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Protecting your global interests Mining and Environmental - South Africa

December 2019

Edition 2

Protecting your global interests

Mining and Environmental

South Africa


1

Editor’s comments

Warren Beech, Editor Partner – Head of Mining and Infrastructure

Keep calm and breathe

With 2019 coming to a rapid close, and because of the significant impacts that recent environmental trends and changes have on the Mining and Natural Resources Sector, we have decided to consolidate our Mining,

Natural Resources and Environmental newsletters, into one final newsletter for 2019.

The Environmental Revolution has been in the spotlight and seems to be gathering momentum, not only for those that have in the past, been regarded as being on the “fringe”, but also “mainstream” stakeholders.

We have therefore included articles by Pascale

Defroberville on electronic waste, and the Carbon Tax Act. There has been rapid innovation and decrease in

production costs, and dramatically increased access to electronic products and digital technology. This has however led to the unintended consequence of creating the fastest growing waste stream (electronic and

electrical waste). Pascale discusses these consequences, and what it means for South Africa. Pascale also comments on the practical aspects associated with the implementation of the carbon tax in South Africa.

We have included an article by Glynn Kent “Was Greta right about us?” where he comments on what is broadly regarded as an emotionally charged speech at

the United Nations Climate Action Summit, by Greta Thunberg.

In the article by Warren Beech and Glynn Kent “If a tree falls in the forest…” (first published in the October issue of Without Prejudice), Warren and Glynn address interesting questions regarding observation and perception, generally, and specifically in relation to

whether civil society has progressed to the point where it is no longer only about the perceptions of a small minority relating to environmental degradation that counts, the implementation of the “polluter pays principle”, and the devastating consequences of tailings dam failures in recent history.

When it comes to the Mining and Natural Resources Sector, it is broadly acknowledged that the Mining Sector prevents the South African economy from going

into full recession. The South African government has re-confirmed, publicly, on several occasions, that the Mining and Natural Resources Sector remains a critical contributor to the South African economy.

Contents Editor’s comments 1

Does the mining industry have a

future in Zimbabwe?

3

Private prosecutions following mine

fatalities – legal appointees beware

5

Electronic waste - the toxic legacy of

our digital age

7

The impact of the competition

amendment act on the mining sector

11

Was Greta right about us? 13

If a tree falls in the forest… 15

When tragedy strikes, follow due

process

18

Individual employees cannot rely on

section 187(1)(C) of the LRA to

claim that their dismissals are

automatically unfair

19

Harmonising corporate governance

framework for South African mining

companies: King IV, Companies Act

and the Mining Charter

21

Mining in Tanzania 23

Mining in Africa 2020 29

Key contacts 37


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The second half of 2019 saw the Mining and Natural Resources Sector struggling again due to uncertain commodity cycles and prices, shifting demand patterns and policy and regulatory

uncertainty.

The frustration felt by many stakeholders, continues to be manifested through disruption at mining operations, demands for jobs, and the opportunity to become service providers to the mines, and service delivery in general (in many cases, the mines are seen as “substitute”

municipalities, and demands are made to these

mines, for service delivery).

The state of the South African economy has, unfortunately, not assisted, and investors are looking more broadly at investment, in Africa.

We have therefore included an article on mining

in Africa in 2020 (including a strong focus on nationalization and nationalism), and specific articles on mining in Tanzania (first published in Mining Weekly) and Zimbabwe (first published in Mining Weekly), prepared by Warren Beech.

No newsletter would be complete, without touching on the unfortunate number of fatal

accidents that have occurred in the Mining and

Natural Resources Sector.

We have included two articles by Eben van Zyl, addressing processes to be followed after fatal accidents occur, and the potential for private prosecutions under South African Law, following

mine fatalities.

The Mining and Natural Resources Sector operates within a complex legislative framework, and we have included an article by Namhla Mzuku about harmonizing corporate governance frameworks and the Mining Charter, an article by Nadia Froneman (first published in the October

edition of De Rebus) on the interpretation and

application of Section 187(1)(c) of the Labour Relations Act relating to automatically unfair dismissals, and an article by Tanya Pollak and Yashika Rowjee, on the impact of the Competition Amendment Act on the Mining and

Natural Resources Sector.

We really enjoyed preparing these articles for you, and we hope that you enjoy reading them. Please feel free to share these articles with any of your colleagues and, if we can help you in any way, please reach out to us.

We would be more than happy to discuss the

articles with you, and present update sessions to you, if this will be of assistance.


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Does the mining industry have a

future in Zimbabwe?

Warren Beech Partner – Head of Mining and Infrastructure

Part 1

The announcement of the intention to repeal the Indigenisation and Economic Empowerment Act by

the Zimbabwe government in March 2019 was driven by various factors, including investor, political and legal motivations.

The Act, implemented by former Zimbabwe President Robert Mugabe in 2008, states that 51% of mines must be black Zimbabwean-owned, thereby limiting foreign ownership. Since Zimbabwe President Emerson Mnangagwa has come in to power in July 2018, there have been calls for this

law to be repealed.

The primary driver behind the amendment to the Act was the feedback received from investors and

how this law impacted on their investment decisions. Although this was the primary motivation to amend the law, it was not the only factor.

There was also a political driver whereby, after the regime change, President Mnangagwa publicly announced that the country was “open for business”, and that the indigenisation law could impact negatively on investment decisions.

A further factor was the legal and political groupings in Zimbabwe that are motivating for legislative and

policy change. There has been extensive policy

development, particularly in relation to Zimbabwe’s diamond mining subsector, as well as good policy development in relation to other minerals.

These groupings, which have been supported by international organisations, such as international financial institution World Bank Group, have been working on redrafting Zimbabwe’s laws pertaining to diamonds and minerals.

The motivation has been to facilitate investor-friendly policy and regulatory framework and regime in Zimbabwe, which also acknowledges that

its mining sector can contribute meaningfully to

growth and development.

Various presentations are being made to parliament in support of policy and regulatory change. It is hoped that this momentum will be maintained, and that the policy and regulatory framework achieves the balance between investor friendliness and truly benefiting the Zimbabwean people.

Impact on Commodities

The Act also has a direct effect on commodities; however, the amendment of the law does not apply to diamonds and platinum.

Zimbabwe’s primary commodities are platinum-group metals, coal, gold and diamonds. Government has recognised the investment in the platinum mining subsector. Existing platinum mines will lead to benefits in the Zimbabwe government and will benefit those who own part of the platinum

mines.

Additionally, as diamonds are typically regarded as good revenue generators, the Zimbabwe

government has decided to retain the indigenisation

requirements for diamonds and platinum.

It is unlikely that the indigenisation law will be lifted for diamonds and platinum in the near future, and in the case of other commodities, the indigenisation requirements will be addressed on a case-by-case

basis as licences are issued to investors.

This, however, has been criticised by some investors as being too uncertain, while other investors have welcomed the opportunity to engage

with government on indigenisation requirements.

Nevertheless, investors in the country’s platinum and diamond subsectors generally acknowledge the

indigenisation requirements and make their investment decisions taking this law into account.

If this law was not applicable to diamonds and platinum, investors would need to renegotiate their indigenisation requirements, which becomes a lengthy procedure and results in uncertainty,

affecting investment decision-making.

South Africa’s broad-based black economic-empowerment ownership in the mining sector can be a practical example for Zimbabwe’s indigenisation programmes.

South Africa’s experience could be a useful starting point, as Zimbabwe grapples with the need for

extensive investment in not only the mining sector but also the associated sectors, particularly

infrastructure such as roads, rail, ports, and power.

There is also an opportunity for the so-called ‘open source’ arrangements where, for example, a railway network is built for the mining sector to transport

its product to market, but the infrastructure can be developed in such a way that it also benefits the agriculture sector.


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Part 2

The optimism following the ousting of former Zimbabwean President Robert Mugabe was short-lived, with the realisation that it would not result in substantial change in the short term, or immediate

return of foreign investment to Zimbabwe. This also came with the realisation that the once-healthy economy of the country would not be immediately revitalised.

Former President Mugabe’s removal does not detract from the significant challenges and realities that the country still faces.

Key challenges include poorly maintained

infrastructure, which had not been maintained for decades, an unstable and unreliable power generation and transmission system, as well as currency fluctuations, particularly following the announcement that Zimbabwe would revert to the

Zimbabwean dollar for trading.

Additional challenges include concerns regarding the ability to import goods and services, and pay for them based on certain exchange rates, the repatriation of funds out of Zimbabwe when appropriate, a potentially unstable political environment and an uncertain regulatory system.

In 2018, a large number of investors, financial

institutions, service providers and conference organisers set their sights on investing in Zimbabwe. However, as the optimism and enthusiasm waned, so did the interest in Zimbabwe. Only the most resilient investors are seriously considering increasing existing investment or

making new investments.

Nevertheless, the vast natural resources of Zimbabwe retains investment focus. The mining and natural resources sector is viewed as a sector that can re-invigorate the economy, particularly given its vastness and potential contribution to significant

growth and development in the country. The mining sector in any mineral resource-rich country is the

engine room of the economy.

Investors and the Zimbabwean government, are

also mindful of the ancillary benefits of the mining

sector, including revenue and taxes, infrastructure development, an extensive network of services and goods suppliers and providers, as well as the multiplier effect, which is the general principle that for each person working at a mine, up to ten other

people are supported.

The mining sector landscape in Zimbabwe presents an interesting scenario, owing to the large- and small-scale mining operations and opportunities. The extraction of minerals, such as platinum-group metals, is ideally suited to large-scale mining, while other minerals, such as gold, can be more suited

small-scale mining.

Both large and small-scale mining will play an important role in Zimbabwe going forward and it will be necessary for all stakeholders to work together to ensure that large- and small-scale miners can work side by side. There is a critical role to be played by small scale miners in support of

growth, development and transformation, provided that small scale mining is regulated in such a way that it encourages small scale miners to mine lawfully, and makes it easy for them to do so. In other jurisdictions, where small scale mining is not regulated appropriately, small scale miners often

resort to illegal mining, with all of the consequences that flow from this, including environmental

impacts, social and socio-economic and related impacts, and losses to the fiscus.

It will therefore be necessary for Zimbabwe to radically change and upgrade its mining laws to achieve the success of both the small scale and

large scale miners. Historically, Zimbabwe has separated its diamond laws from its other mineral laws, and shortly after former President Mugabe’s removal from office, various stakeholders including legal groupings, started working towards changes in the minerals policy and the historical mining laws.

This process is ongoing, and it is hoped that there

will be radical overall change of the mining laws in

Zimbabwe to facilitate a thriving mining sector.


