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COSATU / NUM Initial Submission on theMinerals Development Draft BillSubmitted to the Department of Minerals and Energy, 30 March 2001 |
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COSATU / NUM Initial Submission on theMinerals Development Draft BillSubmitted to the Department of Minerals and Energy, 30 March 2001 |
Table of Contents
1. PrefaceCOSATU and NUM welcome the opportunity to forward a submission to the Department of Minerals and Energy on the Minerals Development Draft Bill [hereafter "the Draft Bill"]. The Draft Bill deals with issues of fundamental importance in the sector, and as such it will be important that a thorough consultative process is followed with all stakeholders. We hope that a maximum degree of consensus - both on the principles and detail of the Draft Bill - will be reached through the NEDLAC engagement. We will of course also be engaging directly with the Ministry and Department and with Parliament.
This constitutes our initial submission into the NEDLAC process. We deal here with our overall approach to the sector focussing in broad terms on the aspects of the Draft Bill which we support and those we have concerns around; we subsequently go through the Draft Bill section by section proposing amendments where necessary; and finally raising additional issues relevant to the mining sector which are not covered in the Draft Bill.
2. Executive summary
While we are broadly supportive of the proposed legislation we believe that it needs considerable strengthening, and furthermore that there are a number of both substantive and technical amendments which will improve the legislation. The key points which COSATU and NUM raise in this submission are as follows:
We are concerned that the Draft Bill does not clearly set out a clear role for the state in the mining industry, particularly in terms of productive mining. We propose that the legislation as well as government policy more broadly, needs to provide for a more active direct role for the state sector in the mining industry.
The mining industry is currently highly concentrated with productive assets located in the hands of a small, predominantly white group. This legislation should explicitly set out to transform the patterns of ownership and control in mining, to reduce monopolisation, and specifically to provide for direct ownership and control by mineworkers in the industry.
Given that mining is dependent on the people who work in this sector, the Draft Bill needs to be far more "people-centred". Its scope needs to be broadened to include issues of direct concern to workers' and surrounding communities such as living and working conditions and health and safety considerations.
Various amendments to the definitions contained in the Draft Bill are proposed.
In the interests of transparency and public participation, improving information provision to affected or potentially affected communities.
In order to better guide decision-making on the granting of prospecting, mining and other rights, beefing up to information to be provided by applicants and setting out more clearly the benchmarks to be used in evaluating applications. These criteria also need to include issues of employment, living and working conditions of miners, and contribution to the local and national economies.
Consultation and negotiation with affected workers around the possibility of the curtailment of mining operations.
Various proposals are put forward to more actively promote mineral beneficiation.
Consideration to reducing the periods for mining rights and renewal thereof.
Possible tightening of the provisions giving effect to the "use it or lose it" principle.
Timely state intervention to deal with mismanaged mining operations.
Social plan for mineworkers, their families and affected communities.
We reiterate our call for a Permanent Statutory Commission on Mining and set out what some of its responsibilities should be.
Ensuring that the transitional arrangements provided for do no open loopholes for the undermining of the objectives of the legislation.
Various proposals are made in relation to the diamonds and petroleum chapters of the Draft Bill, including stronger regulation around conflict diamonds and broadening the obligations of the holders of petroleum exploration rights.
We raise several outstanding issues of concern to us which we believe the legislation should also speak to: sub-contracting and outsourcing; working and living conditions of miners; the promotion of small-scale mining; and health and safety considerations.
Lastly, three additional areas are tabled which may not be of direct relevance to the Draft Bill but which need to be addressed as part of the holistic transformation of the industry: migrant labour; HIV / AIDS; and the amendment of the Mines Works Act.
3. Introduction
South Africa is well endowed with mineral resources amongst which it has the largest world reserves of gold, platinum, chrome and coal. Mining activities have been taking place in South Africa for more than 100 years in all the mineral commodities and particularly gold, diamonds, copper, coal etc. The mining industry has over these years generated wealth amounting to billions of rands.
Despite this wealth and the benefits accrued the majority of South Africans continue to live in poverty. Moreover, mining activities have been exclusively reserved for a minority of South Africans. Blacks could only participate as labourers who were subjected to harsh working and living conditions. The current mining and minerals legislation does not provide opportunities for the majority of South Africans to participate in the industry. This is exacerbated by the ownership arrangement of mineral rights which is concentrated in the hands of few people. The monopolistic character of the mining industry continues to exist with only few conglomerates dominating the industry.
While mining continues to make an important contribution to the economy of the country, further development of the industry has fallen behind. Major development has only taken place in few areas of the sector, which is solely dominated by a few conglomerates. The involvement of other levels of the sector such as junior mining companies and previously disadvantaged communities has been particularly constrained by lack of access to mineral resources. This has led to insufficient exploration and investment, which in turn has had negative effects on economic growth and employment. The current arrangement where companies are hoarding mineral resources under the pretence that such resources which are still underground has a certain value is unacceptable. A mineral resource has a value only when it has been extracted from the ground and brought into the surface or when a deposit has been identified after prospecting has been conducted.
The arrangement is such that access to a piece of land to conduct exploration activities or prospect is constrained by the fact that companies are holding on resources they own under the old regime and are not prepared to release them to anybody. It therefore makes a lot of sense for the state to take custodianship of such resources to ensure that they are not locked but fully exploited for the benefit of the country.
