black business
class was part of the goal. Blacks were to gain access in the formal economy as long as
the underlying structures of the economy were left intact.71 At this time black people
were mostly put in middle management positions without any managerial
responsibility.72 The black people that did have managerial responsibility were mainly
taken in for business strategy. This was when for example black people were needed to
give the company insight into black peoples’ consumption needs and habits.
70
Ibid 69
Ibid 62
72
Ibid 65
71
44
The first democratic elections in 1994, when the African National Congress (ANC), came
to power, was a political turning point. Corporate South Africa responded by appointing
black non-executive directors and by selling businesses to black empowerment groups.
Financial institutions provided funding to so-called Special Purpose Vehicles (SPVs),
which enabled black people without capital to go into business.73 At this point, black
economic empowerment was largely a function of the white businesses’ efforts to change
themselves.74 Political correctness became very important in corporate South Africa.
Black economic empowerment was met with suspicion from the black community in the
late 1980’s, as they feared that it would only create a black middle class without
fundamentally transforming the oppressive political system and give full political rights
to all. It was not until in the early 1990’s that ANC converted to the concept of black
economic empowerment. The ANC’s position has thereafter been characterized by
concepts such as de-racialisation and democratisation of the economy and economic
emancipation of the black majority.75 After the 1994 elections, the ANC-led Government
of National Unity (GNU) was focused on reconstruction and reconciliation. Emphasis
was put on economic inclusivity, aimed at broadening the economic base of South Africa.
This was done by promoting small, medium and micro enterprises (SMMEs) and through
the Reconstruction and Development Programme (RDP). Black economic empowerment
was on the government’s agenda from the very beginning, although not as strongly as it is
today.76 Black economic empowerment of today can be described as a process aimed at
redressing the imbalances in the ownership and control of South Africa’s economic
resources by increasing black participation at all levels of the economy. This shall be
done by job creation, poverty alleviation, specific measures to empower black women,
education, skills transfer and management development, meaningful ownership and
access to finance to conduct business.77
73
TIPS Annual Forum, ‘‘Growth and Investment in South Africa’’ accessed at
www.tips.org.za/events/proceedings/bee.html
74
Empowerment companies no longer there for the picking, Business Day, 9 May 2000
75
Ibid 62
76
BusinessMap, Empowerment 2000-New Directions, 2000, (BusinessMap 2000), pg49
77
Ibid 69
45
Over the years, the government has expanded the parameters of its empowerment
objectives in business to include training, affirmative action, and affirmative procurement
and equity ownership. The empowerment requirements vary between different state
departments, agencies and governments on local, provincial or national level. Several
government departments have for example articulated their own policies for
empowerment. Subsequently, it is difficult to determine what aspects of empowerment
that are most relevant in doing business with these public entities.78
Black economic empowerment can also be seen as a way to deepen the economy and
stimulate growth in the country by releasing the economic potential of the black
population.79
Under President Thabo Mbeki’s leadership work has been put in to create a more
coherent, over-reaching approach towards black economic empowerment. The speed to
enforce change in the South African society has been picked up and empowerment is
becoming a vital part in most of the government’s policies. The government is now
increasingly using both legislative leverage and its buying power to promote black
economic empowerment.80 The sectors most affected by empowerment are broadcasting,
gaming, fishing, IT and telecommunications, construction, transport, energy, mining,
asset management in the financial services sector, municipal services (including water
and sewage provision), education, health care and the defence industry.81 These sectors
contributed to the GDP with 38.5 percent in 1998.82
3.3 Empowerment Comparisons
Black economic empowerment is not a unique phenomenon. Various forms of affirmative
action have, and are, taking place around the world. In Malaysia, a programme similar to
the one in South Africa was launched in 1969. South Africa has learned a lot from their
78
Ibid 76
Ibid 69
80
BusinessMap, Empowerment Guidelines
81
Ibid 80
82
Ibid 80
79
46
experiences. Likewise, Malaysia is a country where affirmative action targets a majority
of the population. Affirmative action is also used to achieve gender equity in several
countries.
South Africa’s history makes it unique from other nations where affirmative action has or
is taking place. In South Africa the majority, approximately 87 percent, of the population
has been disadvantaged and is now subject to affirmative action. The gravity of
suppression is also making South Africa unique in that the empowerment process has to
be very extensive.83
3.3.1 South Africa
Empowerment has successfully taken place in South Africa before. Starting in 1948, the
Afrikaners84 were subject to economic empowerment. However, the Afrikaners began
their process of economic empowerment from a far better position than blacks did in
1994. The Afrikaners were on average relatively more educated than the average black in
South Africa and they had the advantage of a major capital base in the form of land. The
labour market was also substantially different from today, with focus on manual labour
force.
3.3.2 United States
In the early 1970’s, shortly after the Civil Rights movement, there was a conscious
decision by the government in the United States to create a class of black capitalists. The
government was proactive in trying to create equal opportunities for blacks in
employment, education, housing and business. To facilitate black business development
special government structures were set up for the delivery of loans, grants, and technical
assistance to black entrepreneurs. In government procurement policies special
preferences were granted to black-owned businesses. The efforts in the United States had
83
84
Ibid 80
Africaners, also known as Boers, descend from the Dutch settlers in mid 1600
47
a material effect; from 1972 to 1992 the number of black owned businesses grew from
188,000 to 621,000. The situation in the United States was significantly different from
the one in South Africa today. Empowerment in the United States was focused on a
minority group, just as the Afrikaners’ empowerment in South Africa was, whereas the
now ongoing empowerment in South Africa has the majority of the population as its
target. Another difference is the economy; the fiscal resources of South Africa cannot be
measured against the much greater ones of the United States at the time.
The United States also had a number of good black universities that produced a welleducated black managerial and entrepreneurial class. The economic position of blacks
and whites in the United States still, after some 30 years of various initiatives, remains
unequal. Affirmative action is now stigmatized as reverse racism. What South Africa can
learn from this is that measures beyond affirmative action are needed and that various
efforts are required to make real empowerment progress.
3.3.3 Malaysia
Given the population and income statistics, Malaysia is the most relevant example for
South Africa. In 1969, the Malaysian government launched the New Economic Plan
(NEP), which aimed to eliminate poverty and promote greater economic equality between
the different racial groups. Specifically the Bumiputra (indigenous groups, principally
Malays) were empowered through expanded educational opportunities, employment
quotas and incentives for corporate restructuring.85 If a non-Malay company wanted to
bid for government contracts, for example, or if they wanted to go public, they had to
restructure the company and 30% of their stocks were to be sold to Bumiputras at a
discount. In order to promote the growth of an industrial and commercial Bumiputra
community the government also used the allocation of contracts, quotas and licenses.
The NEP worked very well in Malaysia for the Bumiputras, which previously were the
85
Walde T., Mining Law Reform in South Africa, Internet Journal, Vol. 12: Article 2
48
disadvantaged group. In 1970 the Bumiputras’ share of corporate equity ownership was
2.4%. Twenty years later this had risen to 20.3%.86 The criticism against the NEP is that
the Malay elite is seen to have benefited disproportionately, and the Chinese and Indians,
the more successful ethnic minorities, feel the playing field is stacked unreasonably
against them. At the same time Malaysians, from all ethnic groups, acknowledge that the
empowerment focus in the NEP has helped the country to avoid racial turmoil.
3.4 The Current Context
The empowerment initiatives described above have all worked well. Nevertheless, the
prevailing conditions in South Africa today are substantially different. Globalisation,
driven by technological change and economic liberalisation, has reduced a state’s ability
to dictate change in the world of today. The state is much less powerful in relation to
private business or social interests than ever before. This is especially problematic given
the scale of the challenge, to empower South Africa’s 38.1 million black people. Not only
the fact that it is the majority of the country’s population who needs to be empowered
makes it problematic, the relative starting points are more unfavourable than the other
empowerment groups experienced.
3.5 Mining and BEE in South Africa
As a major employer and one of the major industries in South Africa, mining has been
the focus of the South African government’s Black Empowerment initiative with the
introduction of the MPRDA and the Broad-Based Socio-Economic Charter for the South
African Mining Industry. According to Section 1 of the Broad-Based Black Economic
Act (BBBEE),87 BBBEE means:
86
Dunnigan et al; ‘‘Black Economic Empowerment-difficulties and opportunities in making right the
wrongs of the past’’ accessed at http://faculty.insead.edu/dutt/emde/projects/Sept-Oct05/Group-D.pdf
87
Act 53 of 2003
49
The economic empowerment of all black people including women, workers, youth, people