5

Private prosecutions following

mine fatalities – legal appointees

beware

Eben Van Zyl Senior Associate

Carrying a statutory legal appointment in terms of the provisions of the Mine Health and Safety

Act No. 29 of 1996 (“MHSA”) carries a certain level of prestige in the mining industry, however statutory legal appointees are not always aware of the potential consequences which could attach to them by virtue of their appointments, should a fatal accident occur within their area of

responsibility.

An inquiry must be conducted in terms of Section 65 of the MHSA into any accident or occurrence at a mine that results in the death of any person (“the Inquiry”). Such an Inquiry does not limit any other law regulating the holding of an inquest or other inquiry into the

death of a person.

The main purpose of the inquiry, from the perspective of the Department of Mineral Resources (“DMR”) is to establish how the accident occurred and how a similar accident can be prevented from occurring in the future.

Family members of the deceased are becoming

increasingly involved in the Inquiry process and have started appointing attorneys and advocates to represent them during the Inquiry proceedings, seemingly with the main objective, from the family of the deceased’s perspective, to “find fault” on the part of mine management and

supervisors (who carry legal appointments in terms of the MHSA).

Section 72 of the MHSA provides that the presiding officer of the inquiry, who is usually a senior inspector from the DMR, must prepare a written report of his/her findings, recommendations and remedial steps, following

the conclusion of the inquiry (“the Report”). In the Report, the presiding officer will indicate whether or not any person(s) failed to perform their duties and functions in accordance with the provisions of the MHSA and usually makes a recommendation on whether or not,

in the view of the presiding officer, certain persons and/or legal appointees should be

prosecuted in relation to the death of a mine employee.

The DMR subsequently submits the Report, together with the record of the Inquiry and the bundles of evidence, to the investigate officer at the South African Police Service (“SAPS”)

tasked with investigating the accident, as well as the office of the Director of Public Prosecutions (“DPP”) of the relevant region where the mine fatality occurred. It is important to note, however that Section 179(2) of the Constitution of the Republic of South Africa provides that the National Prosecuting Authority (“NPA”) has the

power to institute criminal proceedings on behalf of the state, and to carry out any necessary functions incidental to instituting criminal proceedings. It is therefore in the sole discretion of the National Prosecuting Authority to determine whether or not it will proceed to institute criminal proceedings against any person

and the recommendation made by the presiding

officer of the Inquiry that any member of mine management, supervisors or any other legal appointee or person should be prosecuted, only serves an advisory function, for consideration by the DPP. The view of the presiding officer of the

Inquiry, as a subject matter expert in mining matters, does however, ordinarily carry a lot of weight in the decision making process by the DPP to determine whether or not to institute a prosecution.

Should the DPP, after considering the facts of the matter, decline to prosecute any person in

relation to the accident, it does not mean that

mine management, supervisors, other legal appointees or any other persons involved in the fatal accident, are “off the hook” just yet.


6

The family members of the deceased employee

can elect to institute a private prosecution in accordance with the provisions of the Criminal Procedure Act No. 51 of 1977 (“the Criminal Procedure Act”). Section 7(1)(c) of the Criminal Procedure Act provides that in any case where the DPP declines to prosecute for an

alleged offence, the wife or child (or any of the next of kin where there is no wife or child) of any deceased person, may either in person or by a legal representative, institute and conduct a prosecution, if the death of their family member was alleged to have been caused by an offence.

Section 8 of the Criminal Procedure Act provides

that natural persons and public bodies may prosecute privately. Companies and other legal persons do not have this right, unless this right is expressly conferred by law. The accused, however, can be a company or other legal person.

In order to institute a private prosecution, the

private prosecutor must demonstrate that he/ she has a personal interest in the result of the prosecution and must put up security for the cost of the accused. The private prosecutor can appear personally or through a legal representative. The private prosecutor must

obtain a certificate “nolle prosequi” from the relevant DPP. The certificate nolle prosequi, is a certificate issued by the DPP of the region, to the effect that the DPP has considered the matter and declines to prosecute on behalf of the state.

The certificate nolle prosequi lapses after three

months if proceedings in respect of the alleged offence are not instituted.

Once the certificate has lapsed, the DPP ordinarily will not issue another certificate nolle prosequi, unless there are exceptional and compelling circumstances which can be raised by

the private prosecutor as to why proceedings were not instituted within the required three month period.

Once private prosecution proceedings have been instituted, the NPA still retains the right to intervene at any point during the proceedings

and take over the prosecution from the private

prosecutor.

Mine Management, supervisors and legal appointees should therefore ensure that they are fully conversant with all of the relevant provisions of the MHSA applicable to them in their areas of responsibility and that they exercise diligence and due care in their working

places, at all times. Should an employee pass away as a result of a mine accident which occurred within their area of responsibility, they could either by criminally or private prosecuted, depending of the facts of the matter.


7

Electronic waste - the toxic

legacy of our digital age

Pascale de Froberville

Associate

Introduction

Rapid innovation and decreasing production

costs have dramatically increased our access to electronic products and digital technology and, together with humankind’s unquenchable demand for electronic devices, the unintended consequence of this is the world’s fastest-growing waste stream: electronic and electrical

waste, or “e-waste”.

The widely accepted definition of e-waste is “anything that runs on electricity”. Electrical and

electronic equipment (“EEE”) is anything that contains circuitry or electrical components with either a battery or power supply. EEE covers a wide range of items, including toasters, smoke

alarms, monitors, telephones and mobile phones, electrical toothbrushes, coffeemakers, irons, electrical toys, ovens, TVs and computers, internet routers, printers, fridges, microwave ovens and washing machines. Some less obvious items include spent fluorescent tubes, light emitting diode (“LED”) bulbs, batteries and

battery-operated toys.

E-waste is problematic largely due to the toxicity

of some of the substances that make up the components of the device, which if handled and discarded improperly, can be harmful to human health and cause significant pollution and

environmental degradation. This toxicity, coupled with the complexity of the chemical composition of each item makes recycling difficult.

However, e-waste is valuable as a source of secondary raw material and presents an opportunity for economic benefit.

“If ocean plastic pollution was one of the

major environmental challenges we finally

woke up to in 2018, the ebb and flow of public

opinion could and should turn to electronic

waste in 2019. The numbers are astounding;

50 million tonnes of e-waste are produced

each year, and left unchecked this could more

than double to 120 million tonnes by 2050”.

The World Economic Forum

Considering the potentially disastrous effects of the improper handling and disposal of e-waste, and the possible benefits that may be obtained through the reuse, recovery and recycling of e-

waste, we must implement change toward the adoption of an e-waste economy.

Some statistics on e-waste

As stated above, e-waste is the most rapidly

growing global waste problem.

A study conducted by the United Nations found that in 2012, an estimated 56.56 million tonnes

of EEE were put on the global market. When reaching its end-of-life, this equipment becomes e-waste.

An internationally adopted measuring framework

developed by the Partnership on Measuring ICT (information and communication technology) for Development estimates the total amount of e-waste generated in 2014 was 41.8 million metric tonnes (Mt), which was forecast to increase to 50 million Mt in 2018.

Such a quantity is hard to imagine, yet this is

equivalent in weight to all the commercial aircraft we have ever built throughout history, or

4,500 Eiffel Towers, and that’s just one year’s worth of the e-waste we create.

While there are no exact figures available, in South Africa the Department of Environmental

Affairs believes that e-waste makes up 5% to 8% of municipal solid waste and is growing at a rate three times faster than any other form of waste. According to the e-Waste Association of South Africa, South Africa generates about 6.2 kilograms of e-waste per inhabitant annually and only 12% of that is recycled.

The circumstances are not aided by the fact that only 20% of global e-waste is formally recycled.

The remaining 80% is often incinerated or discarded in a landfill. Many thousands of tonnes are also transported to poor, developing countries to be dismantled by hand or burned by the world’s poorest informal workers. This crude

form of “urban mining” has consequences for human health and creates immense environmental pollution.


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E-waste is Hazardous Waste

The National Environmental Management: Waste Act No. 59 of 2008 (as amended) (“the Waste Act”) defines ‘‘hazardous waste’’ as “any waste

that contains organic or inorganic elements or compounds that may, owing to the inherent physical, chemical or toxicological characteristics of that waste, have a detrimental impact on health and the environment and includes hazardous substances, materials or objects

within business waste, […]”.

Considering the above definition, it is confirmed that the potentially toxic or harmful components of e-waste amount to hazardous waste and, as such, must be handled, stored, transported and disposed of in accordance with national legislation and published guidelines, which are to

be discussed below.

Some examples of these toxic or harmful components, amongst many others, include:

– Mercury - one of the most toxic yet widely used metals in the production of EEE. Mercury is a toxic heavy metal that bioaccumulates in the body, causing brain

and liver damage if ingested or inhaled. Mercury is used in batteries, thermostats and fluorescent lamps

– Lead - commonly used in the EEE industry in such components as solder, lead-acid batteries, electronic components, cable

sheathing and in the glass of cathode-ray tubes, for example. Short-term exposure to high levels of lead can cause vomiting, diarrhoea, convulsions, coma or even death. Continued excessive exposure, as in an industrial setting, can affect the kidneys

– Chlorofluorocarbons (“CFCs”) -

compounds composed of carbon, fluorine,

chlorine and sometimes hydrogen. Used mainly in cooling units and insulation foam, it has been phased out because when released into the atmosphere, it accumulates in the stratosphere and has a harmful effect on the ozone layer, which results in an increased

incidence of skin cancer in humans and in genetic damage to many other organisms

The harmful effects of the improper treatment and disposal of e-waste

While we may not consider a redundant piece of technology to be hazardous, it is the components that make up the item that are considered hazardous. If not properly disposed of, these

substances can have extremely harmful effects on both human health and the environment.

Human Health

E-waste contains several hundred different substances such as lead, mercury, arsenic, cadmium, selenium, hexavalent chromium and

flame retardants that create dioxin emissions when burned.

Overall, human health risks from e-waste include breathing difficulties, respiratory irritation, coughing, choking, pneumonitis, tremors, neuropsychiatric problems, convulsions, coma

and even death.

Informal waste collectors at landfill sites, e-waste workers and local residents may be exposed to these dangerous substances through inhalation, skin exposure and oral ingestion. Inhalation of contaminated dust imposes a range of potential occupational health hazards

including silicosis.

E-waste workers are also exposed to other hazards leading to physical injuries such as electrical shock, and chronic ailments such as asthma, skin diseases, eye irritations and stomach disease.

The Environment

The improper handling and disposal of e-waste can have significant, irreversible effects on the environment, such as the pollution and degradation of air and water quality and soil

contamination.

