Government encouraging mining houses to release mining rights in South Africa

South Africa’s minister of Mineral and Energy Affairs has a message for black- and foreign-owned exploration firms that are experiencing frustration in their attempts to acquire prospective ground in his country: We’re working on it.

Penuell Maduna offered reassurance along those lines in a speech delivered to a packed house of mining executives and investors at the Indaba ’97 mining conference, held recently in this capital city.

Companies wanting to explore for minerals in South Africa complain that they must contend with excessive bureaucracy, including a dearth of information about mining rights and previous geological work done on a property.

Moreover, South Africa, unlike many other countries, does not have a flexible tax regime for foreign investors.

But the major stumbling block facing black- and foreign-owned companies is the entrenchment of large mining houses, such as Gencor and Anglo American, which long ago secured the mining rights to virtually every property with potential for hosting economic mineralization.

Maduna explained that the lack of international competition in South Africa during the latter part of the apartheid era (when international trade sanctions were in place) exacerbated the problem, as did the problems faced by South African-based companies working abroad. Apartheid also made it impossible for black-owned companies to acquire land.

For their part, South Africa’s mining houses insist they have not hoarded mining rights and that they are productively using the rights they hold. They maintain that the reason foreign companies are unable to find open, prospective ground in the country is because of a lack of new geological inventory.

“The balance between constitutional rights, fairness, economic and political expediency and the need to promote investment will ultimately determine the [mineral rights] model that we choose,” Maduna said.

“It has been demonstrated in other countries that it is the rapid turnover of mineral rights that brings minerals to account, and so this must be a primary objective.”

Maduna charged that it is the “duty” of the mining houses to make available the land holdings that are not being worked.

He said his ministry will soon release its Green Paper on Minerals Policy, which is intended to solicit comment and promote debate.

While Maduna and his ministry have not yet decided how they will deal with mining rights, Christopher Jennings, who has lived in South Africa for much of his life and whose company, SouthernEra Resources (SUF-T), is developing a diamond fissure mine in Northern Transvaal province, has a suggestion: “Give them a set time period to work the ground; otherwise, let them lose it.

If they were the mineral rights owner, pay them a small royalty. It would encourage huge amounts of development in South Africa and huge inflows of capital, which are not happening because people can’t get quality ground.” The SouthernEra president said mining rights have long been a “political hot potato” in South Africa.

“The big, established mining companies have been able to sit on properties and not develop them. Now the new government realizes this, and they’ve been getting a lot of pressure from companies like ours — pressure to switch to, say, the Canadian situation of `You work it or you lose it.’ It’s politically difficult for them to do it, but I believe the government can [stand up to the houses], and I believe they will.

“It may take some years, but ultimately they’ll see that it’s for the good of the country.”