with disabilities and living in rural areas through diverse but integrated socio-economic
Strategies.88
The Broad-Based Black Economic Empowerment Act (No. 53 of 2003) establishes a
legislative framework for the promotion of BBBEE provides for the gazetting of
transformation charters and empowers the Minister of Trade and Industry to issue codes
of good practice. The term black is used interchangeably with Historically
Disadvantaged South Africans (HDSAs). BEE as the term implies, is a policy to
enhance the participation of black people in the South African economy. This is
consistent with the Freedom Charter of the African National Congress (ANC)89, a
document that makes special mention of the mining industry. According to the Freedom
Charter:
The national wealth of our country, the heritage of South Africans, shall be restored to
the people; the mineral wealth beneath the soil…shall be transferred to the ownership of
the people as a whole.90
3.5.1 The Constitutional Ground for BEE
In South Africa’s new constitution, Constitution of the Republic of South Africa, equality
is defined as one of the cornerstones of the democracy in the country. At the same time,
the constitution provides for affirmative action measures to be taken. This can be seen as
incompatible. However, according to the framers of the constitution, affirmative action
shall not be viewed as derogation from the right to equality; rather it shall be viewed as a
means to achieve equality and as part of the right to equality.91 The Constitution of the
Republic of South Africa was adopted in May 1996 and entered into effect in February
88
www.dti.gov.za/bee/codes/3_20code000.pdf
The Freedom Charter was signed on 26 June 1955 at Kliptown and had been the main document that
formed the basis of the ANC struggle against apartheid. See the Freedom Charter
www.anc.org.za/ancdocs/history/charter.html
90
Ibid 64
91
Madala, T.H. Affirmative Action-A South African Perspective, SMU Law Review, Vol. 52, No. 4, Fall
1999, pg 1542
89
50
1997. The beginning of the preamble of the Constitution reads as follows: “We, the
people of South Africa, Recognize the injustices of our past; Honour those who have
suffered for justice and freedom in our land; Respect those who have worked to build and
develop our country; and believe that South Africa belongs to all who live in it, united in
our diversity.” The preamble continues by stating that the Constitution has been adopted
by the people so as to “… [h]eal the divisions of the past and establish a society based on
democratic values, social justice and fundamental human rights;” and to “[i]mprove the
quality of life of all citizens and free the potential of each person…” The Constitution is
declared in the explanatory memorandum to “… represent the collective wisdom of the
South African people…”
The equality section of the Bill of Rights in the Constitution makes a specific provision
for the implementation of affirmative action programmes. After having stated that
“[e]veryone is equal before the law and has the right to equal protection and benefit of the
law ...”92 it continues with “[e]quality includes the full and equal enjoyment of all rights
and freedoms. To promote the achievements of equality, legislative and other measures
designed to protect or advance persons or categories of persons, disadvantaged by unfair
discrimination may be taken.”93 Through this the Constitution authorises measures to be
taken which are designed to promote the achievement of equality.
Affirmative action is also sanctioned in the Constitution’s chapter on Public
Administration, as it states that “Public administration must be broadly representative of
the South African people, with employment and personnel management practices based
on ability, objectivity, fairness, and the need to redress the imbalances of the past to
achieve broad representation.”94 (emphasis added). By stating that the administration
must be broadly representative of the South African people, it is indirectly stating that
affirmative action shall take place. This is further emphasised by the fairness criteria and
the explicit wording that the need to redress the imbalances of the past shall be taken into
account in employment and personnel management practices in the public administration.
92
Constitution of the Republic of South Africa, Chapter 2 section 9 (1)
Constitution of the Republic of South Africa, Chapter 2 section 9 (2)
94
Constitution of the republic of South Africa, Chapter 10 section 195 (1) i
93
51
In the Equality section discrimination is prohibited. No one, including the state, may
“unfairly discriminate directly or indirectly against anyone on one or more grounds,
including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour,
sexual orientation, age, disability, religion, conscience, belief, culture, language and
birth.”95
This protection against unfair discrimination is modified in that discrimination on one or
more of the grounds listed “… is unfair unless it is established that the discrimination is
fair.”96 This means that although the criteria listed in terms of nondiscrimination in the
Constitution are far more inclusive than in many modern nations, discrimination on fair
grounds is in principle permissible.97
Thus, the question of the legality of affirmative action in South Africa is answered.
Yet, certain questions remain, such as to what degree either law or private-sector
programmes may be undertaken without conflicting with the Constitution’s core principle
of equality. The requirement that discrimination shall be formally determined to be “fair”
in order to be permissible may mean that no affirmative action programme in South
Africa will be Constitutional without receiving a fairly explicit judicial imprimatur.
Therefore, the contours of South African affirmative action jurisprudence may not
become clear for some time.98
3.5.2 The Mining Industry Charter
The Black Economic Empowerment Charters are written according to industry: Mining,
Maritime, Transport and Service, Information and Communications Technologies,
Agriculture, Forwarding and Clearing, Tourism, Finance, and Petroleum and Liquid
Fuels. Each Charter specifies targets for the involvement of disadvantaged individuals.
95
Constitution of the Republic of South Africa, Chapter 2 section 9 (3-4)
Constitution of the Republic of South Africa, Chapter 2 section 9 (5)
97
Tummula, Krishna K, Policy Preference: Lessons from India, United States and South Africa, Public
Administration Review, Nov/Dec 99
98
Ford, Challenges and Dilemmas of Racial and Ethnic Identity, p1968f
96
52
The Mining Charter was adopted in October 2002. It was created by virtue of Section
100 (2) (a) of the MPRDA, which provides for a Broad-Based Socio-Economic
Empowerment Charter that will set the framework, targets and timetable for effecting the
entry of historically disadvantaged South Africans into the mining industry. After the
creation of the Mining Charter, the Department of Trade and Industry introduced its Code
of Good Practice.99 The development of the Code of Good Practice (the Code) for the
minerals industry in South Africa is also a requirement provided for in the MPRDA.100
The Code does not replace the key legislation and laws relating to the minerals and the
petroleum industry but serves as a statement of present policy providing an overview and
confirmation of the existing mineral and mining policy that is in place. The applicability
and the enforcement of this Code cannot be divorced from the Mining Charter and the
key legislation in relation to the measurement of the socio-economic transformation in
the mining industry. The Code can be amended by the Minister of Minerals and Energy
when there is a change in mining policy and legislation.
The charter was adopted on the back of the empowerment objectives contained in the
new Mineral and Petroleum Resources Development Act. This basic legislation
governing the minerals sector, the MPRDA does make provision for certain BEE
initiatives. As per section 2, the objects of the MPRDA include:
d) substantially and meaningfully expand opportunities for historically disadvantaged
persons, including women, to enter the mineral and petroleum industries and to benefit
from the exploitation of the nation’s mineral…resource;
(e) promote economic growth and mineral…resources development in the republic;
99
Codes of Good Practice for the South African Mining Industry, No. 3216, Government Gazette, April
2009
100
Section 100 (1) (b)
53
(f) promote employment and advance the social and economic welfare of all South
Africans’101
The conversion of existing mineral rights held by mining companies into the new order
rights established in terms of the Mineral and Petroleum Resources Development Act has
been made contingent upon the attainment of the 5-year targets set out in the scorecard
which forms part of the charter (Appendix ...). The Mining Charter scorecard is designed
to assist in evaluating applications for the conversion of all “old order mining rights” into
new order mining rights. Any company or individual with mining or prospecting rights
has five years from 1 May 2004 to 1 May 2009 to convert their mining rights under the
Minerals Development Act (other periods applied for unused rights and prospecting
rights). When applying for a converted right, a scorecard approach is adopted by the
Department of Minerals and Energy.
The objectives of the Mining Charter are similar to those of the MPRDA, although it is
more specific in that it indicates the strategy for the mining industry and indicates
strategies for the implementation of the objectives of the MPRDA.102 The stated
intention of the charter is to undertake the transfer of 15% of the assets of the South
African mining industry to HDSAs by 2007 and to increase this to 26% by 2013. The
Charter identifies the key role that historically disadvantaged South Africans will play in
the industry. It identifies seven areas, referred to as pillars that need particular attention.
These pillars are human resource development, employment equity, migrant labour, mine
community and rural development, housing and living conditions, procurement,
beneficiation and ownership.103
The approach of the charter in assessing compliance is flexible in that under-achievement
in one area may be set-off against over-compliance in another area. A company does not
101
MPRDA (Act 28 of 2002)
S.V. Rungan et al, Incorporating BEE into the new mineral law framework for the South African mining
industry, The Journal of the South African Institute of Mining and Metallurgy, Vol. 105, November 2005,
pg 739
103
Jonathan Faurie, Are Mining Charter and Codes of Good Practice bedfellows? Mining Weekly accessed
