COSATU ON

1 INTRODUCTION

COSATU and NUM welcome the opportunity to make a joint submission on the Draft Regulations ("the Regulations") under the Mineral and Petroleum Resources Development Act. We participated substantially in the various processes leading to the passing of the Act, which resulted in the introduction of some progressive changes with regard to the regulation of the mining industry, including:

Addressing patterns of concentration in ownership in the application process;

Providing for the development of a Broad-based Socio-economic Charter to facilitate transformation of the industry;

Requiring mining applicants to develop prescribed social and labour plans and ensure financial provision to cover related obligations; and

Requiring compliance with mine health and safety obligations as a condition for renewal of mining rights.

The challenge now rests with the Department to entrench and strengthen these gains in the regulations. While the Act serves as the overarching framework, the final regulations must also be consistent with the principles and commitments of the Broad-Based Socio-economic Empowerment Charter for the South African Mining Industry (the Charter) that was finalised on October 2002.

We are concerned that the draft Regulations do not adequately reflect certain key principles contained either in the Act or the Charter. For example, no provision is made for the requirement of upfront financial provision for the Social and Labour Plan, although this requirement was introduced by the Act.

The draft Regulations contain a large number of typographical and editing errors. Further, many of the prescribed Forms are not completely consistent with the requirements set out in the body of the regulations. This may lead to inconsistency in the administration of the Act, especially since this is decentralised to regional levels.

1.1 LAYOUT OF THE SUBMISSION
In most instances, the same concerns apply to different provisions. For the purposes of clarity the submission follows the structure of the draft Regulations and deals with each occurrence separately.

2 CHAPTER 1: DEFINITIONS AND INTERPRETATION

Chapter 1 contains the definitions relevant to the regulations. We note that no definition has been provided for a social and labour plan, which is a concern since the Act is also silent in this respect. Accordingly we propose that the following definition be inserted:
"social and labour plan" means the approved social and labour plan, that is compatible with relevant labour legislation and other statutory obligations, indicating the social, economic and labour arrangements directed at ameliorating the social, economic and labour impacts on individuals, regions and the economy.

3 CHAPTER 2: MINERAL, SOCIAL AND ENVIRONMENTAL REGULATION

Chapter 2 sets out the requirements and procedures relevant to the regulation and granting of mineral rights and permits, the social and labour plan and environmental regulation.

3.1 MINERAL REGULATION

3.1.1 Transferability of and Encumbrance of Permits and Rights

In accordance with section 11 of the Act, a prospecting or mining right may only be transferred with written consent of the Minister. Under section 11(2), consent may only be given if the transferee is capable of complying with the holder's obligations and satisfies the requirements in the Act necessary for the granting of the relevant right.

Draft regulation 4 provides for "Form P", which encloses the application for transfer. A major concern is that no provision has been made either in the body of the regulations or on the prescribed form, for the requirement of the submission of documentation and information by the transferee reflecting the ability to comply with the terms and conditions upon which it was granted. This brings into question how the Department is to assess the transferee's ability to comply with the terms and conditions of the right. We are particularly concerned about the transferee's ability to comply with obligations under the social and labour plan as well as the health and safety obligations.

Accordingly, we propose that amendments be made to regulation 4 and "Form P" in order to provide for such a requirement.

3.1.2 Prospecting Rights

Prospecting rights are provided for under regulations 7-11. Having considered these, we are concerned that the draft Regulations fails to require the submission of key documentation and information that would enable the Department to adequately assess applications for rights consistent with its obligations in the Act.

3.1.2.1 Applications for Prospecting Rights
Regulation 7 identifies the requirements for the application process, including the supporting documents and information that are to be submitted. These cover a variety of categories such as the work programme, description of the applicant's technical ability, and documentary proof of the applicant's financial ability. Our concerns with this part relate to the omission to require information relating to health and safety and the ownership and management structure of the applicant.