It is from this background that COSATU and NUM approach the Draft Bill. We believe that the Draft Bill has the potential to make some progress with respect to transformation of the mining sector. However, without a stronger direct role of the state, fundamental transformation will be limited.
4. Overall approach to the Draft Bill
The Draft Bill is an overarching piece of legislation which deals with a range of aspects of the mining industry. It takes as a premise a recognition of the state as the custodian of the nation's mineral resources. Flowing from this, only the state will be able to grant prospecting rights, mining rights, retention permits and permission to remove minerals; and much of the Draft Bill deals with the processes around this. It also aims to give effect to the "use it or lose it" principle. The legislation proposes the establishment of a Mineral and Mining Development Board. There are specific chapters on trade in diamonds and on petroleum exploration.
COSATU / NUM support many of the aspects of the Draft Bill, in particular the commitment to transforming the mining sector and the vesting of mineral rights in the state. It is natural that the large monopoly mining companies, which are currently direct beneficiaries of the status quo, will fight to protect their monopoly status, hence the negative reaction to the Draft Bill which we have seen from this quarter. We urge government to remain firm in its resolve to ensure that mining is a truly South African industry from which the majority of South Africans benefit. In the interests of strengthening the legislation we raise the following overall concerns with the Draft Bill.
4.1 Role of the state
COSATU / NUM believe that a strong and active state is necessary for the fundamental transformation of the economy as a whole, including the mining sector. Relying primarily on the market mechanism - even if combined with various discretionary and other powers of the state - would tend to preserve the status quo. As discussed above, the current situation can be characterised as control of our mineral resources by a small and overwhelmingly white group. We welcome the principle of the Draft Bill that the State should take full custodianship of mineral resources of South Africa for the benefit of all South Africans. However there does not seem to be a vision nor practical provision for a direct, productive role for the state in the industry. This is a crucial element of the state's role in the industry and is the best way of ensuring that our mineral resources benefit South Africa as a whole and that we achieve meaningful, broadly based black economic empowerment.
We are at variance with government's approach that explicitly prioritises the objective of black economic empowerment and not a clear role for the state. There seems to be an emerging consensus (see for example the report of the Black Economic Empowerment Commission) that genuine black economic empowerment does not mean the enrichment of a few, but rather the opening up of economic opportunities and improvement in living and working conditions for blacks as a whole. Given the nature of the mining industry - for example the large capital investments required - it is not conducive for the participation of a large number of small entrepreneurs. In this situation the most appropriate and feasible way of achieving broad-based black economic empowerment is a central and active role for the democratic state.
The surplus from mining activity, rather than being privately accrued, could be used by the state to fund development, public infrastructure, service delivery and so on. The state through its direct involvement in mining can also set best practice standards for private sector players in the industry, in terms of environmental policy, labour practices, beneficiation etc. Strategic public investment in the mining sector can also be a key component of active industrial policy, giving the state leverage to advance industrial development in particular sub-sectors and/or regions, and allowing for the activation of up- and down-stream linkages with other industries.
This implies a strong role not only in terms of the vesting of mineral rights and various decision-making powers, but the Draft Bill should actively provide for the state's direct productive involvement in the mining sector. This could take various forms and be achieved through various means, including the following:
State or joint state-union buyout of mining operations.
The setting up or new parastatals, or extension of the mandate of existing ones, to be directly engaged in the business of prospecting and mining and economic activities related thereto, such as beneficiation.
The legislation should explicitly set out the role of the state in the sector. We are available for further discussions and concretisation of proposals in this regard.
4.2 Ownership and Control of Mineral Resources
The Draft Bill should have as one of its primary objectives to break the monopolistic nature of the current mining industry which is currently predominantly in the hands of few conglomerates. These highly concentrated ownership patterns within the mining sector inhibit the broadening of benefits from our natural resources and has also been identified as an obstacle to foreign direct investment. The Bill should include clear measures aimed at breaking the monopolistic character such that ownership is also extended to the majority of South Africans. The Bill should include measures to control the activities of the mining conglomerates that between them exercise a monopolistic grip over mining. This monopoly control has limited the development of mining and has had a negative effect on investment in mining in general. For instance consolidation of monopoly by companies such as the envisaged or proposed take-over of De Beers by Anglo-American and the Oppenheimer family should never be allowed to take place as they aim to undermine the need for diversified participation in the mining industry.
We strongly support the vesting of mineral resources in the state, as enshrined in the Constitution of the country. The state would then lease exploitation of such resources to potential investors for a certain period for mining activities. Where mining activities cease to exist such lease or right to exploit mineral resources falls away and should be given to any other potential investor. In the case where resources were held under the old dispensation and no development of mineral deposits is taking place, the state should immediately assume such ownership even within the transitional period. The Draft Bill has taken a positive position in this regard in that mineral resource ownership will be vested in the state.
The Draft Bill is weak in terms of democratisation of the mining industry, both in relation to its ownership and in terms of worker participation in decision making. Mechanisms need to be explicitly included in the Draft Bill which will empower workers to take ownership stakes in mining companies and influence their policies. This should consider inter alia the following:
Retirement funds for mineworkers have significant investments in the mining industry;
The Companies Act and tax laws should be changed to facilitate employee share ownership for mineworkers and to enable them to use retirement funds to take control of certain mines through leveraged buy-outs;
Trust institutions should be set up to allow mineworkers, on a collective basis, to accumulate meaningful equity stakes in the mining industry. This process should be facilitated through the Bill and should be viewed within the context of black economic empowerment;
Explicitly providing for joint ventures between the state and other forms of social capital for example jointly with unions;
The Draft Bill should specifically incorporate a role for co-operatives as part of broadening the ownership base of the mining industry.