on 26/03/2010 at www.miningweekly.com/print-version/are-mining-charter-and-codes-of-good-practicebedfellows-2009-08-07
102
54
have to score full marks on all aspects of the scorecard. If, for instance, a company has
not complied with a standard set in one category, it can “break even” if it has complied
extensively in the other categories. If the company has not complied in an individual
category, it has to give reasons for such non-compliance and state the steps that are to be
taken in order to comply.
In terms of the charter, mining companies are expected to have reached a target of 40%
black representation at management level by 2007. In addition, the charter requires the
mining industry to increase the participation of women in mining to 10%, to improve
mineworkers’ housing and nutrition and to allow miners the chance to be literate and
numerate and to co-operate in the development of mining and rural areas.
3.5.3 Human resource development
Article 4.1 of the Mining Charter makes provision for skills development. Education
would not only increase the skills base of existing employees, it would create a workforce
that is already empowered when they enter the industry.104 Given the legacy of
systematic labour market discrimination and inferior education, accelerated skills and
advanced professional skill development is also important.
3.5.4 Ownership
One of the most contentious features of the Mining Charter is Article 4.7 where the
mining companies have agreed to transfer 26 per cent ownership to HDSAs within 10
years.105 Article 4.1.2 provides that the sale of interests in a mining company would be
on a ‘‘willing seller-willing buyer basis, at fair market value, where the mining
companies are not at risk.
104
105
Ibid 75
Ibid 75
55
3.5.5 Beneficiation
Article 4.8 of the Mining Charter requires mining companies to engage in local
beneficiation activities, specifically beyond mining and processing.
3.5.6 Financing Mechanism
Article 4.12 provides that the industry ‘agree to assist HDSA companies in securing
finance to fund participation in an amount of R100 billion within the first 5 years’.106
3.6. Conclusion
Historical distortions resulting from colonialism and apartheid policies relegated black
people to the margins of society. Having gained political independence black
governments have tried to tip the scales of this economic inequality by formulating
empowerment laws and policies to address this disparity. This has not gone down well
with the previous people who enjoyed benefits under the old order. Criticism was also
coming from the owners of capital who viewed this economic empowerment as some
form of creeping expropriation.
It appears that South Africa’s well thought out BEE policies managed to assuage the fears
of this constituency. Quite the opposite to what happened to Zimbabwe’s land reform
programme, which has relegated the nation from being the Southern African bread basket
to a basket case. This by all means needs to be avoided during the belated empowerment
endeavours currently in motion. From the foregoing it is apparent that Zimbabwe is still
lagging well behind in its legislative and policy formulation regarding empowerment
compared to its neighbour. South Africa presents well thought out formulas which are a
lesson not only to Zimbabwe but the greater international community.
106
Ibid 75
56
CHAPTER 4
4.0 Legislation and Policies Governing Mining and Sustainable Development
4.0. Introduction
This Chapter aims at giving an insight into legislation and policies governing sustainable
development in the mining industries of South Africa and Zimbabwe.
Mining by nature is inherently unsustainable in that the life of the mine is limited and will
eventually come to a close. However, its sustainability can be ensured by the linkages
(downstream, upstream and side stream) it forms with other sectors of the economy.
Sustainable development as defined by the World Commission on Environment and
Development (WCED)107 is “development that meets the needs of the present generation
without compromising the ability of future generations to meet their own needs”.
However, this widely used definition focuses on intergenerational equity and a further
expansion of the standard definition was made during the 2002 World Summit on
Sustainable Development, using the three pillars of sustainable development: economic,
social, and environmental. The Johannesburg Declaration created “a collective
responsibility to advance and strengthen the interdependent and mutually reinforcing
pillars of sustainable development at local, national, regional and global levels.”
During the colonial era in Africa, the mining sector was used to develop the economies of
western nations with no attention to the sustainable development of the sector. This has
not changed much in the post-colonial era. Although the benefits of mining to national
economies are evident, local costs (environmental and social impacts) associated with
mining, especially to local communities, are not being adequately compensated for.
107
Brundtland Report – Our Common future (WCED, 1987)
57
4.1 South Africa
For most of its history, the mining industry in South Africa has not been subjected to
comprehensive environmental regulation. In recent years, however, this has changed
significantly and the industry is now required to comply with a complex web of mining
and environmental policy and legislation. This chapter outlines the most relevant
legislation and policy documents that govern sustainable mining in South Africa.
4.1.2 Constitution of the Republic of South Africa
The lynchpin for sustainable mining is arguably section 24 of the Constitution of the
Republic of South Africa (Constitution). Section 24(a) proclaims the right of everyone ‘to
an environment that is not harmful to their health or well-being.’ Section 24(b) states that
everyone has the right ‘to have the environment protected, for the benefit of present and
future generations, through reasonable legislative and other measures that (i) prevent
pollution and ecological degradation; (ii) promote conservation; and (iii) secure
ecologically sustainable development and use of natural resources while promoting
justifiable economic and social development'.
In two recent decisions,108 the Constitutional Court provided guidance on the meaning of
‘ecologically sustainable development’, thereby informing on the nature of the state’s
obligations in terms of the right. Firstly, the court stated that sustainable development
requires recognition of the inexorable links between socio-economic development and the
environment: Development cannot subsist on a deteriorating environmental base –
unlimited development is detrimental to the environment and the destruction of the
environment is detrimental to development.109 All decision- and law-making processes
therefore need to integrate economics and ecology – not just to protect the environment,
108
In Fuel Retailers Association of Southern Africa v Director-General: Environmental Management,
Department of Agriculture, Conservation and Environment, Mpumalanga Province and Others 2007 (6) SA
4 (CC) (Fuel Retailers Case) and MEC: Department of Agriculture, Conservation and Environment and
Another v HTF Developers (Pty) Ltd (2007) ZACC 25 (HTF Developers case), respectively
109
Fuel Retailers case paragraph 44
58
but to protect and promote future development as well.110 Secondly, sustainable
development requires the provision for all of an adequate livelihood base and equitable
access to adequate resources, including future generations. The court stated:
‘The importance of the protection of the environment cannot be gainsaid. Its protection is
vital to the enjoyment of the other rights contained in the Bill of Rights; indeed it is vital
to life itself. It must therefore be protected for the benefit of the present and future
generations. The present generation holds the earth in trust for the next generation. This
trusteeship position carries with it the responsibility to look after the environment’111
The court also affirmed the precautionary approach to environmental management112 and
held this to be especially important when considering the cumulative impacts of a
development on the environment and socio-economic conditions.113 The right to
environment intersects with a number of other substantive and procedural constitutional
human rights. Thus, depending on the context, protection of the right to environment
would tend to lead to protection of the right of access to sufficient food and water114 as
well as the right of access to housing,115 and vice versa. The right of the child to basic
nutrition, shelter, basic health care services and social services also intersects positively
with the environmental right.116 The procedural rights of access to information,117 just
administrative action118 and access to the courts119 support protection of the right to
environment by facilitating greater public participation in environmental governance and
decision making.
110
Ibid HTF Developers paragraph 60
Fuel Retailers, paragraph 102; HTF Developers paragraph 28
112
The precautionary principle, as articulated in the National Environmental Management Act 107 of 1998,
holds that a risk-averse and cautious approach should be applied, which takes into account the limits of
current knowledge about the consequences of decisions and actions.
113
Fuel Retailers paras 98-9
114
Section 27 (1) (b) Constitution
115
Section 26 (1) Constitution
116
Section 28 (1) (c) Constitution
117
Section 32 (1) Constitution
118
Section 33 (1) Constitution which guarantees the right to administrative action that is lawful, reasonable,
and procedurally fair and section 33 (2) which states that everyone whose rights have been adversely
affected has the right to be given written reasons.
119
Section 34 Constitution
111
59
4.1.3 MPRDA
The rights of access to information and just administrative action are particularly
pertinent in regard to the process of granting prospecting and mining rights.
4.1.4 The Minerals and Mining Policy for South Africa
There are no shortages of policy and legal frameworks for sustainable mining in South
Africa. The Minerals and Mining Policy for South Africa, 1998 devoted an entire chapter
to the topic of environmental management. This policy affirmed that the State, as
custodian of the nation’s natural resources, will ensure that development of South
Africa’s mineral resources takes place within a framework of sustainable development
and in accordance with national environmental policy; norms and standards.120 To this
end, 10 principles on sustainable mining were adopted.121
These included adoption of the precautionary approach as well as the polluter pays