Mine Health and Safety
With regard to health and safety, it is important to bear in mind that the granting of a prospecting right is conditional on the applicant's ability to comply with the Mine Health and Safety Act(MHSA).1 However, the Department will not be in a position to carry out this obligation if it is not provided with the requisite information. In contrast, applicants are required to report on previous environmental compliance pertaining to other prospecting or mining rights.2 This reflects the considerable unevenness in treatment afforded to environmental compliance as compared with health and safety obligations, a pattern, which is consistent throughout the draft Regulations. Accordingly we propose that amendments be made requiring that applicants submit documentation detailing their compliance with health and safety obligations in respect of other mining or prospecting operations. Amendments would have to be made to both the body of the regulations as well as Form B under Annexure 1, which sets out the application form for a prospecting right.

Disclosing Ownership and Management Structure
An important principle introduced by the Act was to ensure that the granting of mineral rights did not result in the concentration of mineral resources under the control of a particular applicant. In this respect, we note support for the provision under regulation 7(1)(i), which requires the submission of a list of existing rights and permits held by the applicant in the region. However, in order to strengthen this, provision should be made for the requirement of documentation on the ownership and management structure of the applicant. The Charter outlines criteria for identifying HDSA(Historically Disadvantaged South Africans) Companies, which should be relied on for this purpose.3 Requiring this information will also enable the Department to assess whether an applicant qualifies as an HDSA and should therefore be given preference as required under section 9(2) of the Act.

3.1.2.2 Terms and Conditions of a Prospecting Right

Regulation 8 sets out the general terms and conditions of the prospecting right. Our concerns with this part relate to integrating broader socio-economic empowerment principles and the ongoing reporting on mine health and safety compliance after the granting of a prospecting right.

Broader Socio-economic Empowerment
In relation to broader socio-economic empowerment, we note with concern that regulation 8(2)(b) states:

"The holder ….must in the employment of employees, adopt and apply the principles outlined in the South African national affirmative action programmes, where possible"

While we support the underlying principle, we believe that the statement is far too broad to have a meaningful impact. Firstly, the use of the words "where possible" is problematic, and may give mining companies an excuse to avoid compliance. We are not saying that impossible targets should be met. However, consideration should be given to the fact that national affirmative action programmes are fairly flexible and furthermore are negotiated between workers and employers. Accordingly, the words "where possible" are not necessary and should be deleted.

Secondly, this provision should be broadened to extend beyond employment equity to include other areas of socio-economic empowerment as well. Here the emphasis should be placed on the principles contained in the Charter, relating to human resource development, employment equity, migrant labour, mine community and rural development, housing and living conditions and procurement.4 Accordingly, we propose that this provision be amended to incorporate the above references to the Charter.

Ongoing Reporting on Mine Health and Safety
In relation to mine health and safety, we note as a positive development that regulation 10(2)(h) requires of holders of prospecting rights to submit six-monthly reports on compliance with the MHSA. Further, an application for the renewal of prospecting right must also be accompanied by report on MHSA compliance. However, we believe that these provisions need to be strengthened in order to be effective.

Firstly, the requirement for reporting on MHSA must be expressly listed on Form C in Annexure 1, which provides the renewal application form. It should be noted that reporting on environmental compliance is expressly noted in both the body of the regulations as well as in Form C.

Secondly, Form GG sets out the specimen agreement between the holder and Department once the prospecting right has been granted. Paragraph 11 of the agreement compels the holder to comply with the MHSA. However, no reference is made to six-monthly reporting on compliance. Since Form GG constitutes a binding agreement, we believe that it is necessary to include a clause to ensure that the holder reports on MHSA compliance.

3.1.3 Mining Rights
Mining rights are provided for under regulations 12-19. Our concerns in relation to this section include mine health and safety, broader socio-economic development, and the social and labour plan.

3.1.3.1 Applications for Mining Rights
Regulation 12 sets out the requirements for the application process in respect of mining rights. A number of our concerns, noted above in relation to prospecting rights, apply equally to mining rights. Therefore these are not discussed in detail and are merely noted below:
§ Amendments should be inserted into regulation 12(1) and relevant application form(Form D in Annexure 1) requiring the submission of documentation on past compliance with health and safety obligations relating to other mining or prospecting rights. This will enable the Department to assess the applicant's ability to comply with the MHSA as required by section 23(1)(f) of the Act.
§ An amendment should be inserted into regulation 12(1), requiring documentation on the ownership and management structure of the applicant company.