4.3 A people-centred mining industry
Legislation dealing broadly with mineral development should not exclude or downplay the "human" element of mining. The mining industry has been notorious over decades for ruthlessly pursuing profit maximisation at workers' expense, who have borne the cost in their remuneration, living and working conditions, and frequently with their lives. Transforming the industry means includes changing these practices.
While some of these issues may be dealt with to an extent in other policy or legislation, we believe that an overarching Act such as the one under discussion should also reflect such concerns. The spirit of a people-centred mining industry which cares for its workers and surrounding communities should also be reflected in the long title, preamble, and objectives of the Bill. Particular issues which we feel should be given special attention are discussed further in sections 5 and 6 of this submission.
5. Specific comments on the Draft Bill
5.1 Preamble
5.1.1 As discussed in section 3.3 above, the mining industry has a bad history regarding working and living conditions and labour practices in general. Workers continue to be exposed to dangerous working environments, low wages and poor living conditions. As part of the commitment to transforming these aspects of the industry, the preamble should include the following:
Committing to a mining industry which values its workers and provides adequate working conditions and dignified living conditions; Committing to a healthy and safe mining industry; Striving for equitable distribution of income, wealth and productive assets.
5.2 Chapter 1: Introduction
5.2.1 The Chapter on definitions as it stands will require a lot of tightening up. Our proposals in this regard are as follows:
5.2.2 The definition on a community (Section 1(v)) is limited to persons who are under the jurisdiction of a traditional leader. It needs to be broadened to include communities under the jurisdiction of local authorities, and possibly other criteria if deemed necessary to identify the intended beneficiaries.
5.2.3 The definition of an employee (Section 1(xiii)) does not include "independent" contractors under the employment of a mine. We believe the definition of an employee should include independent contractors.
5.2.4 The section on financial guarantees (Section 1(xvi)) should not be limited to environmental rehabilitation but must include affected workers, their families, labour drawing areas and the local communities.
5.2.5 Section 1(1)(xvii) defines "historically disadvantaged". This definition deals only with race and excludes women. Women are generally regarded as being historically disadvantaged and as qualifying for empowerment measures. This is relevant particularly in a sector such as mining which has historically been male-dominated, and the Department has recognised the importance of promoting the participation of women in the mining industry. Of course there are different degrees of disadvantage, and gender should not be placed on par with race in this regard. However, we propose that the Department finds a formulation which will promote the meaningful participation of women, in particular black women, in the mining industry.
5.2.6 A definition of a small-scale mine should be included.
5.3 Chapter 2: Fundamental principles
5.3.1 The objects of the Draft Bill (set out in section 2) should be informed by the history we are coming from. This should particularly consider the role the mining industry has played in perpetuating the policies of apartheid through the migrant labour system, slave wages, racial discrimination, displacing communities, environmental damages, poor living and working conditions. The Draft Bill should set as part of its primary objectives the need to commit and oblige the mining industry to compensate for all these atrocities. The Statutory Board proposed in Chapter 6 should as part of its mandate be responsible to deal with matters related to claims for compensation by communities, mineworkers and ex-mineworkers and their families. We propose that the following objectives should be added:
Facilitate state ownership of productive elements of the mining industry;
Diversify ownership of the mining industry by breaking monopolistic ownership patterns;
Eradication of racial and gender discrimination and inequality;
Increasing worker ownership and control;
Promote better working and living conditions on the mines.
5.4 Chapter 4: Mineral Resource Management
5.4.1 Section 10(2)(a), which deals with the holder of a mining right explaining why they have failed to make use of the right in accordance with section 10(1), should specify timeframes for the providing of reasons in this regard.
5.4.2 Section 11(3) deals with a special investigation to establish the occurrence, nature and extent of mineral resources in respect of land. Since those that are going to be affected by such investigation include local communities, the proposed publication in the Government Gazette should be complemented by local news papers, local notice boards or public offices in the particular area
5.4.3 Section 15 deals with the power of the Minster to expropriate any property for the purpose of prospecting or mining. COSATU supports this provision and suggests that there be further elaboration in the Draft Bill around the circumstances which could warrant such actions as well as a clearer conceptualisation of how expropriation power fits into the overall approach for transforming the sector.
5.4.5 Section 17, which deals with assistance to contribute to rural and local economic development, should include Regional (SADC) development elements for communities from which migrant workers are drawn. A provision for the establishment of a fund should be made which should be under the auspices of the SADC to identify and distribute such funds in the region solely for community development and social upliftment. The mining sector in the region should then contribute resources to the fund to be used for that purpose.
5.4.6 Sections 18-21 deal with information and data to be submitted by applicants for prospecting or mining rights, holders of prospecting or mining rights or retention permits, or holders or relevant surface rights. We propose that the following pertinent information also be required:
Number of jobs to be created in the case of a mining right or to be sustained in the case of a retention right
Amount of capital to be committed if prospecting right has been granted
Information regarding exploration and prospecting activities from the previous holder of an old order right if it is a person, company or any institution.
5.4.7 With respect to Section 20 (information and data in respect of boreholes and excavations), we further propose that local communities should also be informed or consulted regarding such intentions.