Air Quality

Informal waste collectors burn the e-waste in order to abstract the metals, such as copper. The contaminants produced by the burning of e-waste has significantly contributed to high levels of the air pollution.

Water Quality

When EEE containing heavy metals such as lead, barium, mercury, lithium (found in mobile phones and computer batteries) are improperly disposed of, these heavy metals leach out of the item and into the soil. This leachate often reaches groundwater channels and other water

courses, polluting several thousands of litres of water. These heavy metals make the water toxic and unusable for the communities, animals and plants that rely on them.

Soil Contamination

As described above, improperly disposed of toxic

heavy metals and chemicals from e-waste can enter the soil as leachate. These chemicals are not biodegradable; they can persist in the environment for long periods of time, increasing the risk of exposure to human and animals.


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E-waste has an adverse impact on the “Soil-

Crop-Food Pathway”. Essentially, when crops grow in soil that has been contaminated by heavy metals, the crops and the food they provide are also contaminated. This can cause illness for humans and animals and restricts viable farmland for clean food production.

The benefits of treating e-waste in terms of the 3 R’s (Reuse, Recover, Recycle)

The World Economic Forum states that the “economic arguments are strong. If we look at

the material value of our spent devices, globally this amounts to $62.5 billion, three times more than the annual output of the world’s silver mines […]. More than 120 countries have an

annual GDP lower than the value of our growing pile of global e-waste”.

Considering the numerous harmful impacts associated with the improper treatment and disposal of e-waste, it is essential that e-waste is directed away from disposal and toward its beneficial reuse, recovery and recycling.

Not only is it better for the environment, but the reuse, recovery and recycling of e-waste has

several economic benefits.

EEE that is still operational but unwanted can be repaired, or the components can be repurposed and reused. Extending the life of EEE and re-

using electrical components is economically beneficial as working devices are worth more than the materials they contain. A circular electronics system, or “e-cycling”, is a system in which resources are not extracted, used and wasted, but reused in multiple ways.

E-cycling creates jobs, retains more value in the

industry and the repaired electronics gives people access to low-cost technology.

E-waste is also extremely valuable as a rich source of secondary raw material. From every 1 million recycled mobile phones approximately 16,000 kilograms of copper, 350 kilograms of silver, 34 kilograms of gold and 15 kilograms of

palladium can be recovered.

These valuable components can be reintroduced back into the production of new EEE, rather than mining for new raw materials, causing significant environmental degradation and depleting scarce natural resources.

Additionally, by harvesting this valuable resource, substantially less carbon dioxide

emissions are generated when compared to mining for new raw minerals.

Moreover, by increasing the percentage of e-waste directed toward reuse, recovery and recycling more resources will be available to

increase investment in appropriate technologies for more innovative and cost-effective methods of recycling, employment opportunities can be

created, and it will contribute to the growth of

South Africa’s growing waste economy.

An added benefit of the proper disposal of e-waste is data destruction. The physical destruction of data holding hardware is one of the most secure methods of data destruction as it destroys the memory which means that it is

almost impossible to access.

The legal requirements for the disposal of e-waste

Considering both the possible harm and benefits associated with e-waste, it is clear that e-waste

should be handled, treated and disposed of in a responsible manner. The handling, treatment

and disposal of e-waste must also be legally compliant.

While there are several statutes that may apply to the handling, treatment and disposal of e-waste, for present purposes we refer specifically to the Waste Act.

Section 16 of the Waste Act creates a general duty of care in respect of waste management, providing that:

– A holder of waste must, within the holder’s power, take all reasonable measures to-

– avoid the generation of waste of waste and where such generation cannot be

avoided, to minimise the toxicity and amounts of waste that are generated

– reduce, reuse, recycle and recover waste

– where waste must be disposed of, ensure that the waste is treated and disposed of in an environmentally sound manner

– manage the waste in such a manner that

it does not endanger health or the environment or cause a nuisance through noise, odour or visual impacts

– prevent any employee or any person under his or her supervision from contravening this Act

– prevent the waste from being used for any unauthorised purpose. (emphasis added)

Section 16(2) provides that “[a]ny person who sells a product that may be used by the public and that is likely to result in the generation of hazardous waste must take reasonable steps to

inform the public of the impact of that waste on health and the environment”.

While section 16 creates a general duty of care in respect of waste management, the storage, reuse, recycling or recovery, treatment and disposal of e-waste must be conducted in terms of the “List of Waste Management Activities that

Have, or are Likely to Have, a Detrimental Effect on the Environment” (GN.921 of 29 November 2013) (as amended) (“the List”).


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Where the waste management activity meets the specific technical qualifications provided in the List, such as the process, volume, area and type of waste (general or hazardous), either a waste management licence is required or the person wishing to commence, undertake or conduct a

waste management activity must comply with the following relevant norms or standards:

– Norms and Standards for Storage of Waste, 2013

– National Norms and Standards for the Sorting, Shredding, Grinding, Crushing,

Screening or Baling of General Waste, 2017

In addition to the above listed norms or standards, any disposal of e-waste to landfill must be in terms of the “Waste Classification and Management Regulations, 2013” (GNR.634 of 23 August 2013), read with “National Norms and Standards for Disposal of Waste to Landfill”

(GNR.636 of 23 August 2013), the “National Norms and Standards for the Assessment of Waste for Landfill Disposal” (GNR.635 of 23 August 2013) and the “Minimum Requirements for the Handling, Classification and Disposal of Hazardous Waste” (Department of Water Affairs & Forestry, 1998. Waste Management Series).

Waste assessed in terms of the Waste Act, the Norms and Standards for Assessment of Waste for Landfill Disposal and the Minimum Requirements for the Handling, Classification and Disposal of Hazardous Waste must be disposed of in terms of the provisions of the National

Norms and Standards for Disposal of Waste to Landfill.

Currently, e-waste may only be disposed of to legally compliant landfills that are designed and authorised to accept hazardous waste.

Most significantly, the National Norms and Standards for Disposal of Waste to Landfill has,

in terms of section 5, prohibited specific types of wastes from being disposed to landfill.

“Hazardous Waste Electric and Electronic Equipment” (lamps) and “Lead Acid Batteries” have been prohibited from being disposed to landfill since August 2016 and “Hazardous Waste Electric and Electronic Equipment” (other) will be prohibited from being disposed to landfill from

August 2021.

Consequently, fluorescent lamps and lead acid batteries are prohibited from being disposed to landfill and as of August 2021 all other e-waste will be prohibited from landfill disposal.

Ethical responsibility - e-waste collectors make it easy for us

In light of the above, it is vital that we implement measures to ensure that our e-waste be redirected away from landfill disposal and toward the beneficial reuse, recovery and recycling thereof.

The e-Waste Association of South Africa

(“eWASA”) was established in 2008 to manage the establishment of a sustainable environmentally sound e-waste management system for the country. Together with eWASA, several e-waste collectors are making the

responsible treatment and disposal of our e-waste easier for us.

E-waste collectors offer services such as the collection of e-waste from homes and offices (often free of charge), data destruction and the responsible reuse, recovery or recycling of same. Some examples of e-waste collectors include DESCO Electronic Recyclers (www.desco.co.za), Interwaste (www.interwaste.co.za), and SIMS

Recycling Solutions (www.simsrecycling.com).

Considering the ease of access to responsible e-waste treatment and disposal facilities, it is important for us, as the creators of e-waste, to ensure that we avoid leaving a toxic legacy for

future generations.

Should you have any queries, please do not hesitate to contact us. Our Environmental department will be happy to assist with any questions or concerns you may have.


11

The impact of the competition

amendment act on the mining

sector

Tanya Pollak Partner

Yashika Rowjee Associate

On 12 July 2019, certain provisions of the Competition Amendment Act 18 of 2008

(“Amendment Act”) came into effect. This article deals with specific noteworthy amendments which impact the mining industry.

New definitions and industry specific criteria for micro, small and medium-sized businesses

One of the purposes of the Competition Act 89 of 1998 (“Competition Act”) is to ensure that small and medium-sized enterprises have an

equitable opportunity to participate in the economy. Excessive pricing by dominant firms has contributed to the difficulties which small and medium sized businesses encounter in operating their businesses. New thresholds have been set to assist in determining which entities qualify as micro, small and medium-sized

businesses which will be afforded protection under the Competition Act.

The definitions of small and medium-sized businesses have been amended to include industry sector and sub-sector criteria based on the number of paid employees and the total

annual turnover of those businesses.

In respect of the mining and quarrying sectors, the following criterial are applicable:

– Micro Businesses - a mining and quarrying business will be considered a micro business in terms of the Amendment Act if:

– the total number of full-time employees

equal ten or less

– the total annual turnover of such business is equal to or less than fifteen million Rand

– Small Businesses - a mining and quarrying business will be considered a small business

in terms of the Amendment Act if:

– the total number of full-time employees equal eleven to fifty

– the total annual turnover of such business is equal to or less than fifty million Rand

– Medium Businesses - a mining and quarrying business will be considered a medium business in terms of the Amendment Act if

– the total number of full-time employees equal fifty-one to two hundred and fifty

– the total annual turnover of such

business is equal to or less than two hundred and ten million Rand

Excessive Pricing

Section 8(1)(a) of the Competition Act prohibits

a dominant firm from charging an excessive price that is to the detriment of its consumers. In the 2009 case of Mittal Steel South Africa Limited and Others v Harmony Gold Mining Company Limited and Another, the Competition Appeal Court ruled that in order to determine what constitutes excessive pricing, the

interpretation of economic value and the reasonableness of the relation between price and economic value are required. The court held that an objective test is required in interpreting “economic value” and that if the relevant price is not greater than the economic value, there will be no contravention of section 8(1)(a).

Conversely, if the relevant price is greater than the determined economic value, then the test of reasonableness will become applicable.