3.1.3.2 Terms and Conditions
Regulation 14 sets out the terms and conditions applicable to mining rights. Our concerns in relation to this part include enforcement and financing of the social and labour plan, broader socio-economic empowerment, and mine health and safety.

Social and Labour Plan
In line with section 23(1)(e) of the Act, regulation 12(1)(g) requires the holder of a mining right to submit a social and labour plan. However, we are extremely concerned that the regulations are silent on the upfront financing of the social and labour plan, despite this being required by the Act. In addition, the regulations do not make provision for the enforcement of financing obligations. In contrast, regulations 14(2)(f) requires the making of "appropriate and adequate financial provision" for environmental rehabilitation and remediation. We believe strongly that an amendment should be inserted into regulation 14(2) similarly requiring the making of adequate financial provision for the social and labour plan.5

Broader Socio-economic Empowerment
Regulation 14(2)(b) provides that the holder must "engage in joint-ventures or any other form of co-operation with the Black Economic Empowerment(BEE) entities to develop technical skills and infrastructure". While we support the underlying principle, we believe that this provision is too narrow and should be extended to include other areas of socio-economic empowerment contained in the Charter as well. As with prospecting rights these include, human resource development, employment equity, migrant labour, mine community and rural development, housing and living conditions and procurement.

Ongoing Reporting on Mine Health and Safety
No provision is made for ongoing reporting on MHSA compliance during the existence of the mining right. Accordingly, we propose that an amendment be inserted into regulation 176 , requiring an annual report on MHSA compliance. Further, an amendment should be inserted into paragraph 15( the health and safety clause) of Form HH7 , binding the holder to make annual reports on MHSA compliance.

Social and Labour Impacts
Provisions under regulation 14(2)(c) and (d) require the investigations and assessment of environmental impacts. This reflects the unevenness in treatment between environmental concerns on the one hand and other broader social and labour concerns on the other. Therefore, we propose that an amendment be inserted into regulation 14(2) compelling holders of mining rights to investigate, assess and prevent social and labour impacts in accordance with the "approved" social and labour plan.

Use of Local "Contractors"
Regulation 14(2)(h) requires the holder where possible to make use of local contractors, services and equipment. We support the underlying principle which is to stimulate local economic development. However, taking into account the abuse of mine workers' rights through the practice of "independent" contracting, we believe that local contractors should be replaced with local companies and communities.

3.1.3.3 Application for the Renewal of a Mining Right

Mine Health and Safety
We note that under regulation 15(1)(i), an application for the renewal of a mining right must include a summary of the holder's compliance with the MHSA. However, this needs to be strengthened by including it as a requirement in the application form (Form E in Annexure 1) as well.

Social and Labour Plan
Regulation 15(1)(f)8 requires the submission of a "revised social plan" for the renewal period. This should be amended to a revised social and labour plan. Further, provision should be made for the submission of documentary proof of the financial provision for the social and labour plan, as the regulations are silent in this respect. Further, provision should be made for the submission of a summary report on the overall compliance with the previous social and labour plan.

3.2 SOCIAL AND LABOUR PLAN
Regulations 26-29 set out the various provisions on the Social and Labour Plan, that is applicable to mineral resources.

3.2.1 Financing
We have already noted serious concerns in respect of the failure of the regulations to set out the requirement for financial provision as required by the Act. We regard this as a fundamental flaw, which will seriously undermine the effectiveness of the introduction of the social and labour plan. While the Act provided for the obligation to ensure adequate financial provision, it is silent on the nature and form that this would take. The implication is that this obligation will be left largely to the discretion of mining companies, which is extremely problematic.

Accordingly we propose that a subclause be inserted into regulation 26, setting out the methods and form of financial provision as well as providing for the setting of standards of quantum.