5.4.8 Section 22, which deals with information and data in respect of mining, processing and marketing of minerals, should be expanded to include subsections requiring information about:
the number of workers employed and
Progress regarding social upliftment and local economic development.
5.4.9 Section 23 provides for the notice of profitability and curtailment of mining operations affecting employment - obviously a key issue for our members. The term "imminent" may need to be defined in the context of the holder of a mining right being required to notify the Director-General in the event of mining operations being imminently scaled down/ceased with stipulated employment effects. This clause (23(1)) should be further amended such that not only the DG but also affected workers, through their trade unions, are timeously informed of developments. Similarly, clause 23(2), which provides for possible remedial actions in response, should also stipulate negotiations with the union representing the majority of workers as well as consultation with the community and major stakeholders.
5.4.10 Section 24 A deals with the promotion of mineral beneficiation. COSATU has for some time called for the active promotion of beneficiation and NUM has made proposals around beneficiation in the mining sector. However we are not convinced that tax incentives are necessarily the best means of doing so. Over the past two decades we have seen a shifting of the overall tax burden of the country away from the corporate sector - and in particular away from the mining sector - onto individuals.
We do not support tax incentives to business which have the effect of either limiting the aggregate amount of revenue available to the state for socio-economic development, or further shifting the tax burden onto working people especially lower-to-middle income earners. A further danger with tax incentives if not carefully designed and implemented is that they can be taken advantage of for activities which would have taken place anyway, thus providing a windfall gain to business.
We believe that there may be superior ways of promoting beneficiation, including more active state involvement and investment in this regard, and for example requiring mining companies to reinvest in beneficiation and in particular labour intensive beneficiation. 24.A.(3)(b), which provides that any royalties payable to the state be utilised for research in connection with the beneficiation of any mineral in the Republic, is certainly preferable to section 24.A.(3)(a), which allows that no royalties be paid to the state by a holder of a mining right. Under the latter option, there is not even a guarantee that beneficiation will take place. We propose that government should investigate options for compelling companies to pursue beneficiation. These options could include tax penalties for failing to add value, rather than relying on tax incentives.
The promotion of beneficiation should also explicitly include the element of job creation and capacity building as a condition for granting a permit and considering incentives. The section should include a clause which reads as follows:
The Minister should endeavour to promote, support and assist the establishment of small to medium mineral beneficiation initiatives in collaboration with the DTI and within the framework of the existing programmes. These initiatives should consider as its primary objective the creation of jobs and development of local economies.
We believe that the following are some of the factors which impede the further beneficiation of minerals and should be taken into account in a strategy to promote beneficiation:
Lack of access to capital by small to medium sectors;
Lack of access to raw material due to legislative restrictions;
Lack of appropriate skills;
Lack of sufficient commitment and support from established players;
Lack of appropriate infrastructure.
The present initiatives to promote beneficiation of minerals must be accelerated with the intention of replicating them such that they begin to provide increased opportunities for employment and foreign exchange earnings. The industry together with government support must promote new and expanding markets both at home and abroad for present and future mineral products. Such products should capture the highest possible value added for industry and all its stakeholders.
The Draft Bill should spell out obligations for companies that will receive state support through supply-side and other measures. It is important that such obligations are clearly spelt out to ensure that the benefits accruing from beneficiation are equitably shared. The assumption underlying beneficiation is that the benefits will be automatically shared. This is not necessarily the case. For instance, it does not follow that mining companies will reinvest their profits secured through state support.
5.5 Chapter 5: Mineral Regulation
5.5.1 Sections 25 - 33 deal inter alia with the granting of prospecting rights. We believe that these sections need to contain stronger protection for affected communities, whose quality of life could be seriously impacted upon by prospecting or mining operations. While section 25(a) prohibits the granting of a prospecting or mining right on land comprising a township or an urban area, it seems to be silent on other residential areas. Should communities be displaced or adversely affecting by prospecting or mining, adequate compensatory measures need to be implemented.
5.5.2 This also relates to the lodging of objections to the granting of a prospecting right. Section 27(1) provides for a notice to be displayed at the office of the Director: Mineral Development and in a public building in the district concerned informing the public of the application and procedures for objecting. This cannot be said to constitute a proper consultation process and problems may arise later where communities - for example who believe that their environment will be negatively affected by the proposed development - feel that they have not been consulted and oppose the prospecting or subsequent mining. Section 27(3) sets out a fuller consultation process - including more active measures such as newspaper notices - which may be followed at the discretion of the Director: Mineral Development. We propose that this more extensive procedure should be followed in the first place, i.e. the procedures stipulated in sections 27(3)(a)-(c). Any other measures which the Department feels it would be appropriate to include should supplement the procedure outlined in 27(1). Similarly with respect to the procedures around objecting to the granting of a mining right, the notice referred to in 39(1) is inadequate and we propose that the more extensive publicity measures set out in 39(3) should supplement this.
5.5.3 Section 25(a), which prohibits the granting of a prospecting or mining right on land comprising a township or urban area, should also take into account villages or rural residential areas.
5.5.4 Section 26(3) could be strengthened to prevent further monopolisation of the mining industry by not granting an application for a prospecting right if the applicant already has a specified degree of monopoly in the mineral/group of minerals/area. Obviously benchmarks would need to be specified (reflecting the extent of market dominance and market power) to objectively measure this. We propose a similar approach in relation to section 38(2) which deals with application for mining rights.
