272020Jan
Community issues and resource nationalism adding pressure on the Mining industry

Community issues and resource nationalism adding pressure on the Mining industry

INTRODUCTION

As if mining by its very nature is not difficult enough from a technical, financial, environmental and labour point of view, added pressure has been brought to bear upon mining companies generally in Africa as a result of the increasing community issues affecting mining operations and the general tendency of increased or “creeping” resource nationalism in the mining industry.

Although the community issues and resource nationalism are present in mining in Africa, one should caution in believing it is unique to Africa, the same tendencies applying in many other parts of the world such as in South America and Russia.

COMMUNITY ISSUES IN MINING IN AFRICA

Mining often occurs in rural remote areas where there are indigenous communities. However there is also a tendency for communities to mushroom around mines once development of the project takes place as a result of potential job opportunities, offshoot industries and procurement for the mining operations.

There are two prime examples in South Africa where issues between the host communities and the mining entity have resulted in the delay in the development of the mines. The first involves the Xolobeni community in relation to the Xolobeni mineral sands project of Transworld Energy and Mineral Resources (“TEM”), an Australian mining company, wanting to mine the titanium rich sands. Ultimately the disputes between the community and the mining company resulted in a high court ruling in the Gauteng Division in Pretoria.

The applicants relied on the Interim Protection of Informal Land Rights Act (“IPLRA”) and the requirement that their consent is needed in terms of Section 2(1) of that Act before they may be deprived of their land. They argued that such consent must be fair and informed. The DMR did not ensure the applicants had a consent from the community prior to the grant of a mining right. The applicants also referred to international laws for their contention that mining rights may only be granted if traditional communities who have rights in land as contemplated in terms of the IPLRA, grant their consent. The court held that having regard to overall purpose of the IPLRA and the Mineral Petroleum Resources Development Act 28 of 2002 (“the MPRDA”), and given the status afforded to customary law under the South African constitution, the court could see no reason why the two Acts cannot operate alongside one another and the MPRDA does not trump the IPLRA. The court held, inter alia, that the Minister lacked any lawful authority to grant a mining right to TEM, without having complied with the provisions of the IRLPA.

In a further recent 2018 Constitutional Court case, Maledu v Itereleng Bakgatla Resources, the court also considered that the IPLRA and the MPRDA should be interpreted and read harmoniously and that there is a right given to communities to decide what should happen to their land and that their consent is required before they may be deprived of their land.

A further issue that arises in regard to community is resettlement of communities that already dwell on land over which a mining right is granted in South Africa. An example of a successful relocation in South Africa is the Mogalakwena Mine, one of the most profitable platinum mines in the world, which mines by opencast methods. This resulted in the relocation of an extensive community, the biggest issue being the relocation of graves and an improvement in lives rather than in degradation.

NATIONALISM IN THE MINING INDUSTRY

Many mining operations in the world have now been detrimentally affected by the State’s desire to ensure that the mineral reserves and resources of the country are used to benefit the country and its population as a whole, rather than the need to see returns on capital investment.

Often “creeping” nationalism in Africa’s resources section is used as a political tool to woo the electorate.

This drive towards nationalism is most often achieved by changes in legislation, mainly the mining legislation and tax legislation. This has clearly been seen in, for example, the Democratic Republic of Congo recently amending its legislation to extensively increase royalties, taxes and other obligations, having a detrimental affect mining operations and the profitability and return on investments. DRC also provided for the designation of strategic metals and substantial increased royalties as well as abolishing clauses in mining agreements giving fiscal stability for ten years.

Tanzania has also substantially revised its mining code in imposing extra obligations, increased royalty rates and increased government participation, once again to the detriment of the return on investment of existing mining company. There were also local content regulations which were imposed.

Zambia and Kenya are further examples of countries that have increased royalties, increased State participation and imposed extra obligations to the benefit of the State and to the detriment of mining companies.

Resource nationalism is a hot topic of debate in South Africa. Radical change was brought about in 2004 by the MPRDA to convert the private mineral rights system and introduce a State licencing system, introducing the State custodianship over mineral resources.

South Africa also introduced the concept of historically disadvantaged South Africans (“HDSA”) and a mining charter to deal with various aspects of incorporation of HDSA’s into the mineral mining industry including in respect of ownership thereof. Furthermore from 1 March 2010, royalties are payable to the State on all mining operations and draft amendments to the mining legislation with proposed restrictions on exports and requirements to beneficiate. At this stage there is no State participation in mining projects, but there is state mining company which is more involved in mining operations in South Africa than ever before.

CONCLUSION

Many mining operations in Africa are unsuccessful notwithstanding the burdens imposed upon mining companies including the issues raised above. However a balancing act is required to harmonise the interests of the State, the interests of the community and the aspirations of the mining company. Often this delicate balance is disturbed by the actions of one or more of the stakeholders and then often to the detriment of all concerned.

Article compiled by Chris Stevens – Director at South African member firm Werksmans Attorneys

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