3.2.2 Objects and Contents of Social and Labour Plan
The objects and contents of the Social and Labour Plan are contained under regulations 27 and 28 respectively.

3.2.2.1 The Labour Plan
The previous draft legislation preceding the Act, provided merely for a Social Plan. However, owing to pressure from COSATU/NUM, provision was made for the inclusion of a Labour Plan, which was combined with the Social Plan. Despite the merging of the two, the distinct elements and purposes of the two types of plans should be borne in mind. The two plans are not the same although they do complement each other. Of major concern is that the Social and Labour Plan provided for in the Regulations is in reality just a Social Plan, since the labour components have been omitted.

The Social Plan is directed at ensuring adequate future arrangements to reduce the social and economic impact on workers and surrounding communities in the event of large scale retrenchments or eventual closure of the mine. Thus the need for financial provision, which for example may be used to provide opportunities for re-skilling or up-skilling of retrenched workers.

The Labour Plan in contrast is intended to identify the working and living arrangements that a mining company intends to provide for workers and how it intends to comply with relevant labour legislation. The Labour Plan component would require the submission of the employer's plans for employment, skills development, employment equity, housing, health etc.

Accordingly we propose the insertion of the following provision under regulation 27 in order to set out the objects of the labour component:

27(1) The objects of the social and labour plan are to?
(a) …….…(h)
(i) put a labour strategy in place that addresses working and living arrangements of mine employees and is compatible with relevant labour legislation and other statutory obligations,

Further we propose the insertion of the following provisions under regulation 28 in order to set out the contents of the of labour component:

28 (1) The social and labour plan proposal must include the following, but is not limited thereto?
(a) ……………(I)
(j) Projected employment levels, including types, nature and length of the jobs;
(k) Proposed skills plan;
(l) Proposed employment equity plan;
(m) Housing and accommodation plans;
(n) Proposed health plan, including strategy to combat HIV/AIDS;
(o) Indication and commitment to improve working conditions should be demonstrated in the plan;

3.2.2.2 Future Forums
Regulation 28(1)(f) requires the submission of information concerning implementation and the setting up of a "future" forum. The Social Plan Guidelines from the Labour Department, provide for the setting up of future forums comprising representatives of workers and management. However, regulation 29 provides for the setting up of a Social and Labour Plan Forum. Clarity is required as to whether there are to two different types of forums or the term future forum was used in error.

3.2.3 Social and Labour Plan Forum
Regulation 29 provides for the setting up of a social and labour plan forum comprising 5 representatives each of the holder of the mining right, the employees and relevant local authority. We support the establishment of such a forum since this will facilitate worker participation in the implementation and monitoring of the plan.

However, we do have two amendments to propose. The first relates to the representation of employees on the forum. We believe that provision should be made for the proportional representation of registered trade unions, which is consistent with labour legislation.

Secondly, we propose the employment of a full time facilitator who will ensure that the forum is able to operate proactively and is not merely a bureaucratic structure.

4 CHAPTER 3: PETROLEUM EXPLORATION AND PRODUCTION

Chapter 3 sets out the requirements and procedures applicable to petroleum resources. Similar to the Chapter 2 on mineral resources, this Chaper provides for the regulation of the applications for granting of petroleum rights and permits, the social and labour plan and environmental regulation. Our concerns in relation to this Chapter are largely similar to those noted above in respect of mineral resources. Therefore, our comments are fairly brief.

4.1 PETROLEUM RESOURCES

4.1.1 Exploration Rights

The obligation under regulation 68(f)(ii) to submit documentary evidence of an applicant's ability to comply with the MHSA, must be amended to include the information on past compliance in respect of other petroleum rights or permits. Further the application form (Form M) should also be amended to list this as a requirement.

The requirement under regulations 69(2)(b) and (c) that holders of exploration adopt principles of national affirmative action programmes and engage in joint ventures with BEE entities, should be broadened to include other areas of socio-economic empowerment provided for in the Charter.

Further, regulation 69(2)(b) requires to apply national affirmative action programmes "where possible". We believe that these words are problematic and merely give holders an easy option to avoid addressing historical imbalances at the workplace. Besides national programmes are fairly flexible, which would not place too onerous an obligation on the holder.