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The Amendment Act provides for certain factors

to be considered when determining if a price is

higher than a competitive price and the reasonableness thereof. The Amendment Act provides that if there is a prima facie case of abuse of dominance as a result of the dominant firm charging excessive prices, the dominant firm has an opportunity to illustrate that the

price was reasonable. In addition, any person determining whether a price is excessive must firstly determine if the price in question is higher than a competitive price and whether the difference is unreasonable. The following factors must be taken into account when determining whether or not the difference in price is

unreasonable:

– the dominant firm’s price-cost margin, internal rate of return, return on capital invested or profit history;

– the dominant firm’s prices for the goods or services:

– in markets in which there are competing

products

– to customers in other geographic markets

– for similar products in other markets

– historically

– relevant comparator firm’s prices and level of profits for the goods or services in a

competitive market for those goods or services

– the length of time the prices have been charged at that level

– the structural characteristics of the relevant market, including the extent of the respondent’s market share, the degree of

contestability of the market, barriers to entry and past or current advantage that is not due to the respondent’s own commercial efficiency or investment, such as direct or

indirect state support for a firm or firms in the market

– any regulations made by the Minister

Ebrahim Patel, in terms of section 78 of the Competition Act regarding the calculation and determination of an excessive price

Additional Considerations for Mergers

The Amendments Act contemplates the following additional factors to be considered by the Competition Commission or Competition Tribunal in relation to mergers:

– the extent of ownership by a party to the merger in another firm or other firms in related markets

– the extent to which a party to the merger is related to another firm or other firms in related markets, including through common

members or directors

– any other mergers engaged in by a party to a merger for such period as may be

stipulated by the Competition Commission

Additional exemption and extension of exemption period

In terms of the Amendment Act, the circumstances in which the Competition Commission may grant an exemption in relation to prohibited practices governed by the

Competition Act has been extended to include

the competitiveness and efficiency gains that promote employment or industrial expansion.

Furthermore, the Amendment Act compels the Competition Commission to either grant or refuse an exemption within one year of receipt of an application.

The changes to the Competition Act are significant and will have far reaching results vis-à-vis the mining industry. Mining and quarrying businesses are therefore cautioned to seek legal advice in relation to any matter which may potentially fall within the ambit of the Competition Act when operating their

businesses. It should also be noted that further provisions of the Amendment Act which may impact the mining industry are envisaged to come into effect at a future date.


13

Was Greta right

about us?

Glynn Kent

Associate

On 23 September 2019, sixteen-year-old climate change activist, Greta Thunberg, gave an emotionally charged speech at the United Nations Climate Action Summit wherein she condemned

world leaders for failing to adequately address climate change. Whilst her speech received mixed reviews with many questioning the substantive facts underpinning her impassioned plea or her credentials to pronounce on the issue, it is worthwhile to reflect on South Africa’s position, in

light of recent legislative and policy developments, to understand whether her claims are entirely justified.

Integrated Resources Plan, 2019

On 18 October 2019, the Minister of Mineral Resources and Energy, Mr Gwede Mantashe,

approved the long awaited the Integrated Resource Plan (IRP) for 2019. In essence, the IRP is the blueprint of the country’s energy needs and the corresponding resource allocations necessary to meet those needs. The importance of the IRP from a climate change perspective relates to the makeup of country’s energy resources and the

direction the country has chosen to adopt.

Since the promulgation of the first IRP of 2010, a total of 18 000 MW of new generation capacity has been permitted comprising 9 534 MW of coal power, 1 332 MW of hydro power, 6 422 MW of renewable energy by independent power producers and 1 005 MW of open cycle gas and

diesel turbines.

At the press briefing for the release of the IRP, it was revealed that South Africa’s energy sector contributes close to 80% towards the country’s total Greenhouse Gas (GHG) emissions, of which 50% of those emissions arise from electricity

generation and liquid fuel production.

Perhaps the most disheartening outcome of the IRP was the acknowledgment of the crucial role that coal would continue to play for the foreseeable future.


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It was advised that coal would remain South Africa’s

dominant energy supply contributing 39% of the

energy volumes required to meet demand with calls for an increase in generating capacity by 1 500 MW with half coming on-line in 2023 and the second 750 MW in 2027.

In addition to increased coal generating capacity,

the IRP provides for additional capacity as follows:

– Hydro - 2,500MW

– Solar PV - 6,000MW

– Wind - 14,400MW

– Nuclear - 1,860MW

– Storage - 2,088MW

– Gas & Diesel - 3,000MW

– other distributed generation, co-generation, biomass and landfill technologies - 4,000MW

The continued reliance on coal power stations to meet Eskom’s baseload requirements will continue to obfuscate our commitments towards reducing our GHG emissions, particularly considering Eskom’s flagrant disregard and unwillingness to comply with

the prescribed Minimum Emission Standards (MES) under the National Environmental Management: Air Quality Act 39 of 2004.

In addressing potential (read imminent) non-

compliance with the MES, the Minister has proposed that a balance be struck between energy security,

the adverse health impact of poor air quality and the economic costs associated with plants shutting down. With the IRP being based upon a “least-cost electricity supply and demand balance”, it is foreseeable that coal fired power stations will continue to be the chief contributor towards our GHG emissions with no meaningful reduction

anticipated anytime soon.

Carbon Tax Act, 15 of 2019

On 1 June 2019, the Carbon Tax Act 15 of 2019

(“the Act”) came into operation. The Act is designed

to provide for the imposition of a tax per tonne of carbon dioxide (CO2) equivalent emitted.

The primary objective of the Act is to reduce GHG emissions in a sustainable, cost effective and affordable manner.

The Act will initially only apply to the scope 1 emitters in the first phase with the first phase being

from 1 June 2019 to 31 December 2022 and the second phase being from 1 January 2023 to 31 December 2030.

The Act contains a basic tax-free threshold of approximately 60% of the emissions and further

allowances for specific sectors. As a result, the Act carries the potential for tax exemptions up to 95%

of all emissions during the first phase. The Department of National Treasury has advised that this will equate to a carbon tax rate arranging from between R6 – R48 per tonne of CO2 equivalent emitted.

Whilst the Act is a significant milestone in South

Africa’s attempts at reducing its GHG emissions, the

Carbon Offset regulations under the Act have yet to be promulgated. These regulations are an intrinsic part of the Act as they make allowances for companies to reduce their tax liability through investment in approved carbon offset projects.

The perceived benefit of the proposed Carbon Offset regulations is the belief that they will promote the reduction of GHG emissions in sectors not directly covered by the Act.

From a theoretical standpoint, the Act is certainly a positive step towards meeting our international obligations towards addressing the issues of climate change. However, the implementation of the Act

and its effectiveness in reducing GHG emissions

remains to be seen.

National Environmental Management: Air Quality Act, 39 of 2004 – National Greenhouse Gas Emissions Regulations

On 3 April 2017, the Minister of Environmental Affairs published the National Greenhouse Gas Emission Report and Regulations (“GHG Regulations”) which requires companies to report on their emissions which exceed a predetermined

threshold.

The GHG regulations are aimed at providing a single national reporting system which will not only aid South Africa in achieving its international climate change obligations, but also provide for determination of taxpayer liability under the Act.

A failure to register, report or keep records in terms of the GHG regulations constitutes an offence amounting to a fine of up to R5 million or 5 years imprisonment for first time offenders and R10 million or 10 years imprisonment for second and

subsequent offenders.

A proposed amendment to the existing regulations

was published on 6 September 2019 and is currently open for public comment.

Concluding Remarks

Whilst not exhaustive of the recent policy and legislative steps taken by South Africa in addressing the issues of climate change, the above represents the legislative and policy which will determine

whether we are able to meet our international obligations.

The energy sector’s continued reliance on traditional coal power stations remains the country’s biggest

stumbling block in reducing its GHG emissions.

Unfortunately, the IRP suggests that this issue will persist for the foreseeable future. Furthermore, effectiveness and speed at which the legislative and regulatory interventions can serve to reduce GHG emissions is uncertain at this stage.

So, as far as South Africa is concerned, one might suggest that Greta Thunberg is probably vindicated by her views.


15

If a tree falls in the forest…

Warren Beech Partner

Glynn Kent Associate

The question, “If a tree falls in the forest and no

one is around to hear it, does it make a sound?”, raises interesting questions regarding observation and perception. Regardless of who postulated this thought experiment first, or when it was first postulated, it remains valid today,

particularly in a society that is obsessed with capturing and projecting images, often aimed at creating or influencing specific perceptions.

It is just as important in a world where civil society has become more aware of the devastating impact that modern industrial activities have on the environment. Perceptions

matter, but the key question is whether responsibility for historical, current and future

pollution and degradation of the environment is something which can only be determined based on perceptions of strong supporters of environmental rights only, or whether civil

society has developed to such a point that there is consensus on the general principle that polluters must pay, and if so, whether there are certain levels of pollution which are tolerable and acceptable, because such pollution facilitates growth and development, that benefits the majority of the citizens of a country.

In this article, we explore views around the “polluter pays” principle and whether certain

pollution is tolerable (and therefore acceptable) where the activities that have caused, are causing and may cause pollution and degradation, provide benefits to the citizens of South Africa, such as increased revenue to the

fiscus, jobs, infrastructure development, social upliftment, and more inclusive procurement.

On 25 January 2019, Brazil suffered one of the worst tailings dam failures in recent history, with the collapse of Vale’s Brumadinho Iron Ore Tailings Dam, bringing back memories of South

Africa’s own tailings dam disaster, at Merriespruit, in the town of Virginia, on 22 February 1994, which resulted in the death of 17

persons, and extensive damage to property and the environment.

Tailings dams, simply put, are structures

designed for the storage of mining waste. During the mining process, minerals are extracted, and processed, typically using water, to allow for the minerals to be separated and processed. The remaining waste, containing water, is pumped

and stored in tailings dam facilities, which need to be properly designed, constructed, managed and maintained. Usually, a tailings dam failure, is related to shortcomings around design, construction, management and maintenance, or a combination of these.

The response from civil society, government, and

the regulators following the disasters referred to above, was swift, decisive and substantial,

including both prosecutions and the payment of fines. This was understandable, given the magnitude of the disasters, and the very public way in which the disasters were brought to the

attention of the world.

The collapse of the tailings dam walls at Brumadinho saw the reported release of approximately 11.7 million cubic tonnes of tailings. The effects were nothing short of devastating, with a reported 248 people losing their lives and another 22 persons, missing.

Aside from the loss of human life, damage to property, and the death of livestock,

environmental devastation to the region has been catastrophic, with reports suggesting that the volume of waste released has the potential to pollute over 300km of river systems, as well as to contaminate both the soil and ground

water.

With all the attention on the devastating event at Brumadinho, the question understandably turned to who would be responsible for remediation of the environment, and for how long.

Globally, the Polluter Pays Principle (“PPP”) has

emerged as a cornerstone of Environmental Law.


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The PPP features under Principle 16 of the Rio

Declaration on Environment and Development 1992, and provides as follows:

“National authorities should endeavour to

promote the internalization of environmental

costs and the use of economic instruments,

taking into account the approach that the

polluter should, in principle, bear the cost of

pollution, with due regard to the public

interest and without distorting international

trade and investment.”

Applying this principle, Vale has already reported expenses related to the collapse, amounting to

approximately USD 4.5 billion by the first quarter of 2019, alone.

