Proposed MPRDA amendment on small mining unconstitutional

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ATTORNEYS say a proposal to amend a section of the Minerals & Petroleum Resources Development Act (MPRDA) so that small mining is restricted to black controlled companies may be unconstitutional.

One of the proposed amendments to the MPRDA is to Section 27 and states that mining permits for properties of less than 1.5 hectares, and of no more than two years in duration, can only be awarded to applicants who have in excess of a 50% black economic empowerment (BEE) shareholding.

This is thought to affect quarrying and small alluvial diamond mining – a relatively small sector of the mining economy – although there are fears this could be extended to broader sections of the sector.

Peter Leon, a partner at Herbert Smith Freehills, said there was no reason why economic transformation should not be affected through the current conditions in the mining charter, rather than the MPRDA.

“The question accordingly is why the DMR [Department of Mineral Resources] believes the transformation of the small scale mining industry cannot be achieved under the mining charter. Unfortunately, the DMR has not explained the need for the greater BEE participation for the holders of mining permits or why the transformation objectives of the MPRDA cannot be achieved under the mining charter.

“If the DMR is unable to provide reasonable and justifiable reasons for the distinction, the proposed amendment may well be arbitrary,” said Leon. “Should this be the case, the limitation on the right to freedom of trade, occupation or profession may be unconstitutional,” he added.

Referring to the empowerment target in the Mining Charter, Webber Wentzel attorney, Jonathan Veeran said “… there is no reason supporting the deviation from the normal 26%”.

Nicola Jackson, partner at law firm Fasken Martineau said that while affirmative action was important, there is precedent that restitution should not constitute an abuse of power or impose substantial due harm on those excluded; in this case, non-black people.

“Against this background, the proposed amendments could be considered to impose substantial due harm on those excluded from the benefits thereof (non-black people) and may in this regard struggle to pass constitutional muster,” said Jackson.

Commenting on the proposal, shadow mines minister, James Lorimer said: “We will oppose it at the NCOP level and when it comes back to the National Assembly. Unless the ANC has a change of heart, they will include it in the final bill”.

“My issue is that it will be seen as another bad sign. Mining majors know that that is the trending direction of government policy and will be asking how long it will be until that provision is extended to them too,” he said.

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