5.5.5 Sections 29 to 31 deal with the processing of an application for a prospecting right, approval to grant such a right, and criteria to refuse granting it. We propose the inclusion of a provision that the Director: Mineral Development should be satisfied that the applicant has the ability to meet adequate labour and health and safety standards. Granting prospecting rights to companies which do not have such ability could have dire consequences for workers.
5.5.6 Section 38 sets out the procedure for an application for a mining right. Section 38(2)(e) of this stipulates the business plan which should form part of the application, including inter alia a technical and feasibility report, a detailed forecast of various costs, and proof of the applicant's technical ability and financial resources. We propose that the business plan should also include a labour plan which sets out the proposed workforce/job creation plans, remuneration and conditions of service, living arrangements, health and safety provisions, and other relevant information. This is important information which needs to be taken into account in evaluating an application for a mining right.
5.5.7 In the current Draft Bill, criteria for approval to grant a mining right (laid out in 42(1)), similarly focus on the applicant having adequate technical abilities and financial resources to conduct sustainable mining and deal with environmental impacts. Further they deal with the applicant's ability to obtain capital requirements. If the Minister is satisfied that the applicant meets these criteria, (s)he is compelled to grant the mining right. However, these criteria seem inadequate to guide such an important decision as the granting of a mining right. Labour believes that there are other significant considerations that should be taken into account, including the following:
The projected contribution to national and local economic development. Criteria could be set out to benchmark these, such as the strategic significance of the proposed activity and its projected contribution to GDP, the fiscus etc.
Specifically, the projected employment effects arising from the granting of the mining right and the type and quality of these jobs.
The working and living conditions of the workforce as set out in the business plan (see our proposals on 38(2)(e) above).
The ability and financial resources of the applicant to implement these plans and pursue sound labour relations. This may also entail appropriate amendments to section 43, which sets out the criteria to refuse the granting of a mining right and similar amendments to section 47 which deals with the refusal of an application for the renewal of a mining right.
5.5.8 Section 45 provides for a mining right for up to 25 yrs and renewal for a further 25 years. Comparative evidence indicates that this is long by international standards. Particularly given South Africa's socio-economic realities, this may be longer than appropriate and may have the effect of entrenching the status quo and locking in current skewed ownership structures.
We believe that some reduction in this period can accelerate the pace of transformation as well as contributing to a more dynamic economic structure.
5.5.9 Section 46 deals with an application for renewal of mining right and the information that should be provided in this regard. The stipulations set out in section 46(2) are fairly minimal and would probably be inadequate to make a decision of such significance which will hold for the next quarter of a century. This section should thus be expanded to include other relevant information such as a quantification of the contribution to economy and employment, black economic empowerment and worker ownership, economic viability, etc.
5.5.10 Section 47 sets out the criteria for refusal to renew a permit. This should be expanded to explicitly include issues around labour and employment. This would ensure that a company which, for example, did not create the promised jobs or which had a poor record on labour relations or health and safety is not allowed to continue the same problematic practices.
5.5.11 Sections 48(a) and (b) attempts to give practical effect to the "use it or lose it" principle by stipulating as an obligation of a holder of a mineral right that they must timeously commence with mining operations as well as "continuously and actively conduct mining operations in accordance with the business plan". We support the intention here but suggest that some tightening up of the legislation may be required. How will government assess whether these obligations are being fulfilled and that a company is not just conducting low-intensity "token" mining in order to hang on to their right without properly exploiting the mineral resources.
5.5.12 Within the same section, 48(g) obliges the holder of a mineral right to "pay the prescribed royalties to the state". We seek clarity on how these royalties will be prescribed and the structure of the royalties, in the context of the overall revenue system.
5.5.13 Sections 49 - 59 deal with retention permits. We are concerned that these provisions can provide a loophole for companies to escape the "use it or lose it" principle by allowing them to continue holding rights without exploiting these, and seek clarity on the rationale for these provisions. Even if it can be demonstrated by the holder of a right that mining is uneconomical, why not open up the right so that another party who believes that it is feasible to use the mineral resources productively can do so.
5.5.14 We have serious concerns in relation to section 62(1), which allows for the exemption of a group of people from applying for a prospecting or mining right. Presumably this is intended to promote black economic empowerment. However such an exemption will be open to abuse or perceptions thereof. Even in the case of targeted ownership transfer, there is still a need for a business plan, geological and environmental reports, social plan and so on. No group should be exempt from thorough and transparent application procedures. Certainly particular groups can be targeted through different evaluation criteria, and processes can be simplified where appropriate for small-scale mining, but even these should be clearly and transparently laid out and implemented.
5.5.15 Section 63 allows for the abandonment of prospecting or mining rights for a mineral, group of minerals, or portion of an area. There could potentially be a situation where a right is granted for a "package" of minerals or for an area, with a mixture of more and less profitable resources within this. In the interests of taking maximum advantage of our resources, rights could be given as a package to ensure that less profitable mines which would not necessarily be actively mined in their own right will be exploited by tying them to more profitable mines. Allowing holders of rights to "dump" certain parts of such a package would undermine such an approach. We seek a response from government in this regard, but would suggest the deletion or reformulation of this section.
5.5.16 A further issue which should be covered either in this chapter or some other relevant part of the Draft Bill is state intervention in relation to mismanaged mining operations. In the further development of this legislation, options should be explored for the state to intervene in mismanaged mining operations at the request of stakeholders (such as unions or communities). This would be aimed at avoiding a situation where a mine is poorly run over a period of time and by the time there is outside intervention, it is already too late resulting in job losses. The State could contemplate taking over operations that are mismanaged either directly or through the IDC or other state companies. This will limit the burden that tends to be shifted to the state to take care of the after effects when such operations are closed down.