As the reported world’s largest producer of iron ore, these ongoing rehabilitation costs could be absorbed by Vale, albeit with a significant dent to the company’s reputation and share price. Unfortunately not all producers of environmental

pollution have the financial resources available, to properly rehabilitate pollution until such time as their obligations have been fulfilled.

In addition, the costs to rehabilitate pollution are often difficult to quantify as the impacts of pollution can often only be determined years

after the event that caused the pollution. It is

also often difficult to identify the persons (and corporate entities) that are responsible for the pollution, and, in instances where multiple persons have contributed towards the pollution, to accurately apportion liability for the rehabilitation costs among them.

In South Africa, the starting point is Section 24 of the Constitution which provides:

“Everyone has the right- (a) to an

environment that is not harmful to their health

or well-being; and (b) to have the

environment protected, for the benefit of

present and future generations, through

reasonable legislative and other measures

that- (i) prevent pollution and ecological

degradation; (ii) promote conservation; and

(iii) secure ecologically sustainable

development and use of natural resources

while promoting justifiable economic and

social development.”

In support of Section 24 of the Constitution, PPP

is provided for in Section 2(4)(p) of the National Environmental Management Act, No. 107 of 1998 (“NEMA”), which provides that:

“The costs of remedying pollution,

environmental degradation and consequent

adverse health effects and of preventing,

controlling or minimising further pollution,

environmental damage or adverse health

effects must be paid for by those responsible

for harming the environment.”

In addition, Section 28(1) of NEMA provides

that:

“Every person who causes, has caused or may

cause significant pollution or degradation of

the environment must take reasonable

measures to prevent such pollution or

degradation from occurring, continuing or

recurring, or, in so far as such harm to the

environment is authorised by law or cannot

reasonably be avoided or stopped, to minimise

and rectify such pollution or degradation of

the environment.”

An important provision that was subsequently

inserted, is Section 28(1A) of NEMA, which provides that:

“Subsection (1) also applies to a significant

pollution or degradation that— (a) occurred

before the commencement of this Act; (b)

arises or is likely to arise at a different time

from the actual activity that caused the

contamination; or (c) arises through an act or

activity of a person that results in a change to

pre-existing contamination.”

Section 24 of the Constitution, read with Section 2(4)(p), Section 28(1) and 28 (1A) of NEMA not only introduce PPP, but provide that PPP will

apply in respect of persons that have caused, are causing, or will cause pollution and degradation, even where the event occurred before the

coming into force and effect of NEMA, and potentially provides for ongoing liability and responsibility, long after the event.

The application of PPP in South Africa has played out in the mining sector.

In the widely publicised case of Harmony Gold Mining Company Ltd v Regional Director: Free

State Department of Water Affairs and Others (971/12) [2013] ZASCA 206; [2014] 1 All SA 553 (SCA); 2014 (3) SA 149 (SCA) (4 December

2013), the Supreme Court of Appeal held that the obligations imposed by a directive issued by the Minister of Water and Sanitation, in terms of

Section 19(3) of the National Water Act, No. 36 of 1998 (“NWA”) to prevent and/or remedy pollution remained in place until such time as the obligations had been fulfilled.

In this matter, five mining companies were issued with a Section 19(3) NWA directive to undertake anti-pollution measures in respect of

both ground and surface water contamination apparently caused by historical gold mining activities. The preventative measures were required to continue until such time as an

agreement and a joint proposal towards the long term sustainable management of water arising from mining activities could be reached and

subsequently approved by the Department of Water and Sanitation.


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Notably, the judgement confirms that obligations

imposed on polluters would remain in place, irrespective of whether or not a polluter had

alienated the land on which the pollution had occurred.

More recently, questions have arisen regarding the application of PPP within the context of the obligations placed on mining companies to continue undertaking preventive and/or rehabilitative measures after the closure of the

mines. This question is particularly relevant within the South African context, in addressing the issue of acid mine drainage (“AMD”). The impacts of AMD may only become apparent after

the closure of a mine. Pumping of contaminated water, and, sometimes, treatment of water, particularly AMD, and the principle “last mine

standing” raises interesting questions, some of which have been addressed in the Financial Provisioning Regulations Pertaining to the Financial Provisions for Prospecting, Exploration, Mining and Production Operations: National Environmental Management Act, No. 107 of

1998 (“the 2015 Financial Provision Regulations”), and the Proposed Regulations Pertaining to Financial Provisioning for the Rehabilitation and Remediation of Environmental Damage caused by Reconnaissance, Prospecting,

Exploration, Mining or Production Operations (“the Proposed Financial Provision

Regulations 2019”). It is clear from both the 2015 Financial Provision Regulations and the Proposed Financial Provision Regulations 2019, that the intent of Government is to ensure ongoing responsibility and liability for water, long after mines have closed. This has required careful consideration of the methods of financing

these ongoing responsibilities, particularly in circumstances where the mines have closed, and the income-generating capacity of that mine has ceased. PPP is heavily reliant on the polluter remaining in business, in some form or another, and having enough resources, or having made

sufficient resources available, to attend to the rehabilitation and remediation, where necessary, after the mine has closed.

Successful compliance with PPP is therefore dependent on financing arrangements during the life of mine, so that appropriate rehabilitation can be implemented, post closure. The extensive

challenges faced by the mining sector, which have resulted in many mines being placed on care and maintenance, and even closing, continue to place significant strain on funding available for rehabilitation, and the ability to contribute to financial provisioning for

remediation and management, particularly in

relation to water, post closure.

Unless appropriate financial provisions are made,

or an alternative funding method is devised, Government, and ultimately the tax payers, may

bear the burden of rehabilitation and water management, in future, regardless of the provisions of Section 28(1) and 28 (1A) of NEMA.

Given the significant contribution that the mining sector makes to the economy, directly, and indirectly through its support of infrastructure

development, growth and development, transformation, and the “multiplier effect” i.e. the principle that, for every mine worker, at least ten other persons are benefitted, the question

must turn to whether it is necessary, in certain circumstances, for the State to carry the burden.

There will be a number of vocal stakeholders,

particularly environmental activists, who will vehemently oppose any assumption of liability, by the State, despite these significant benefits, that have been derived, from mining.

In principle, PPP makes sense, but it is clear that PPP, as laudable as the principle may be,

requires careful consideration and a pragmatic approach, particularly where, like the mining industry, significant benefits have been derived from the mining operations, and these benefits

are likely to continue, in future. Ongoing discussions amongst stakeholders will be necessary to consider whether it is appropriate

for certain pollution to be tolerated, in the interests of civil society as a whole, taking into account the general principles of sustainable development.


18

When tragedy strikes, follow due

process


Mining operations around the country strive to send home employees safely at the end of each shift, by implementing various stringent health and safety measures in their working places.

Despite these measures and various safety drives to put health and safety of employees above all else, fatal accidents unfortunately continue to occur.

While no employer would like to contemplate the

death of any employee on duty at any of its operations, employers must ensure that they follow due process, in the event of a fatal accident occurring.

On 10 May 2019, the Chief Inspector of Mines published, in terms of the Mine Health and Safety Act No 29 of 1996 (the “MHSA”), a Guidance Note on Medico-Legal Investigations of Mine Deaths. The guidance note originated from the need to provide clarity on the process that must be followed for deaths that require a

medico-legal autopsy and to give guidance to all stakeholders regarding their roles and responsibilities in cases of natural, unnatural or uncertain mine deaths.

When a death occurs on the mine premises, the roles and responsibilities of the employer are detailed in Section 9 of the guidance note. While

most of the required steps to be followed ordinarily form part of the emergency preparedness and response procedures followed by employers when a serious or fatal accident

occurs at the mine, there are a few important additional requirements imposed on the employer in terms of the guidance note, which employers should take note of.

Clause 9.1(e) of the guidance note requires that the employer “should bring the death to the attention of the Occupational Medical Practitioner (“OMP”) or any medical practitioner, as soon as possible, who must certify the death.”

Clause 9.4.1 of the Guidance Note stipulates

that: “In the event of a death, the employer is required to get an OMP/medical practitioner to certify the death. The OMP/medical practitioner should take into account the circumstances surrounding the death, as provided by the employer, as well as the occupational and

medical history of the deceased in determining whether the death is due to natural, unnatural or uncertain causes.

Should the OMP/ medical practitioner decide that death is due to unnatural causes, the OMP/medical practitioner must notify the SAPS who will open a docket and notify the Forensic

Pathology Services.”

Our interpretation of the requirement, is that an ALSP or an ILSP who attends to an employee following an accident, can declare an employee deceased. The additional requirement is, however, that the mine’s OMP or any medical practitioner must subsequently certify the death

as soon as possible after the employer had brought it to his/ her attention. In order for a

death to be “certified”, the OMP or any medical practitioner must examine the body and indicate if the likely cause of death was due to natural or unnatural causes. It therefore does not appear to be an absolute requirement that it must be the

mine’s OMP who must certify the death of the employee after an ALSP or ILSP had declared an employee deceased. It can be any medical practitioner who is registered as such in terms of the Health Professions Act No. 56 of 1974.

This will assist in the employer in the event that

the mine’s Occupational Practitioner is not available to attend to the certification of the death and any other medical practitioner can be

dispatched to attend to the certification of the death. The OMP must, however, assist the medical practitioner who completes the death certificate with relevant information, for example

medical surveillance data, the condition and the environment where the body was found etc., where required.

In accordance with the guidance note, the mine’s OMP is also now required to participate in the investigation conducted in terms of Section 11(5) of the MHSA.

There are various other requirements which are set out in the guidance note, which employers

are required to take note of. Employers should consider implementing the provisions of the guidance note in their emergency preparedness and response procedures, to ensure that

relevant employees who are involved in the process following any accident or occurrence at a mine that results in the death of a person, are aware of the provisions of the guidance note.


19

Individual employees cannot rely

on section 187(1)(C) of the LRA to claim that their dismissals are

automatically unfair

Nadia Froneman Senior Associate

Jacobson v Vitalab (LC) (Unreported case No is 1042/19, 28-5-219) (Van Niekerk J)

Van Niekerk J recently held that s 187(1)(c) of the Labour Relations Act 66 of 1995 (LRA), which

provides that a dismissal is automatically unfair if the reason is ‘a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer’, cannot be relied on by individual employees.

Facts

Jacobson (the applicant) was a founding director

and shareholder of Vitalab (the respondent), as well as an employee thereof. He was also, a director and shareholder of a property-owning

company, Strawberry Bush, the owner of the premises in which Vitalab is situated.