principle; insistence that a consistent standard of environmental impact management
would be adopted, irrespective of the scale of mining concerned; equitable and effective
consultation with interested and affected parties, including provision for a right to appeal
all decision-making; compliance with, and taking into account of the local development
objectives, spatial development planning and integrated development plans of the
municipalities in which mining operations occur; and the building of capacity to
effectively implement environmental management measures and monitor occurrences of
pollution, amongst others.
As discussed in Chapter 1, the MPRDA122 is now the primary statute regulating
prospecting and mining in South Africa. Amongst its objectives is the requirement that
120
Para 4.2 Minerals and Mining Policy for South Africa (October 1998)
Ibid 13, para 4.4
122
Published as GNR 527 GG 26275 of 23 April 2004. The MPRDA was recently amended by the Mineral
and Petroleum Resources Development Amendment Act 49 of 2008 (MPRDA Amendment), although this
Act – while it has been assented to by the President – has not yet commenced. The most significant change
effected by the MPRDA Amendment is to facilitate the transfer of the approval of mining-related
121
60
holders of mining rights contribute to the socio-economic development of the areas in
which they are operating.123 These objectives have since been translated into a
comprehensive policy framework for promoting BBBEE in the mining sector, which
includes mine community and rural development.124
Furthermore, the MPRDA strongly emphasized the need to give effect to the
environmental right by ensuring that mineral resources are developed in an orderly and
ecologically sustainable manner.125
4.1.5 Sustainable Development through Mining
In 2005, the (then) Department of Minerals and Energy initiated a Sustainable
Development through Mining (SDM) programme. The vision underlying this programme
is to ensure that by 2015 the South African minerals sector is contributing optimally to
sustainable development. The key strategic objectives of the SDM programme were
recently formulated for discussion.126 They include the objectives: That value extraction
from South Africa’s minerals sector benefits vulnerable groups; that the minerals sector
moves toward sustainable end states, internalizes negative costs and associated
consequences and fully aligns the cumulative and life-cycle aspects of the sector with
sustainable development principles; and that fundamental human rights are upheld.
environmental authorizations from the Department of Mineral Resources to the department of Water and
Environmental Affairs. The MPRDA is supplemented by the MPRDA Regulations which include a chapter
on pollution control and waste management.
123
Section 2 (c) – (f) and (i)
124
In particular, the Broad Based Socio-Economic Charter for the South African Mining Industry. The
objectives articulated in the Empowerment Charter were further developed in the Codes of Good Practice
for the South African Minerals Industry (April 2009- GN 446 GG 32167 of 29 April 2009). As regards
mine community and rural development, the scorecard published in the Codes of Good Practice, indicates
this element will be assessed with reference to the following: (1) Whether the mining company contributed
in the formulation of integrated development plans, and whether the mining company is co-operating with
government in the implementation of these plans, both in the areas in which mining takes place and major
labour sending areas; and (2) whether the mining company has made an effort to engage the local mine
community and major labour sending area communities.
125
See the Preamble and sections 2 (h) and 3 (3) MPRDA
126
Department of Minerals and Energy, A Strategic Framework for Implementing Sustainable
Development in the South African Minerals Sector: Towards Developing Sustainable Policy and Meeting
Commitments Discussion Document (2nd draft) (August 2009).
61
The Mine Health and Safety Act 29 of 1996, whilst primarily targeted at ensuring the
health and safety of employees at mines, also contains a few provisions relating to the
health and safety of non-employees. It therefore forms part and parcel of determining
whether the right to an environment not harmful to health and well-being has been
violated.
4.1.6 The National Environment Management Act
Mining policy and legislation states that national environmental norms are applicable to
the mining sector. The National Environmental Management Act 107 of 1998 (NEMA)
defines the national approach to environmental management and contains a variety of
innovative regulatory mechanisms aimed at sustainable development of renewable and
non-renewable resources. The regulatory mechanisms in the NEMA include a
comprehensive list of national environmental principles; environmental impact
assessment (EIA) of activities having a substantial detrimental impact on the
environment;127 and establishment of a statutory duty of care in regard to environmental
degradation and pollution.
4.1.7 Other Legislation pertaining to Environment Management
While prospecting and mining activities can pollute all environmental media, water
resources are arguably impacted most severely. For this reason, the National Water Act
36 of 1998 (NWA) which provides for the integrated management of all aspects of water
resources in South Africa is very important. There are many other policy and legislative
instruments that are applicable to balancing mining against other present and future uses
of resources with a view to ensuring sustainability. These include policy and legislation
pertaining to agriculture,128 conservation and biodiversity;129 waste management;130 food
127
R385 – 387 GG 28753 of 21 April 2006. The EIA process is threshed out in the NEMA EIA
regulations. The NEMA was recently amended to incorporate mining into the EIA framework – see the
National Environmental Management Amendment Act 62 of 2008. The Amendment Act commenced on 1
May 2009 (GN 27 GG 32156 of 24 April 2009), but the provisions relating to mining only enter into force
upon the commencement of Act 49 of 2008.
128
For instance, the Conservation of Agricultural Resources Act 43 of 1983; the White Paper on
Agriculture, 1995; the Administration Manual for State Agriculture Land, 2001; the Draft Sustainable
62
security;131 land reform;132 land use planning;133 the protection of heritage resources;134
and tourism,135 amongst others. For the purposes of this report, however, which aims only
at an understanding of the core policy and legislation applicable to sustainable mining,
they are not considered.
4.2 Zimbabwe
Although Zimbabwe has implemented national environmental policies and legislation,
they are often seen as ineffective due to lack of adequate staff, expertise and resources to
implement and enforce them. A wide new range of environmental laws has been put in
place in order to achieve their National Environmental Action Plan. There are over 18
pieces of legislation (see below) governing the management of natural resources and
environmental protection, and administered by at least 7 different government ministries.
Unfortunately, attempts to implement effective environmental measures are ensued in
duplication and fragmentation of authority and responsibilities. As a result,
environmental issues relating to mining in general have been dealt with in several
fragmented (and often conflicting) pieces of legislation. It is hoped that the
Environmental Management Act, 2002 will resolve many of these problems arising from
conflicting legislations.
Utilisation of Agricultural Resource Bill, 2003; and the Policy on Agriculture in Sustainable Development
(Discussion Document, 8th draft).
129
Including the Biodiversity Act 10 of 2004; the Protected Areas Act 57 of 2003; and the Mpumalanga
Nature Conservation Act, 1999.
130
Including the Waste Act 59 of 2008 and the National Waste Management Strategy.
131
Particularly, the Integrated Food Security Strategy for South Africa, 2002.
132
For instance, the Restitution of Land rights Act of 1994 and the policy on Land redistribution for
Agricultural Development, 2001.
133
Including the White Paper on spatial Planning and Land Use Management Bill and relevant Integrated
Development Plans
134
Particularly the National Heritage Resources Act 25 of 1999.
135
Including the policy on the development and Promotion of Tourism, 1996.
63
4.2.1 Zimbabwe Constitution and Environmental Legislation
The current constitution of Zimbabwe (As Amended at 29 February 2009) has no specific
clause that provides for the protection of the environment,136 nor did the Natural
Resources Act (1941, Chapter 20:13 now repealed) directly cover Environmental Impact
Assessments (EIAs). Consequently EIAs were not a legal requirement in Zimbabwe,137
and in recognition of this shortcoming, the Government of Zimbabwe (GoZ) published an
EIA Policy in 1997 and associated guidelines. This policy was intended to complement
any future EIAs and the promulgation of environmental management legislation.
4.2.2 Legal and Regulatory Framework
4.2.2. Mining Policies
To date the main focus on environmental management in Zimbabwe has been on
developing an effective and efficient legal and administrative framework to facilitate
management of natural resources.138 The National Conservation Strategy (NCS) of 1987
was the first policy document to incorporate the concept of sustainability into
development and environmental management. The NCS has established an
Interministerial Committee on Environment. Zimbabwe’s Second Five Year
Development Plan (1991-95) provides that environmental impact assessment (EIA)
should be undertaken for major development projects. An Environmental Impact
Assessment Policy (1997) was put in place to govern EIAs.139
This policy formed the foundation for a law reform process which resulted in the
Environmental Management Act, 2002 (Chapter 20:27),140 and subsequently has
136
Constitution of the Republic of Zimbabwe
Southern African Institute for Environmental Assessment 2003. Environment Impact Assessment in
Southern Africa, Windhoek, pg 352
138
Id 137
139
Id 137
140
Government of Zimbabwe 2002. Environmental Management Act (Chapter 20:27) Government
Printers, Harare
137
64
produced a draft National Environmental Policy (2003).141 This was developed with the
purpose of complimenting and enhancing the Environmental Management Act and other
complimentary acts pertaining to environmental protection and management and
sustainable development.
However, section 4 of the Environmental Management Act (EMA), (Chapter 20:27),
2002, affords every citizen of Zimbabwe the following environmental rights:

The right to live in a clean environment that is not harmful to their health;

Access to environmental information;

The right to protect the environment for the benefit of present and future
generations; and

The right to participate in the implementation of legislation and policies that
prevent pollution, environmental degradation and sustainable management and use
of natural resources, while promoting justifiable economic and social development.
The major policy regulating mining activities is the Mines and Minerals Act, chapter
21:05 1996 edition together with its subsequent amendments. This all too powerful piece
of legislation was designed to promote development of the mining sector with minimal
restrictions. This Act is administered by the Ministry of Mines through the Mining
Affairs Board. This Board must consult with the Natural Resources Board before issuing
a licence and should in principle ensure that any negative environmental impacts are
mitigated and enough resources are budgeted for eventual reclamation and rehabilitation.
The Act however, covers only a limited range of environmental issues once a mining
permit has been issued. The main criteria for issuing a permit are technical and financial
competence. By ignoring specific issues on environment, the Act has left room for abuse,
leading to indiscriminate dumping of waste material, erosion, siltation and other ills.
141
Government of Zimbabwe, 2003, National Environmental Policy, Second Draft, Prepared by the
Ministry of Environment and Tourism. For Discussion and Consultative Purposes Only.
65
Several regulations have been enacted in support of the Mines and Minerals Act. Most
important of these include:

The Mining (Health and Sanitation) Regulations, 1977 which regulate for the
provision of adequate health and sanitation facilities on a mine. This regulation is
rarely applied on small-scale mines because these facilities are non-existent and
there is no small-scale miner who has been legally charged for failure to provide
the facilities to their employees.