5.5.17 Sections 64 and 65 deal with environmental management principles and the duty of care, responsibility for environmental management and for remediation of environmental damage. We propose that the costs of remedying environmental damage should as far as possible be borne by companies, as it is them who reap the profits of mining and who cause environmental damage in the pursuit of profit maximisation. It may also be advisable to explicitly include liaison/co-operation with the Department of Environmental Affairs and Tourism around environmental issues. Furthermore, we believe that the issues of health and safety provisions for workers need to be beefed up in these sections.
5.5.18 Section 73, or another appropriate part of the Draft Bill, should include the social plan to cover workers, their families and affected communities. In the event where a mining operation is contemplating curtailment of operations or retrenchment apart from informing the Director-General, a process of negotiations with the union should be activated before the matter is dealt with in the Permanent Commission on Mining. The matter should only be referred to the minister as a last option to resolve any disagreements. [This should include all the liabilities due to the workers in terms of wages, pension and any other form of compensation than narrowing it to environmental liabilities]
5.5.19 Section 74 on Preferential claim in the case of liquidation or sequestration should not be limited to the environmental aspects of mining but should also cover social impacts. It should include payment or fulfilling all costs commitments due or outstanding particularly for workers in as far as all their payments are concerned such as monthly wages, pension etc.
5.6 Chapter 6: Minerals and Mining Development Board
5.6.1 The Draft Bill suggests that the board will operate within the Department of Minerals and Energy meaning that it will operate within limits and under the influence of the Department. The call for a Permanent Statutory Commission on Mining is based on the understanding that in order for it to be independent of the direct influence of the department of Minerals and Energy and has to be a statutory body which is accountable to the Minister. We reiterate our call for a permanent statutory commission on mining which should be outside the bureaucracy and protocol requirements of the department and government, and propose that this be built into the legislation.
5.6.2 The primary function should be to oversee and advise the Minister on issues pertaining to transformation in the mining industry. This should include matters of retrenchments and socio-economic development. The Draft Bill talks about the Minerals Development Board whose functions do not include the social and labour aspects of the industry particularly so far as promotion of best practices, industrial relations and contracting/sub-contracting. The Commission should as its other functions include the creation and promotion of an operating environment that encourages the use of best practices for industrial relations; health and safety issues; and the protection of environment; and the advancement of small-scale mining.
5.6.3 The Commission should take steps to ensure inter alia:
access to finance for small-scale mining on equal terms with other sectors;
labour and social issues are addressed
access to mineral resources
working and living conditions in the mining industry are improved
promote and implement the Social Plan
establish efficient information gathering capacity for research purposes
establish programmes of investing into alternative large-scale industries
facilitate employee/state buyouts of marginal mines in conjunction with the Industrial Development Corporation (IDC)
promote an appropriate balance between capital and labour intensive production in favour of the latter.
5.6.4 Regarding the composition of the Board, Section 79 stipulates persons not qualified to be members of the Board. This section excludes office-bearers of any political party/organisation/ movement or body of a political nature. We are not clear on the rationale for this and seek clarity in this regard. Our concern is that some trade unionists may be unintentionally excluded by this. We also seek clarity with respect to the position of business leaders with direct (both corporate and personal) financial interests in decisions being taken, vis-à-vis their participation in the Board and relevant decisions.[The appointment of members to the board should be upon the different stakeholders than being the prerogative of the Minister]
5.7 Chapter 7: Transitional arrangements
5.7.1 Section 90 of the Draft Bill provides for the continuation of pending prospecting and mining operations which were lodged at least 60 days before the commencement of the Act, provided that this is not contrary to the objectives of the Act. We propose that the Department looks at a further tightening up of this section to avoid companies trying to take advantage of the Act not yet being in force to push through applications contrary to the objectives of the legislation.
5.7.2 Section 91 of the Draft Bill provides for the continuation of a prospector's right after the commencement of the Act, while section 92 provides similarly for the continuation of permission to remove and dispose of minerals during prospecting. We propose that specifically with reference to clauses 91(1), 92(1), 92(3), 93(1), and 93(3), the Draft Bill include a stipulation that these rights be conducted within the Act as well as including mechanisms to deal with such activities or rights being exercised contrary to this Act.
5.7.3 Section 94 (1), which sets out the process for notification to holders of old order rights, should include the requirement that such a notice should also be published in the news papers, public notice boards and other effective means of canvassing the invitation
5.7.4 Section 94(2)(b) stipulates the information that should be provided as part of the motivation for why a prospecting or mining right should not be granted to another party. We propose that a further subsection 94(2)(b)(iii) on how such mining activity will sustain current jobs and create extra quality ones
5.7.5 Section 98(1) provides for the registration of mineral rights within six months following the commencement of this Act. This provision should be tightened to ensure that such registration does not contradict the objectives of the Act.
5.8 Chapter 8: Control over the possession, the trade, the processing, the export and import of diamonds.
5.8.1 This chapter should also take into account current processes and initiatives around conflict diamonds and related issues. There is an international movement around prohibiting trade in diamonds which are associated with forces trying to unseat democratically elected governments and the violation of human rights, and stronger measures need to be incorporated into the Draft Bill to regulate this. The section on the prohibition on the export or import of unpolished diamonds (section 109) should include subsections as follows: 109(3) Any unpolished diamond imported into or exported outside South Africa should be accompanied by a certificate of origin. 109(4) Any unpolished diamond imported into or exported outside South Africa should comply with internationally set standards. The section on penalties in Chapter 10 should include appropriate and adequate measures with respect to this serious issue.