During 2016, the directors and shareholders of Vitalab implemented a retirement age of 70

years. Jacobson sought to continue working until the age of 75 - subject to his good health. To effect this wish, the parties agreed to conclude various fixed term contracts of employment, the first of which, would be terminated on 30 June 2018. During 2017, Jacobson resigned as a

director of Vitalab and Strawberry Bush but remained a shareholder. A dispute arose regarding the value of Jacobson’s shares in

Strawberry Bush.

In May 2018 Vitalab offered Jacobson another agreement, which suggested a settlement of the dispute regarding his shareholdings in Vitalab

and Strawberry Bush. Jacobson did not accept the offer and, instead, continued working at Vitalab on the same terms.

On 9 July 2018 Vitalab sent a second proposed

agreement to Jacobson in terms of which:

– he would agree to retire from active practice and resign as an employee of Vitalab

– he would sell his shares in Vitalab for a

stipulated price

– Vitalab would reemploy him until 31 May 2019 at a stipulated nett salary

Jacobson refused the offer.

On 26 July 2018, Jacobson was advised that unless he signed the agreement by 30 July 2018, his services would be terminated. Jacobson did not accept the offer and Vitalab terminated his services on 1 August 2018, with effect from 31

August 2018.

Jacobson argued that his dismissal was automatically unfair in that the main cause of his

dismissal was his refusal to accept a demand in respect of a matter of mutual interest between himself and Vitalab.


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Court findings

The court had to determine whether s 187(1)(c) of the LRA finds any application in a dismissal dispute concerning an individual employee. The court found that it did not because of the following:

– Before 2014, the section provided that it was automatically unfair to dismiss an employee if the reason for the dismissal was to compel the employee to accept a demand in respect of a matter of

mutual interest between employer and employee

– In 2014 the section was amended to provide that a dismissal is automatically unfair if the reason is ‘a refusal by employees to accept a demand in respect of any matter of mutual interest between them and their employer’ (my italics)

– The purpose of the amendment - according to the Explanatory Memorandum that accompanied the Amendment Bill - was to ‘protect the integrity of the process of collective bargaining under the LRA’. That process, by definition, contemplates combined action and participation by more than

one employee

– The new section’s wording refers to more than one employee. This demonstrates that the prohibition only applies when employers seek to force employees (plural) to extract a concession by employees to demands made in the collective context

As such, the s 187(1)(cc) only applies where:

– an employer makes a demand

– more than one employee is involved

– the employees refuse to accept the demand made

– as a result, they are dismissed

In the circumstances, the court held that the dispute before it did not fall within the realm

of s 187(1)(c) of the LRA.

This judgment is important given that a

number of individual employees legitimately relied on the pre-amendment version of the section. This is no longer possible since the advent of the new section and this recent judgment.


21

Harmonising corporate governance framework for

South African mining companies:

King IV, Companies Act and the

Mining Charter

Namhla Mzuku Candidate Attorney

Introduction

The BEE Commission’s report 2018, between

2017 and 2018, had no significant change in the

levels of transformation, with black ownership reflecting a decline to 25.2% from 27% and current management control still sitting at 38% for black people. Accordingly, it is worthwhile analysing the South African corporate governance principles and the impact of the King IV codes have on mining companies, if these

recommendations were to be effectively applied.

Mining companies operate in a complex environment which requires the company’s board to make difficult decisions to ensure short-term operations are aligned with long-term objectives.

This balancing exercise, may require the boards of mining companies to view the establishment of

corporate governance framework as a means-to-an-end, with the end being to assist the board in determining a strategy that will steer the company towards a direction of achieving it business purpose and as a means, the King IV principle, being viewed less as a matter of

regulation and more as an enabling framework for a company to enable the company to operate more efficiently. In the mining industry, the legislative framework informs corporate governance and the level of board diversity within these corporate governance structures. From a mining company’s perspective, the

Companies Act 71 of 2008, as amended (“the Companies Act”) read together with the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (“the Mining Charter”) illustrates how the voluntary application of King IV corporate governance principles trigger statutory obligations and

consequences.

To capture the nuances of the King IV corporate governance principles within South African companies and the mining legislative framework, this article adopts the definition provided by Du

Plessis, which corporate governance is:

“the process of controlling management and of

balancing the interests of all internal

stakeholders and other parties, who can be

affected the corporation’s conduct in order to

ensure responsible behaviour by corporations

and to achieve the maximum level of efficiency

and profitability of a corporation”.

The objective of this article is to argue that the harmonisation of the King IV corporate governance principles with the Companies Act and the Mining Charter legislative imperatives

could offer a unique contribution towards establishing, for the boards of the mining companies, a practical generic framework that will reduce potential liabilities for non-compliance with legislative requirements and ensure that decisions are implemented efficiently and effectively.

Inter-relationship between King IV Corporate Governance, Company Law and Mining Legislation

In addition to the corporate social responsibility

requirements in the Companies Act, the Mining Charter is an illustration of the increasing requirement for mining companies to invest in broader service activities which could have an effect on the board’s ability to balance their responsibility to the shareholders, to the

company itself and their responsibility to the community within which it operates.


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To this end, the King IV corporate governance

principles, with respect to stakeholders and boards process seeks, to ensure that the power is exercised in a balanced manner, the legal and regulatory obligations are complied with, and identified risk is managed. Also, this regulation process establishes mechanisms to hold the

company accountable to its stakeholders and the society in which it operates.

The mining industry in South Africa is one of the most highly regulated and complex industries which require compliance to a number of laws and regulations, inter alia, and the most

significant of which is the Constitution, the Mining Charter and the Companies Act. The

Constitution because governance and exercise of corporate power may not be inconsistent with the Bill of Rights, the Mining Charter, because it is a statutory enactment for “effecting broad-based and meaningful transformation of the mining and

minerals industry” and the Companies Act, as it empowers the board’s continuous independent oversight of material matters. Therefore, the value in harmonising corporate governance with legislation is that it can, if applied effectively, assist the board of a mining company to demonstrate the discharge of their fiduciary

duties of skill, care and diligence.

Challenges for Effective Corporate Governance Implementation

Whilst the success of a diverse corporate governance structure has been well-documented and the King IV requirements emphasise the critical role that stakeholders play in the governance process, what remains as a barrier

within the mining industry is the imbalance in the demographics of competitive board members within mining companies and therefore all aspects of board diversification must be

evaluated. The important question remains whether King IV corporate governance principles address the legislative transformation agenda or

whether the recommendation of a certain level of diversity in governance structures should be interpreted as indirectly addressing the transformation agenda.

The Companies Act and the Mining Charter in South Africa are legislative instruments used for

the management of the relationship between the stakeholders and the company. In terms of this legislative framework, sustainability of a company does not only mean financial profitability, but its contribution to the greater

society through non-financial initiatives such as transformation.

It is for this reason that the Mining Charter

requires a board composition reflective of the racial and gender demographics of South Africa and the ethos that the achievement of transformation in mining companies is attached to offices and positions being open to everyone under conditions of fair equality of opportunity in

the mining industry. However, the BEE Commission notes that the inadequate disclosure of demographics of the boards on the integrated or annual reports of most entities poses a challenge on the analysis of transformation at management level, therefore transparency is a

prerequisite for King IV principles to be effective.

Having regard to the above, there are many who

argue that the King IV, as a voluntary code of corporate governance, it is not a sufficiently strong intervention that will adequately address the imbalance in the demographics of competitive board members or address the

legislative transformation agenda, especially because it provides for flexibility around implementation.

It is argued, further, that King IV is principle-based and even with the “apply and explain” recommendation, companies can still potentially avoid applying these principles, only having to

explain the non-compliance without specific

consequences. Be that as it may, it would be a mistake to conclude that voluntary codes of governance carry no sanction when contravened, because notwithstanding the enacted legislative consequences, there are social and market

related sanctions. The Companies Act is aligned to the King codes, even though the Companies Act is not explicit on the exact roles of those charged with governance. It does, however, provide guidance as to how board members are conduct themselves when in the role of a director in the form of Section 76 of the Companies Act.

Conclusion

Corporate governance and issues of transformation within boards remains an importance topic and this is why the mining regulations are continuously being amended to

ensure compliance. A diversified governance structure in South Africa goes beyond the principles of corporate governance (as they impact a number of other key matters and legislative imperatives such as the broad-based economic empowerment scorecard used by the

BEE Commission), the Companies Act and the Mining Charter are an illustration of South African politics intrusion in corporate boardrooms, more particularly, in determining corporate ownership

and management structures.


23

Mining in Tanzania


Tanzania, like several African and other

jurisdictions, is facing significant demands from its citizens to benefit more from Tanzania’s vast mineral resources, particularly gold and diamonds, with other minerals such as gemstones, nickel, copper, uranium, kaolin,

titanium, platinum also present in Tanzania.

Nationalism takes various forms, from subtle measures such as increased royalties and taxes, all the way through, to nationalisation.

Tanzania has implemented various measures along the spectrum of resource nationalism, which has impacted dramatically on investment

in Tanzania, including in relation to prospecting,

which is the life blood of a long term, sustainable Mining and Natural Resources Sector.

Tanzania has also had a unique mining history, with many of the historical mining operations being conducted illegally, and through small

scale and artisanal miners. The relaxation of the Mining Laws in the early 1980s and 1990s, which allowed for private ownership of mining claims and foreign investment, started changing this landscape but it is extremely difficult to reconcile small scale and artisanal mining with large scale, formalised mining, and unless the small scale

and artisanal mining is regularised in such a way that it is easy for the small scale and artisanal

miners to obtain licences and to mine lawfully, illegal mining may continue, with all the adverse consequences that flow from this including loss of revenue to the Tanzanian government, unsafe mining operations, detriment to the

environment, and adverse impacts on social and socio-economic structures.

The new mining legislation introduced in Tanzania, from 2017 which was ostensibly aimed at increasing revenue to the Tanzanian government, caused investors to be concerned.

The highly publicised fight between the Tanzanian government and Acacia, which has been recently resolved through Barrick acquiring

the remaining shares, sent all the wrong messages to investors and created concerns regarding stability arrangements, security of tenure, and security over substantial investment

that have been made.

Without debating the merits of the fight between

Acacia and the Tanzanian government, the events surrounding the stoppages of Acacia’s mines, and its gold exports, understandably made current operators and potential investors a little cautious The amended Mining Laws which

were imposed in 2017 included higher taxation on mineral exports and a more substantial government stake in various mining operations.

While laws that are implemented to support and encourage flow of benefits from the Natural Resources Sector, to the citizens of Tanzania, the manner in which these laws have been

introduced and implemented in Tanzania has impacted on investment, and are certainly aimed

at furthering the interests of resource nationalism.