Regulation 69(2)(d) and (e) require the holder to investigate, assess and prevent environmental impacts. We believe that this should be extended to social and labour impacts as well.

Similar to our comments on prospecting, we believe that provision should be made for ongoing reporting on MHSA compliance at six month intervals. An amendment to this effect should be inserted into regulation 71, which deals with progress reports.

An application for a renewal of an exploration right in terms of regulation 73, should be accompanied by a summary report on overall MHSA compliance.

4.1.2 Production Rights

The obligation under regulation 74(g)(ii) to submit documentary evidence of an applicant's ability to comply with the MHSA, must be amended to include the information on past compliance in respect of other petroleum rights or permits. Further the application form (Form N) should also be amended to list this as a requirement.

Provision should also be made for ongoing reporting on MHSA compliance at one year intervals, in line with comments on mining rights.

The regulations are again silent on the question of financial provision for the social and labour plan. Therefore, we propose that an amendment be inserted into regulation 74(1)(f) requiring that documentary evidence provided showing that adequate financial provision has been made for the social and labour plan.

The requirement under regulations 75(2)(b) and (d) for holders of production rights to participate in joint ventures with BEE entities and adopt principles of national affirmative action programmes should be broadened to include other areas of socio-economic empowerment noted in the Charter.

While we support the principle underlying the requirement to use local contractors, we believe it would be more appropriate to refer to local companies and communities. (See regulation 75(2)(j).)

4.2 THE SOCIAL AND LABOUR PLAN
The Social and Labour Plan component replicates the provisions applicable to mineral resources. The comments made in respect thereof also apply. (See pages 7-9).

5 CHAPTER 5: GENERAL AND MISCELLANEOUS REGULATIONS

Our comments in this section are confined to the notice of profitability and curtailment of mining or production operations, as provided for by regulation 119 and section 52 of the Act. Form Y sets out the form of the notice of profitability.9

Firstly, the Act requires the holder of a mining or production right to consult with registered trade unions and affected employees. However, this requirement is not reflected in the form. We propose that an amendment be inserted requiring documentary proof of consultation.

Secondly, section 52(1) of the Act requires the timing of the notification to be triggered by EITHER one of two events (viz., profitability levels averaging less than 6% for a 12-month period or the scaling down of operations leading to retrenchments. The form appears to suggest that both conditions are to be met in order to trigger the notification requirement. Amendments should be made to Form Y to ensure consistency with the Act.

6 CHAPTER 6: TRANSITIONAL ARRANGEMENTS

Regulations 126 and 127 provide for the application process for conversion of old order prospecting rights and old order mining rights respectively. Provision is made for applications on Forms I and J respectively.

It is of major concern that Form J does not expressly provide for the submission of a social and labour plan, although this is required by section (2)(f) of Schedule II of the Act. An amendment should be inserted requiring the submission of a social and labour plan as well as the documentary proof of adequate financial provision.

7. CONCLUSION

It is of great concern to us that many of the issues raised in this submission relate to matters, which we had thought had been captured in the Act. The draft Regulations if finalised in their current form would substantially water down key principles of the Act. Therefore, we would like to request the opportunity to meet with the Department, since the resolution of these issues are more likely to benefit from direct engagement.

Footnotes

1. See section 17(1)(d) of the Act.
2. See Form B in Annexure 1.
3. See para 4.7. of the Charter.
4. See paras 4.1 - 4.6.
5. Note further comments on the Social and Labour Plan are contained below in the discussion on regulations 26-29.
6. Regulation 17 provides for annual reporting on amongst others compliance with the social and labour plan and progress made in terms of socio-economic empowerment.
7. Form HH of Annexure 1, provides the form that is issued when the mining right has been granted. The holder signs the document and is therefore bound by its terms.
8. Note that there is a typographical error in the numbering since this provision is listed as 15(1)(b).

9. Note that Form Y has numerous typographical errors. Apart from duplications, its refers to the corresponding section in the Act as section 49 when it is in fact section 52.