The Mining (Management and Safety) Regulations, 1990 which seek to control
health and safety in and about mining operations. The regulations cover
management and responsibility in mines, surface protection, and protection in
working places, ventilation, gases and dust and examinations in several certificates
of competency. They also cover certain ILO Conventions, including Convention
No. 45, which prohibits women from working underground. Compliance with these
regulations demands a certain level of technical competence on the part of mine
management, and the availability of adequate resources to supply the safety
clothing and equipment to employees. None of the current formal small-scale mines
comply with at least 20% of the requirements of these regulations for the reasons
cited above.

The Mining (Alluvial Gold) (Public Streams) Regulations, 1991 – which seek to
control the small-scale gold panning activities in the country. The regulations
empower local councils (RDCs) to issue permits, monitor and control gold panning
in designated areas. The regulations also require that mining will take place only in
the riverbed, and not closer than 3m to either bank. Undercutting is prohibited, as
are excavations deeper than 1.5m. All mined out areas must be backfilled and the
gold sold to the Reserve Bank or its agents.
In 2007, several Statutory Instruments (SI) were passed in terms of section 140 of the
EMA (Chapter 20:27). These regulations are significant in that they operationalise the
Act in the sectors which they cover. They provide for the specific procedures to be
followed in complying with the provisions of the Act. More importantly, they incorporate
66
the modern principles of environmental management such as polluter pays, public
participation, preventive principle, environmental rights and so on.142
Other sectoral laws relevant to mining include:

Water Act (1998);

Natural Resources Act (1996);

Parks and Wildlife Act, (1998);

Forestry Act (1996);

Hazardous Substances and Articles Act (1972);

Atmospheric Pollution Prevention Act (1971);

Water (Effluent and Waste Water Standards) Regulations (1977) set effluent
standards for discharges into water catchment areas;

Explosives Act (1972);

Communal Land Forest Produce Act (1998);

Public Health Act (1996)
4.3 Conclusion
Previous mining companies used to pay scant regard to sustainable means of mining.
Profits were spirited abroad with putting much back into the communities were minerals
would have been extracted from, let alone the environmental degradation left behind.
Indigenous communities were left to pick the pieces sometimes with very devastating
consequences because of the dangers left behind. For example water pollution and
damage to their agricultural land
Natural resources are finite resources by their very nature. The importance of developing
sustainable means of using these resources has therefore taken great prominence. Local
communities and national governments have accordingly paid regard to their use and
142
Zimbabwe Environmental Law Association website accessed at www.zela.org/site/newsletter.asp
67
means of extraction. Issues to do with the environment have come to fore as well as the
issue of benefiting local communities.
South Africa has again taken the lead in this regard. A plethora of environmental laws
have been put in place to ensure local communities benefit and the environment is well
looked after in a sustainable manner. Still more needs to be done. The case of
Zimbabwe is sad as has become to be expected. Although on paper it has some of the
well written pieces of legislation, decades of impunity has resulted in the neglect of
environment regulation. The cutting of trees on farms which used to be the envy of the
world, gold panning on river banks, veld fires have all taken a toll on the environment.
Authorities need to take a stance before the situation spirals out of control. Legislation
needs to be updated and strengthened and duplication of environment control needs to be
avoided.
CHAPTER 5
5.0 A Case for Harmonising Minerals Law in SADC
5.0 Introduction
The Southern African Development Community’s (SADC’s)143 regional economic
integration agenda includes a macroeconomic convergence programme, intended to
achieve and maintain macroeconomic stability in the region. According to the treaty
establishing the SADC, one of the means of realizing this vision is to achieve sustainable
utilisation of mineral resources and effective protection of the environment. This is in line
with the fact that the mining sector already plays an important role in the overall
economic development in terms of generating foreign exchange and the creation of
143
Angola, Botswana, the Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi,
Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.
68
employment.144 Mining in SADC remains a predominant industry as it contributes about
60% to the total foreign exchange earnings, 10% to total GDP though in some member
States it goes up to 50% and about 5% to direct formal employment.145 SADC is also an
important player on the international mineral market with shares between 11% and 45%
of the world supply of eight major commodities which includes chromite, cobalt,
diamond, gold, manganese, copper, platinum and uranium and has considerable potential
in the dimension stone sector and other industrial minerals. In addition SADC possesses
some of the world’s richest deposits for a number of minerals.
SADC member states are aligning their mining legislation with each other in a bid to
attract investment and boost economic growth in the mineral rich southern African
region. The SADC harmonisation of mining laws framework has been in place since
2006 and seeks to align mining policies, mineral processing and value addition policies,
research and development and policies on small scale mining enterprises.146 The
harmonisation project is aimed at ensuring that mining policies of member states are
knitted in a way to facilitate investment and ensure common standards in the region’s
mining sector as reflected in its strategy and protocol on mining.147
5.1 SADC Protocol on Mining
The SADC Protocol on Mining was adopted in 1997 to promote the interdependence and
integration of mining policies for the accelerated development and growth of the Mining
Sector in the SADC Region. The Protocol outlines a number of key areas in which the
Member States of SADC agree to collaborate. These include; information sharing,
enhancing technological capacity, the promotion of private sector and small scale mining,
environmental protection and occupational health and safety.
144
C.J Chanda, Mining Investment Promotion in the SADC Region, UNCTAD
Ibid 144
146
http://www.southerntimesafrica.com/article.php?title=SADC_harmonising_mining_laws&id=3431
147
SADC 1997 Protocol on Mining, www.sadc.org
145
69
One of the key principles underlying the SADC Protocol on Mining is the recognition
that a thriving Mining Sector can contribute to economic development, alleviation of
poverty, and the improvement of the standard and quality of living throughout the region.
To achieve this, the Protocol has the following objectives:

participation and the promotion of economic empowerment for the historically
disadvantaged through the mining sector.

Investments in training and capacity building, including in the area of occupational
health, are seen as an important cornerstone in attaining the objectives of the SADC
protocol on Mining.

to foster economic integration of the region

to promote investment into development of the mining sector

to integrate mining into the economies of the region

to maximize benefits from mining

to promote sustainable and environmentally friendly mining industry; and

to compile and disseminate information relevant to the mining sector
5.2 SADC Mining Sector Strategy
The major thrust of the 1992-1996 Mining Sector Strategy (MSS) and Programme was to
attract investment into the region. During this period, member States took bold measures
to create a conducive environment for private sector investment.
The 1997-2001 Mining Sector strategy was approved by the Council of Ministers at their
meeting held in Blantyre, Malawi in September 1997. The objectives and strategies were
based on experiences gained during the implementation of the 1992-1996 strategy. The
strategy has taken cognizance of the changing political and economic situation in member
States, which include democratisation process, liberalisation of the economies, embracing
the private sector as the prime-mover of the production process and the dawn of peace in
the region. The 1997-2001 Mining Sector Strategy also takes into account the fact that
70
the SADC Mining Industry is highly integrated into the World economy and thus the
region should endeavour to remain competitive by way of encouraging member States to
adopt progressive economic policies. This document highlighted the following strategies
to be adopted:

Information dissemination on the investment climate and business opportunities
available in the region

Strengthening National/Regional institutions involved in mineral and development

Encouraging downstream processing of minerals

Compiling data on potential mining projects

Identifying potential commodities for exploration

Encouraging publications on geological information

Reducing the adverse environmental impact of mining

Ensuring training and sustainability of human resources.
5.3 Compliance with the SADC Protocol on Mining and SADC MSS
During the past decade, a number of countries made efforts to reform their policies and
the regulatory environment, aimed at encouraging private sector participation, attracting
new capital investments, technology and skills and stimulating exploration. In addition,
the global technological advances and cost competitiveness in minerals production
developments, the globalization of finance and investment and the global competition for
investment resources, led to most countries choosing more liberal policies.
For example, Botswana’s Parliament passed a new Mines and Minerals Act after an
extensive period of consultation and study of more modern legislation operation in other
countries. The aim of the new legislation, coupled with revisions to taxation policy, is to
provide an economic environment which is favourable for investment in the minerals
industry of the country, and which allows companies to be globally competitive.
71
South Africa, on the other hand, has recently amended the MPRDA to give to align it wit
environmental legislation and the Royalty Act to align its tax regime with international
best practice. It should be noted that with the MPRDA much debate has been made about
security of tenure of mineral rights and property, and some of these issues are still under
discussion (for example the nationalization debate instigated by the firebrand ANC youth
League President). Objections from the Chamber of Mines have been founded on the
fear that possible expropriation of mineral rights by the State, or the imposition of
penalties and levies, could in fact discourage investment, because of increased hurdle
rates and higher risk, as perceived by the potential investor.
Nevertheless, agreement was reached between the Government and the Chamber of
Mines, investors have been reassured by the Minister of Mines with regard to security of
tenure. The parties further agreed to promote black empowerment, and illustrated this
commitment through the establishment of Black Empowerment Fund to support small
mining companies, and help finance acquisitions.148
Proposals for a revised and consolidated fiscal framework for mining in Zimbabwe are
still under review. The proposals aim to ensure that the mining investment regime in
Zimbabwe maintains its competitiveness for mining capital and that Government gets a
share of mine-life profits. At their 71st Annual Conference in Victoria Falls, the
Zimbabwe Chamber of Mines was reassured by the President of Zimbabwe that no
expropriation of mines will be carried out as a result of the introduction of BEE
Regulations.
However, current developments in the country in terms of political and economic
instability, and a slide into severe recession do not bode well for the successful
implementation of these policies, and the attracting of foreign capital.
The Department of Mines and Energy in Namibia launched its strategic plan for the
Minerals industry, for 1999-2003. The plan builds on the foundations laid since
148
Financial Times, 21 May 2010
72
independence, which concentrated on establishing a self sufficient energy sector, and
encouraging investment in the minerals industry.
The plan is based on the following objectives:

To promote investment in the minerals and energy sectors

To ensure the sustainable contribution of resources to the socio-economic
development of Namibia

To create a conducive environment for the mineral and energy sectors

To regulate and monitor the exploration and exploitation of mineral and energy
resources

To minimise the impact of exploitation of mineral and energy resources on the
environment

To provide a professional and customer focussed service. Specifically, the plan
aims to stimulate growth in the mining sector by 2-3% in real terms per year,
through:
1. Creating an enabling environment that will be competitive and conducive
to promoting investment
2. Promoting the development of a vibrant and sustainable small mining
sector
3. Ensuring that mineral resources are exploited in a safe, responsible and
sustainable manner
4. Promoting the integration of the mining with other sectors.
Namibia recognises through this plan, the need to attract foreign investment, in a
competitive market. The plan recognises the potential for investment in Africa, and
wishes to ensure that its legal, fiscal and economic environment is conducive to attracting
its fair share of this investment. To this end, the Government is increasing its expenditure
significantly, to support private and foreign investment.149
149
World Bank 2005
73
Chapter 6
6.0 Recommendations
6.0 Introduction
South Africa and Zimbabwe have both tremendously benefited from their mineral
resources. Most of the towns and cities in these countries owe their origin to mining
activities. South Africa and Zimbabwe have made improvements in creating a vibrant
and a diversified mineral sector. However, these improvements have not been sufficient
to secure a sustainable sector that is socially and economically integrated into the longterm development aspirations of its peoples.
6.1 Recommendations on Mining law and Policy, Mineral Rights and Tenure
Property rights should be clearly defined and enforced. A compensation clause should
always be embedded in the property rights. Importantly, Government should not
inappropriately nationalize or expropriate investments. Nationalization should only be
done for public purposes, under due process of law, on a non-discriminatory basis and
against prompt, adequate and effective compensation.
The Government has signed BIPPAs with a number of countries which aim to ensure that
the sacrosanct nature of private property and property rights is observed across all sectors
of the economy, in conformity with the best standards and international agreements.
Given the centrality on protection of investment capital in economic growth, the
Government should champion the respect for BIPPAs and other strategic agreements
with regional and international business partners in order to promote further investment.
74
6.2 Recommendations on Black Empowerment Policies
While it is a noble idea to ensure that the indigenous people benefit from the exploitation
of minerals, this should be done in a manner which should not retard growth of the sector.
Considering the capital intensive nature and risk involved in mining development, there
is need to review the proposed minimum shareholding to be reserved for the Government
and/or indigenous investors. Other consideration such as investment in infrastructural
development and social responsibilities should also come into play in determining the
equity levels.
• government should define what it is trying to achieve through the BEE policy. It should
stipulate what success will look like and it should set terms for business about when
success will be declared and the policy reach its conclusion (for business as a whole and
as individual entities).
6.3 Recommendations on Environment and Sustainable Development
The development, exploitation and utilisation of natural resources in today’s environment
requires the involvement, collaboration, and the establishment of partnerships between
stakeholders including governments, the private sector, bilateral and multilateral
development agencies, local communities, NGOs and other partners. The extent of
activities described reflects, to a certain degree, these new developmental relationships
and dynamics.
Mining can be an environmentally disruptive activity, and can dislocate traditional
lifestyles. Mining can also foster development in certain areas. Therefore, mining
companies need to improve their image by collectively acting in a sound environmental
and social manner. They need to remain open to scrutiny by delivering as much
information related to the project as possible during the life-time of the project. They also
need to remain open and flexible to the responses from other stakeholders during the lifetime of the project, without compromising their own economic viability. By being
75
accountable and transparent with their performance, they will be seen acting as good
corporate citizens.
Although the purpose of mining companies is to generate profit for their shareholders,
dealing with social issues in mineral development projects, and integrating the concept of
sustainable development in their performance may be seen, in the short term as a
distortion of the market. But, on the contrary, this new behaviour not only minimizes the
risk for the industry in the short term, but potentially increases its viability in the long
term.
Governments also need to adopt new strategies. Central governments need to allow local
governments to actively participate in issues related to the mineral projects they host, and
protect their share in the future revenues. Highly centralized governments need to
empower local governments, and let them channel and protect the interests of their
constituencies. Effective distribution of benefits, including rents, originating from
mineral development projects, and an equitable allocation of the costs incurred in mineral
developments are of paramount importance to satisfy the needs and concerns at local,
regional and national levels. Central and local governments also need to develop and
build their own capacities to actively participate with the other main stakeholders in the
design and implementation of mineral development projects and satisfy the needs of their
constituencies.
A key issue is to identify economic opportunities for local communities outside of
mining, and to use some of the rent from the mine to develop an economic base to
support local communities after the mine has closed. There are three factors of major
importance. First, whatever economic opportunity is identified, it needs to be subject to
local consultation and public participation throughout the design and implementation
stages to gain long term acceptance. Second, to guarantee certain levels of success in the
long run, local communities need to build capacity to manage their own affairs. They
require education, training in access to information and communication technology,
negotiation skills and interpretation of technical information to effectively participate in
76
public consultation processes. Third, within this process, there is a need for the positive
and active role of NGOs. Their presence and active participation encourages transparency
and accountability by the other two main stakeholders, mining companies and
governments.
6.4 Recommendation on the Harmonisation of Mineral Legislation in SADC
SADC has the responsibility of converting the regional mineral heritage into wealth by
facilitating investment into the mining sector. If SADC has to succeed in its efforts, it
has to address the following:
6.4.1 Harmonisation of Legislation and Policies
A uniform Southern African approach to attracting international foreign direct investment
that learned from the practices of other major mining jurisdictions should be promoted
between members of SADC. The cost of doing business should be reduced and the region
needs to ensure a common legal framework that protects property rights and
acknowledges the relationship between risk and reward in exploration and mining. A step
by step approach to harmonization between SADC countries is recommended.
A “One Stop Shop” SADC regional website that targets international and indigenous
mining investors should be created and kept functional.
6.4.2 Promotion of Foreign and Indigenous Investment
The most balanced approach to developing mining activity would be to attract
international capital and investment while ensuring that indigenous investors also benefit
from and/or participate in major mining ventures. To this end transparency and security
of investment for investors should be accompanied by respect for the environment and
the sustainability of local communities.
77
To improve the investment climate, Africa has recognised that it should:

Create an enabling policy environment;

Promote good governance, peace and stability;

Train human resources;

Provide reliable supporting infrastructure;

Improve the capacity for technology acquisition and innovation;

· Increase the capacity to mobilise financial resources; and

Promote of public-private partnerships.
6.4.3 Value Addition
Governments should encourage the establishment of downstream metal processing and
manufacturing and support industries, where economically appropriate, that can add
value to local mined production and create local employment. These initiatives should be
market-driven, based on the comparative advantage of each country and accompanied by
enabling legislation. Free movement of materials through the SADC region would aid
this aim as would focus on improving infrastructure. Both these actions would improve
the general investment climate which in itself would encourage investment in sustainable
value addition in mining and across other sectors.
6.4.4 Emerging Markets
Southern Africa should approach the opportunity offered by the emergence of Asia as
both potential investors and major future markets for their metals by further developing
commercial contacts with Asian countries. Countries such as China and India should be
invited to share the risks of developing minerals projects through forming strategic
partnerships. SADC countries should ensure that their infrastructural capacity is attractive
to Asian investors. Increased cooperation with international agencies such as the Study
Groups is recommended as a way of improving market intelligence on Asia.
78
Stringent measures must be made to develop the technical and business capacity of local
project promoters and local consultants, as an active local junior mining sector can be a
means of attracting international players.
6.4.5 Communications Strategy
It is in the interest of Southern African countries to work with the media to improve
transparency in the mining sector. It is evident that the continuous negative image by the
mainstream international press instigates seriously against direct foreign investment.
This has to be urgently and continuously be countered by the SADC member states.
SADC should be better equipped to attract foreign direct investment and communicate
their national approaches to mining investment policy. Transparency at all levels is vital
in governments (such as the license applications process) and in industry (such as
shareholding structure). It is recommended that there should be communication and
interaction with local communities, regularly updated national mining websites.
6.4.6 Avoiding the Dutch Disease
Dutch disease is name applied to the phenomenon experienced by countries which have a
rich endowment of minerals, the result of which is that the economy of the country
becomes heavily reliant upon the revenues received from mineral sales, at the expense of
the growth of other industries.
Frequently, large government revenues are realized, raised either through direct
involvement or ownership, or through mineral rents, and these revenues then become
expended on non-value creating activities, such as social spending or military spending.
The fact that this revenue is not reinvested into creating a viable manufacturing sector, or
downstream beneficiation industry, results in a booming minerals sector (which is
unsustainable because it is based on a wasting asset) coexisting with a lagging or
shrinking manufacturing sector.
79
In this case revenues generated in the economy, which flow to the State, are spent on non
traded goods and services, as opposed to those being invested in those sectors which
would diversify the economy, and ensure its sustainability. Such a situation existed in
South Africa, during the periods of isolation, when in 1979/80, military spending
accounted for 16% of government spending, at a time when taxation from mining was at
a high rate, reaching a record 28.48% of government tax revenue in 1981 (van Blerk).
Currently, such a risk exists in war torn countries, where the issue of conflict diamonds is
indicative of the desire by countries to use mineral wealth to fuel military or political
action, or to use it as a rationale for occupancy of neighbouring territories. Clearly, such
action reduces the long term ability of mineral endowment to contribute to sustainable
economic success.
If the minerals industry is to contribute its full potential to the sustainable development of
a globally competitive SADC minerals industry, regional policies and practices must
have some degree of common direction and purpose, so that multinational companies can
continue to support the industry, through direct investment, and through the
establishment of joint ventures with Governments, local entrepreneurs and the small
mining sector.
6.5 Conclusion
The ultimate aim of this research process was to understand state of mineral rights and
tenure in South Africa and Zimbabwe. The mineral rights and tenure systems in South
Africa have been shown to more advanced than those of Zimbabwe. Zimbabwe has more
to learn from the South African system of mineral law and policy. The same applies for
the black empowerment, environment management and sustainable. Zimbabwe’s laws
are too fragmented with no one authority in particular being in charge.
The performance of any economy relies upon investment in the various sectors of the
country. In developing countries like Zimbabwe, investment opportunities are mainly in
the primary industries, particularly the extractive industry (mining) and agriculture. One
of the main drivers of investment is a sound and clear policy on property rights. Respect
80
of property rights attracts and promotes private sector investment which is the engine for
economic growth. In order to attract investment, Zimbabwe should continue to uphold
the sanctity of property rights. Both domestic and foreign investors find comfort in
internationally acclaimed property rights. This brings about confidence in the country’s
policies and security to investment.
The establishment of property rights and the subsequent enforcement of these rights is
key to attracting investment, promoting economic growth and development, as well as
improving the living standards of people. It is against this background that the
Government of Zimbabwe should honour the provisions of all existing BIPPAs which
have been signed with other countries.
Zimbabwe, being a signatory to various international treaties and conventions like
MIGA, ICSID and the United Nations Convention on International Trade Law, should
continue to observe compliance with such arrangements. Furthermore, the judiciary
system should be further resourced adequately to ensure speedy resolution of investment
disputes. The upholding of property rights leads to increased investments by the private
sector both domestic and foreign. The private sector is the engine of economic growth in
various countries as it results in the development of the economy.
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