Having said that however, Tanzania holds vast mineral resources, and remains a potential

investment destination for major minerals such as gold and diamonds, and other minerals that are becoming more important such as copper, nickel, platinum, and rare earth elements, which are required to support the growing “green economy” and the move towards a circular economy.

With the settlement between Acacia (through the intervention of Barrick) and the Tanzanian

government, the “roadblock” has now been removed, and will open up further investment into the Tanzanian Mining and Natural Resources Sector, which can then contribute significantly to growth, development and transformation of the

Tanzanian Mining and Natural Resources Sector.

The primary challenges in relation to the Tanzanian Mining and Natural Resources Sector include regular changes to minerals policy and legislation, the implementation of measures aimed at appeasing demands for resource

nationalism, inadequate infrastructure (rail, electricity, water, etc.), and aligning Tanzania’s historical small scale and artisanal Mining Sector

with the more formalised Mining Sector, predominantly owned and operated by multi-national corporates (with Tanzanian government free-carried interest).


24

The changes introduced by President John

Magufuli created various concerns amongst

investors and operators of mines. The new Mining Laws require the Tanzanian government to own at least a 16% stake in mining projects, and has raised royalty taxes on gold, copper, silver and platinum. Of most concern however, is that the changes allow the Tanzanian

government to declare existing Mining Development Agreements with existing operators null and void, and empowers the Tanzanian government to re-negotiate the terms and conditions.

The dictatorial and autocratic approach adopted

by President John Magufuli, has also been of

concern, because it impacts on stability, the Rule of Law, and expectations that there should be some certainty in relation to the political structures in place, and how politics plays out in Tanzania.

The banning of the export of unprocessed ores, by the Tanzanian government, ostensibly in

order to encourage the construction of domestically based beneficiation plants seems to make sense, on the face of it. However, any mining company that faces such a ban, will have its share price impacted, and make its investors nervous. Where major companies process their

ore in Tanzania, like AngloGold Ashanti, the recent changes are unlikely to be as concerning.

The settlement by Barrick with the Tanzanian government saw Barrick acquiring the shares that it did not hold in Acacia, but at the same time, the Tanzanian government acquired shares and 50% of the beneficial economic interest in

Acacia. This is likely to be regarded by the Tanzanian government as a success story and other mining companies will probably be wary about how this could impact on them, and the precedent it may have set.

The changes to the Mining Laws which require

mandatory listing of mining companies on the

Dar es Salaam Stock Exchange may also present challenges – the listing would be aimed at unlocking investment. If the Dar es Salaam Stock Exchange is unable, for any reason, to facilitate capital raising, this could impact on prospecting and other projects, and the

development of mines in Tanzania.

Investors interested in Tanzania are, understandably, cautious but investments are still being made, because of the vast natural resources that are available for extraction and beneficiation in Tanzania. It is hoped that the Tanzanian government moves towards stability

on the application and interpretation of its Mining Laws so that investors have relatively certain basis on which to make their investment decisions.

The primary trend sweeping Tanzania, as is the

case with many African jurisdictions, is resource

nationalism and most, if not all of the measures that have been implemented by President John Magufuli in the changes to the Mining Laws, are aimed at securing substantial benefits for Tanzanian citizens through mechanism such as banning of exports of unprocessed ores,

increasing royalties, increasing shareholding in foreign companies, and increasing the beneficial interest in mining companies.

Meeting the demands for resource nationalism often creates an unstable investment environment, which can only be mitigated by a

very deliberate attempt to create stability

through clear policies and Mineral Laws. For example, if the government shareholding in mining companies is set at 16%, provided that this percentage remains stable for a specified period, appropriate investment decisions can be made.

The momentum across Africa in support of

resource nationalism has been driven, primarily, by the view that Africa can stand on its own feet, and that Africa is therefore “open for business”. At the same time however, expectations are created, and, understandably, the Tanzanian citizens, as is the case with other African

countries, expect to benefit substantially from the vast natural resources in Tanzania. If these expectations are not met, this unfortunately creates a vicious cycle of unmet expectations, greater demand for participation, and community activism in support of these demands.

The primary drivers behind resource nationalism

are social and socio-economic conditions, and the perception that vast mineral wealth equates to vast financial wealth which should be made available to all.

The calls for greater resource nationalism across the African content, are likely to increase in the

latter part of 2019 and early into 2020.

Africa has one of the largest untapped work forces in the world.

Tanzania, like many African countries has a sector of the population (18 to 25) which crave education, because this is often seen as the key to accessing formal jobs.

The Mining Sector is complex, and because it is so multi-disciplinary, the Mining Sector provides an ideal training ground for education across key skills such as engineering, environmental, safety, and beneficiation.

There is high demand for education and skills development both from the eligible population

and the mines, as they develop their operations.

The Mining Sector is the “engine room” of growth, development and transformation, and can play a significant role in upskilling persons and providing both formal and informal education opportunities.


25

Zimbabwe’s Indigenisation Laws are a good example of the general principle that, for the Mining and Natural Resources Sector to thrive, the government needs to acknowledge the “roadblocks” to success, and greater investment.

The announcement of the intention to repeal the Indigenisation and Economic Empowerment Act by the Zimbabwean government in March 2019 was driven by various factors, including investor, political and legal motivations.

Under the Indigenisation and Economic Empowerment Act, implemented by former

President Robert Mugabe in 2019, 51% of mines

had to be Black Zimbabwean-owned, which limited foreign ownership. The Indigenisation and Economic Empowerment Act was subsequently amended, to limit the requirement to platinum and diamond mining companies. The

realities however dictated, that even in relation to platinum and diamond mining companies, the Zimbabwean government needed to re-visit the requirement, and the recent announcement that the Indigenisation and Economic Empowerment Act will be repealed and replaced, supports the facilitation of investment in Zimbabwe. This does

not mean that Zimbabwe is facing significant challenges – like many countries, it still faces substantial challenges associated with historical

Mining Laws, uncertain policies, and aging infrastructure (ports, rail, road and electricity), and an uncertain political environment.

Ownership is one of the pillars in most

Indigenisation Laws, such as South Africa’s Mining Charters. It is however, not the only pillar and it is necessary to look at Indigenisation Laws, holistically. It is more about ensuring that, across the spectrum, an appropriate approach is adopted in support of growth, development and

transformation. For example, in the South African Mining Charter, in addition to ownership, Mining Charter 3 addresses procurement,

supplier and enterprise development, human resource development, employment equity (at all levels including board, executive management, senior management, middle management, junior

management, employees with disabilities, and core and critical skills), career progression, mine community development, housing and living conditions and related aspects.

For an Indigenisation Law, such a Mining Charter to be successful, it is necessary for all of these aspects to be addressed holistically, in such a

way that mining companies can achieve compliance through appropriate and applicable allocation of resources depending on the specific

circumstances applicable to that mining company. For example, in certain instances, ownership may not be the most efficient method

of transformation, because, for example, employment equity and community development, requires greater priority.

Demands from “doorstep” communities cannot be underestimated. These demands include access to procurement contracts, employment, and education. The seamy not be achievable, through compliance with the ownership

element/pillar.

In our view, successful implementation of Indigenisation Laws, through structures such as Mining Charters, is dependent on adopting a holistic approach.

The cautious approach adopted by investors is typically influenced by:

– regulatory and policy uncertainty

– security threats

– political instability

– increasing royalties and other taxes

– increased cost associated with employment

– commodity cycles and uncertain commodity

cycles

– political instability and risk

However, one of the biggest factors has been the threat of enforcement (or actual enforcement) of Environmental Laws, and the environmental

liabilities (rehabilitation and remediation).

Recent claims by Zambian communities against

mining companies, including Vedanta, and the court cases in multiple jurisdictions (Zambia, South Africa and the United Kingdom) will have a sobering effect on mining companies.

There are therefore several common themes and concerns regarding recent changes to Mining Laws in countries such as the DRC, Mali,

Tanzania and Zimbabwe, and the political landscape. These themes include:

– stabilisation arrangements which are generally put in place to attract investments,

and theoretically, to support such investment until the mine becomes profitable

– Indigenisation Laws, particularly where specific indigenisation levels are required in relation to strategic minerals (which often require higher investments)

– increased royalties

– exchange control and the impacts that this has on procurement, particularly of imported

– currency fluctuation

The primary concerns voiced by investors is the

uncertainty which results from regular changes to Mining Laws, often because the particular political climate and socio-economic drivers.


26

If Tanzania wants to truly be “open for

business”, its Mining Laws must make it as easy

as possible for foreign companies to invest in Tanzania and there should be a strong focus on creating a stable policy and regulatory environment, implementation of principles which support security of tenure and stabilisation for relevant periods, a transparent application process, and once mining and prospecting rights

have been granted, an apparent framework of interpretation and application of the Mining Laws. If the Tanzanian government can achieve certainty on these aspects through its Mining Laws, this will significantly facilitate investment in the Tanzanian Mining and Natural Resources Sector.

Tanzania’s unique historical mining industry, which was focused on small scale and artisanal mining, together with illegal mining that has taken place, has created a legacy of concern, specifically in relation to environmental impacts, and health and safety.

Environmental compliance is a complex business, which requires dedication of human and capital resources to ensure compliance not only with domestic laws, but also international laws. Recent, major environmental disasters, such as the tailings dam collapse in Brazil, once again highlighted how fragile a seemingly well-run

mining operation can be, with devastating consequences to the environment, people, and structures.

Disasters at mines create a focus point, which often results in the regulators of a particular country implementing new laws, and taking a tough stance on compliance and enforcement.

There is a growing global trend towards the enforcement of the principle “polluter pays” which has significant financial implications for the mining companies. At the same time, regulators are prosecuting decision-makers and the mining companies themselves.

For example, in South Africa, the prosecution of British Petroleum for environmental and non-compliance, has also made companies stand up, and pay attention.

The move towards the “circular economy”, and the “green economy” is gaining momentum and is being implemented or encouraged through

various mechanisms including decisions by major investors to divest from “dirty minerals” such as coal. The failure by mining communities to obtain the “social licence to mine”, without which mines typically do not start up, or, once they have started up, cannot operate, without

disruption, will be a major disruptor, and of

course, enforcement by the regulators, always impacts.

As global standards become more entrenched,

and enforced through formal and informal (such

as investment decision-making) mechanisms, Tanzania will also be faced with how to align its local aspirations for growth, development and transformation, with the desire to make the world a better place, for future generations.