5.8.2 Section 113 which deals with the consideration of application for a license, and section 114 which deals with the issue or refusal of a licence, do not appear to set out adequate criteria for such decisions and are more bureaucratic. We propose that the Draft Bill should include substantive criteria for evaluating license applications, including job creation, black economic empowerment, the promotion of domestic ownership, undermining monopolisation of the industry and so on.
5.8.3 Section 119(3)(a) circumscribes the transfer of a license to a company or close corporation. We propose a further interrogation and if necessary tightening of this clause, on the one hand to ensure that it will not inhibit black economic empowerment within the industry and on the other hand that it will not reinforce or allow further monopolisation of the industry.
5.8.4 Section 120(2)(b) states that the Director-General will only grant approval for the acquisition of a controlling interest in any company or close corporation if this will be in the interest of the diamond trade in general. We propose that this conception of "interest" could be expanded to the national and public interest, with relevant benchmarks being specified such as contribution to economic development and broadening participation in the industry. Furthermore, this section should be tightened to prevent further monopolisation of the diamond sector.
5.8.5 Section 123, dealing with the return of a license which has been suspended or cancelled, should include the period within which this should be done and the section on penalties in Chapter 10 should include appropriate measures if this is not done.
5.8.6 Section 124(4) should add a sentence to read as follows: If it is an imported diamond, a certificate of origin must be produced.
5.8.7 Section 143(4(a) dealing with existing agreements remaining in force, should include a rider that provided these are not contrary to national or public interest or the objectives of the Act.
5.8.8 Section 154(2)(b), relating to the prohibition of entry of certain unpolished diamonds into South Africa, should add "or internationally set standards or laws.
5.9 Chapter 9: Petroleum exploration and production
5.9.1 Chapter 9 regarding the upstream activities of petroleum requires substantial tightening up. The Chapter does not put as an obligation on a holder of a right to contribute to socio-economic development. Whilst the nature of the petroleum upstream sector is different from mining as it takes place in most cases offshore, the element of contributing towards development should never be overlooked.
5.9.2 Moreover, the issue of black economic empowerment or involvement of the previously disadvantaged persons in the upstream side of the sector should be strengthened. This would reinforce the charter signed between the existing petroleum sector and the government around the industry's commitment to 25% involvement of blacks in the sector. The Chapter should also provide for capital and capacity assistance by the state and put it as an obligation and condition for approving permit to the industry or applicants from the already established sections of the sector.
5.9.3 There is also a need for the Draft Bill to do away with the remnants of the past or transform the sector from its closed and secretive way of operation characteristic of the apartheid period. The current companies involved should commit themselves to the concept of redressing the imbalances existing in terms of ownership, control and management structures.
5.9.4 Specifically, section 190 which lays out the functions of the Petroleum Agency should include responsibility for promoting the petroleum industry in the interests of South African economic development, monitoring and promoting redistribution and transformation of petroleum industry, and (together with the Department Of Labour) upholding good labour standards and labour relations practices in the industry.
5.9.5 Section 192, dealing with the obligations of holders of exploration rights, should be strengthened in relation to health and safety protection of the workforce and surrounding community.
6. Further issues on the Draft Bill
There are several other issues which we considered to be very relevant to the mining industry but which have been omitted in the Draft Bill. While some of these issues also cross-cut with other policy processes or other dimensions of the industry, we believe that they also relate directly to the Draft Bill and would like to see them adequately incorporated in the legislation.
6.1 Contracting/Sub-contracting and outsourcing
The mining industry is increasingly retrenching workers and replacing them with contractors. NUM and COSATU regard contracting/sub-contracting and outsourcing abusive, inhumane, oppressive and unproductive way of managing a mining business. Contracting/sub-contracting and outsourcing work involves exposing workers to poor working conditions, compromised health and safety standards and destruction of quality jobs.The use of "independent contractors" and the general trends towards casualisation and outsourcing are undermining labour standards in the economy, including in the mining sector.
The Draft Bill fails to address the issue of sub-contracting. We propose for its regulation through the establishment of an accreditation body which should be under the Permanent Statutory Commission on Mining whose functions should be to register contractor/sub-contractors, monitors and ensure their compliance with legal standards and good codes of practice. This should ensure that non-quality sub-contracted jobs do not replace quality ones. This issue is also raised in section 4 of our submission in terms of the definition of an employee. We suggest that a cue can be taken from the Mine Health and Safety Act that regards contractors as employees.
6.2 Working and living conditions
The interest of mineworkers in as far as working and living conditions are concerned should be part of the objective of the Draft Bill. Redressing the ills of apartheid in the mining industry will require a complete transformation of the industry such that mineworkers as well as their families and communities are appropriately compensated. The Draft Bill should expressly deal with this issue as part of the overall transformation of the mining industry.
