[miningmx.com] – SOUTH Africa’s mining sector is already girding itself for a likely iteration of amendments to the Mineral & Petroleum Resources Development Act (MPRDA), while the extent of potential fiscal changes are the subject of the Davis Commission, chaired by esteemed attorney, Denis Davis.
The sector can now prepare for another, as yet unseen, set of legislative papers to pass its way: SOMCO or the State Owned Mining Company bill.
Whether this new acronym is to be feared as much as the MPRDA, or the State Intervention in Mining (SIMS), is a matter for conjecture. Right now, attorneys are unsure what the bill might contain.
The prospect of new legislation was raised by mines minister, Ngoako Ramatlhodi, in his budget speech last month in which he said: “One of the critical instruments of the democratic development state is greater participation by the state in the mainstream economy.
“The establishment of the state mining company represents a positive step in the right direction’.
Said Jonathan Veeran, an attorney at Webber Wentzel in Johannesburg: “I’ve not seen sight of the bill, but it’s certain that government wants to get involved in mining directly’.
“All of the coal rights currently in AEMFC will be transferred into SOMCO. I don’t know what the bill will look like, but I don’t think the company will be much different in terms of the structure of a normal state-owned mining company in South Africa,’ said Veeran.
AEMFC is an acronym for the African Exploration & Mining Finance Company, the name of the current state-owned mining company which is currently housed in the Central Energy Fund (CEF).
The AEMFC is essentially a coal company with a single operating mine, Vlakfontein in Mpumalanga province that supplied about 1.6 million tonnes of coal to Eskom, according to the CEF in its 2012/13 annual report.
It has plans to build two new coal mines – one is actually an expansion of Vlakfontein and the other is a commercially questionable coal-to-liquids type coal deposit once owned by BHP Billiton Energy Coal South Africa.
The question is what AEMFC will become once the SOMCO legislation is passed?
Will it be an operating company, or an operating and investment company which raises the prospect that it could house the mining investments in the Industrial Development Corporation as proposed by SIMS?
And might Alexkor, the diamond firm, be wrapped up into SOMCO as well? Government has already suggested Alexkor move into coal production.
Roger Baxter, COO and senior economist at the Chamber of Mines of South Africa, said that the SOMCO would be squarely positioned to provide coal to Eskom, although he had not seen the proposed legislation.
“It will be focused on the coal space, but it also needs to compete on equal footing in South Africa, especially in area of environmental control.
“It’s not producing much coal at the moment, but I think it will be an operating company rather than investment entity,’ he said.
There’s also the question of whether SOMCO will envelop another mining company in which the government has a stake, the Pan African Mining Development Company (PAMDC), an entity the late Brett Kebble wanted to list, but which also includes the interests of the governments of Zambia and Zimbabwe.
Said James Lorimer, shadow mines minister and an MP for the Democratic Alliance last year: “It looks as if several different departments are going into business on their own. I think this is a confusion and I cannot see it ending well’.
All three pieces of legislation are proposing that the government take a direct hand in either setting prices, controlling export trade flows or, in the case of the SOMCO bill, becoming an active participant in the mining sector as well as regulating it: the much feared “referee and player’ role.