6.3 Small-Scale Mining and Junior Mining
The Draft Bill does not address small-scale mining as proposed in the White Paper as a form of socio-economic development. Since it is already happening the legislation should include a section which regulates the operation of small-scale mining. Small-scale mining should happen in an integrated way to enable small mines to operate in a profitable, sustainable and safe manner. To ensure its success small mining will require active support from the state, the industry, provincial and local authorities. Such an integrated approach should cover the following four areas:
6.3.1 Environmental, Health and Safety Issues
All mining should be subjected to the same regulation concerning environmental and health and safety standards;
Small miners should be responsible for environmental rehabilitation. The principle of "polluter pays" should be applied across the industry including for small-scale mining;
Small-scale mining requires a specific approach by country and by site to set standards and adequate incentives for miners - but health and safety on small mines should not fall below the standards and norms set nationally and locally for all mines;
Education, training and awareness programmes for small miners are a key to its success
6.3.2 Organisational, Social and Women Participation Issues
The employment and working conditions of small miners should not fall below the standards and norms set by national legislation;
Small miners association should be encouraged, to spread knowledge and provide a link with other aspects of rural and community development;
Entrepreneurship should be supported to allow small miners to transform themselves into formal business;
Barriers to women's participation should be removed and including throughout the mining sector.
6.3.3 Legal and Regulatory Issues
Legislation and legal recognition is the first and essential step in developing small-scale mining;
Artisanal miners, particularly those currently in the informal sector, need to be able to get the mining title to the deposit they discover and sell or transfer the title;
There should be active promotion of co-operatives amongst small-scale and artisanal miners;
· Regional mining centres should provide mining license for small mining that lapse if mining has not begun within a year;
The state should assist in marketing with district buying centres that pay a full price for output;
Large and small mining companies should be encouraged to co-exist, as both have a role to play
6.3.4 Technical and Financial Issues
Appropriate technology should be introduced and popularised to increase productivity and viability of small scale mining;
The state and development agencies should set up model mines for training and for providing extension services;
The state should identify suitable areas and deposits that are viable for small-scale mining;
Allow self-sustaining financing mechanisms to develop, based on mutual savings and loans associations etc;
State should stand surety or guarantor for small-scale miners
It is only when small mines operate in the context of a supportive and regulated environment such as this that they stand a chance of promoting rural development. The establishment of such an environment cannot be partial - it has to be comprehensive and integrated. The role of government departments at both national and provincial level will be extremely important.
The promotion of small-scale mining should involve the parallel development of a small to medium beneficiation sector which will then be involved in the manufacturing of jewellery and other mineral products.
6.4 Health and safety standards.
Health and safety standards do not seem to be accorded the same prominence as environmental considerations in the application for prospecting and mining rights, save for the requirement to provide for health and safety costs associated with mining operations. It is suggested that strong reference also be made to the Mine Health and Safety Act so that consideration of ability to meet adequate labour and health and safety standards form an important criteria in the consideration of applications, refusals and extensions.
Health and safety standards fall in the category of consideration for exemptions by the Minister in terms of section 62. Except for environmental considerations, prospective applicants can be exempted from any provisions of sections 26(2) or sections 38(2).
We propose that the Draft Bill needs considerable strengthening throughout in relation to health and safety. Certain proposals in this regard are made in section 5 of this submission.
7. Additional issues
Finally, we would like to take the opportunity to raise several issues which may not be of direct relevance to the legislation at hand but which concern the industry in general. We would like these to be part of a holistic discussion on transforming the mining industry and where relevant referred to other appropriate processes.
7.1 Migrant labour
The migrant labour system as it relates to the mining industry should fundamentally be changed or reformed. The system was structured to serve the interest of the mining industry without the respect of the workers, their families and the areas where they come from. The changes should be part of the move to put in place a coherent and integrated migration policy for South Africa. Whilst we acknowledge the current process on international migration policy, we feel the Draft Bill does not address the issues of migrant labour particularly those related to the mining industry.
The approach should be guided by the following principles:
The migration policy process should be as inclusive as possible and be conducted within the context of a broader regional economic development plan;
Thorough effective legal guarantees of equal wages and working conditions must be ensured such that the current policy processes avoid a situation where the employment of foreign workers leads to the de facto erosion of labour standards and deterioration of the conditions of all workers in South Africa;
Fair and appropriate control mechanism of migrant workers should be put in place;
An agreed number of migrant workers from neighbouring SADC countries should be allowed access to the South African labour market and heavy fines should be imposed on employers who employ illegal immigrants;
Employment of skilled workers should not jeopardise the priority of developing skills in Southern African workforce;
Compulsory deferred pay for mineworkers should come an end;
The right of mineworkers and including migrant workers to bring their families to the mines should formalised and including the right to apply for citizenship;
There should be an extension of education and skills programmes for migrant mineworkers.
7.2 HIV / AIDS
The Bill does not address the issue of HIV / AIDS prevalent as a result of living conditions on the mines based on the hostel system. Whilst the Department of Health is leading the state's programmes the Draft Bill must give effect to the role of the mining industry in so far it takes measures to prevent the spread of HIV / AIDS and other opportunistic diseases amongst workers in the industry.
7.3 Mines Works Act, 1956
Section 9 of the Mines Works Act, 27, 1956 dealing with exemptions was not revoked nor amended by the Minerals Act, 50, 1991. An inclusive process should be agreed on to look at the amendment of the section such that it puts mineworkers in line with the provisions of the Basic Conditions of Employment Act. Where there are conditions specific to the mining industry which may make certain provisions of the BCEA difficult - such as around meal intervals -appropriate compensation would need to be agreed on where mineworkers do not benefit from the rights accorded to workers in other sectors.
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