There are significant, potential consequences of illegal mining including health and safety,

environment, and social and socio-economic consequences. It is an unfortunate realty that, often, the illegal miners taking the most risk i.e. extracting the mineral, receive the least benefit and often work under appalling conditions, and often exposed to toxic materials. Those that

benefit most, are often syndicates that take the

least direct risk, but drive up demand. Socio-economic conditions drive illegal mining, and until socio-economic factors can be addressed, there will always be an opportunity for illegal mining.

Once this reality has been accepted, real

conversations can start about regularising the small scale and artisanal mining, and the illegal miners, into mainstream mining, with a strong focus on compliance. Regularisation will require the small scale miners/illegal miners and the large scale miners, to work together to support growth, development and transformation of the

small scale and artisanal mining/illegal mining subsector. In addition, the Tanzanian government will need to implement systems and laws which facilitates smaller miners, while at the same time acknowledging that, in certain respects, smaller miners cannot achieve compliance (there are certain aspects which

should be non-negotiable, such as compliance with Environmental Laws.

One of the primary concerns faced by investors is the uncertainty which results from regular changes to Mining Laws and Regulations, often, because of the particular political climate and

socio-economic drivers. Often, regardless of the wording of a particular Mining Law or Regulation, governments and the relevant ministries such as the Ministry of Mines, interpret and apply the Mining Laws and Regulations to suit the political climate at that time and socio-economic demands at a particular time. It is extremely

difficult, in these circumstances, to do business, because often, by challenging the interpretation and application of the Mining Laws and Regulations, this creates an adversarial relationship between the miner and government. The reality is that the relevant governments hold the power and this power can be used to disrupt

mining operations, impact export of the

minerals, and repatriation of funds.

Indigenisation Laws, which are often linked to resource nationalism, remain a concern, because of the regular changes that are made to the Indigenisation Laws i.e. if they remain stable (no

“moving of the goal posts”), investors can factor the requirements into the feasibility studies, and investment decisions.


27

Historically, investors have required higher levels of certainty in relation to the various factors that are taken into account to determine the feasibility of a proposed investment, and whether to continue investing in a particular

project or operation.

While certain investors still require high levels of certainty, there is a growing group of investors that are prepared to invest, despite uncertainty regarding certain investment criteria. However, most if not all investors require specific levels of certainty in relation to criteria such as the

required levels of indigenisation, security of tenure, and a legal system which gives the

investor an opportunity to challenge any adverse decisions of the government, in a fair, reasonable and transparent manner.

Regular changers to the Mining Laws and those

laws which impact materially, such as exchange control, are probably where governments go wrong, particularly where changes to the Mining Laws and related laws, are made with little or no consultation or in complete disregard to bilateral or multilateral treaties, and without having regard to international conventions.

Investors cannot of course expect indefinite consultation, particularly in those African

countries where governments are facing increasing pressure by their citizens to participate and benefit from natural resources.

The starting point, is always, for there to be policy certainty, because policies provide the

framework for regulatory certainty. For African governments to increase investment, not only directly in relation to the Natural Resources Sector, but also for example, infrastructure development, policies which are clear, are necessary. Sometimes, for example, it is not

necessarily about the percentage of indigenisation, but rather, that there is certainty around indigenisation requirements with the

expectation, that those requirements will remain stable, for a particular period.

Transparency is critical – all processes, including applications for prospecting or mining rights and

how those rights can be impacted upon, must be readily available and accessible to stakeholders.

Just as important however, is the need for fair administrative processes, where rights may be impacted upon or where the exercise of administrative discretion, can impact on or disrupt operations.

Lastly, the rule of law remains a critical factor,

together with accessibility to a court system which is independent, unbiased, and which can determine disputes quickly.

The most important thing that mining companies can do, before investing in a country, and to mitigate the risks, is to have a proper understanding of the relevant landscape in the relevant country – there has to be a realistic

view, and expectations must be managed accordingly.

What is absolutely critical to successful investment is to have a good understanding of the community landscape. Unless mining companies invest and develop mines in such a way that they are granted the “social license” to

mine, investors and the mining companies can expect to face lengthy delays, and disruption to

the implementation of the project, and, once the mine is up and running, disruption to mining operations, including getting the minerals to market.

Community activism is extensive, and potentially disruptive. This can be avoided by not only identifying the need to engage with communities, but also to understand the needs and wants of particular communities (social and socio-economic projects cannot simply be implemented without understanding what the needs and wants

of the community are), and delivering on promises made. For example, it is not simply good enough to build a structure for a

school – everything that is required to make the school function properly, must also be provided, such as furniture, IT, qualified teachers, and proper administration and funding.

Recent cases in South Africa (Duduzile Baleni and Others, and the Minister of Mineral Resources and Others, and Grace Masele Mpane Maledu and Others, and Itereleng Bakgatla Minerals Resources (Pty) Ltd and Others) have also highlighted the importance of understanding

decision–making structures within communities and the acknowledgement that, different communities have different decision making

structures and requirements. These principles also apply elsewhere in Africa.

Hidden costs of implementing mining projects must also be considered. These hidden costs may

come in the form of additional taxes, import and export duties, exchange control regulations, regulations around which minerals can be sold, and to whom, and the often, extensive costs involved in complying with a particular country’s Mining Laws. Investors and mining companies should also be mindful of the additional costs

incurred as a result of delays, particularly where the processes contemplated in the Mining Laws,

are not complied with, properly, or at all, because they are not understood properly.


28

The most important thing that mining companies can do, before investing in a country, and to

mitigate the risks, is to have a proper understanding of the relevant landscape in the relevant country – there has to be a realistic view, and expectations must be managed accordingly.

What is absolutely critical to successful

investment is to have a good understanding of the community landscape. Unless mining

companies invest and develop mines in such a way that they are granted the “social license” to mine, investors and the mining companies can expect to face lengthy delays, and disruption to the implementation of the project, and, once the

mine is up and running, disruption to mining operations, including getting the minerals to market.

Community activism is extensive, and potentially disruptive. This can be avoided by not only identifying the need to engage with communities, but also to understand the needs

and wants of particular communities (social and socio-economic projects cannot simply be

implemented without understanding what the needs and wants of the community are), and delivering on promises made. For example, it is not simply good enough to build a structure for a school – everything that is required to make the school function properly, must also be provided,

such as furniture, IT, qualified teachers, and proper administration and funding.

Hidden costs of implementing mining projects must also be considered. These hidden costs may come in the form of additional taxes, import and export duties, exchange control regulations, regulations around which minerals can be sold,

and to whom, and the often, extensive costs involved in complying with a particular country’s Mining Laws. Investors and mining companies should also be mindful of the additional costs incurred as a result of delays, particularly where the processes contemplated in the Mining Laws, are not complied with, properly, or at all,

because they are not understood properly.


29

Mining in Africa 2020


South Africa has faced strident calls for the

nationalisation of the Mining and Natural

Resources sector, which, in my view, is the final step along the spectrum of resource nationalism.

Recent events across Africa including in Tanzania, Zambia, and the DRC, particularly with

the amendments to the Mining Laws in these countries, are strong indications that resource nationalism is sweeping the African continent.

Calls for nationalisation (as in South Africa), and the measures that are implemented from time to time in support of resource nationalism (particularly, the changes to the Mining Laws), tracks very closely with two phenomena, namely

upcoming elections (i.e. as part of the election rhetoric and promises to gain support) and the State of the economy at any point in time (the worse off the economy, the greater the socio-economic demand for jobs, services, commercial opportunities, and, ultimately, participation in

the actual or perceived wealth generated by mining operations).

There are a broad range of measures along the spectrum of resource nationalism, including the implementation of trade and other tariffs,

establishing restrictions on procurement (goods and services, indigenisation and ownership requirements, increased royalties, and

restrictions on the export of certain minerals, or, at the very least, the export of raw minerals, aimed at encouraging local beneficiation.

The most recent example of this, outside of

Africa, was the announcement of Indonesia will

enforce a complete ban on the export of raw nickel ore from 1 January 2020, two years earlier than initially planned. The purpose is to secure supplies of raw nickel ore for numerous smelters that are under construction, and the drive to increase local processing capacity. South Africa

has stopped short of nationalisation, but has made provision (and created the mechanism) for outright State ownership if the State wants to do so (it can apply for and be granted prospecting and mining rights), and has actively created the legislative framework for resource nationalism is various forms including:

changing the mineral ownership regime from

private ownership to State custodianship of minerals of behalf of the citizens, with the right holder only being given a right to the minerals

under the prospecting and mining rights

– implementation of a standalone Mining Royalty Act, which also casts the collection net a lot wider

– implementation of “windfall”, and “super”

taxes which impact the Mining and Natural Resources Sector

– implementation of Indigenisation Laws (in the case of South Africa this is Mining Charter 3, which requires compliance with

specific targets relating to Black ownership,

procurement of goods and services, and diversity).


30

Changes to Mining Laws in other African

countries, including, most recently, Mali, are

supportive of resource nationalism, regardless of the terminology that is used.

Most, if not all African countries that have significant mineral resources, face calls for outright nationalisation, and for more stringent

resource nationalism as their economies fluctuate, and the political landscape and political players change. The reality of attracting investment often challenges this position – more mature governments typically implement the resource nationalism measures incrementally to ensure that investors are not scared off, but

later become locked in by the investments that

have been made.

Commodity cycles also impact on the implementation of resource nationalism measures – the better the cycle, and the better the price, the higher the demand from citizens to benefit from this, regardless of whether the

uptick is sustainable or not. Increased calls for resource nationalism are also part of a broader anti-west/colonialist past. Fears that there is a new wave of colonialism through economic investment, are being explained away, on the basis that “this time it is different” (many African

countries are however realising that the investment from countries such as China and

Russia, are coming with its own “golden handcuffs”).

The China/Russia (and to a lesser extent, the other BRICS partners) investment potential and dynamic is being used to play off the

“traditional” western investment/investors, and to:

– drive up the costs of acquiring prospecting and mining rights i.e. getting more, ostensibly to meet socio-economic demand from citizens

– induce more commitment to infrastructure

development at the cost of the investor,

including, for example, the “open access” use of infrastructure by multiple/ancillary sectors such as agriculture

– obtain support for policy and regulatory change, desired by the relevant political

party in power

Representatives of various Africa companies have, on several occasions, indicated that “if you don’t like what we are offering, we will get Russia or China to invest”. Investment or potential investment from Russia or China seems to give the African governments a better

perceived or actual bargaining position, when

there are options waiting in the wings.

Resource nationalism is likely to continue as a trend in Africa in 2020, and may impact on investment decisions.

There is also a trend towards cautious

investment from all investors, including China,

but the risk appetite varies, with China and Russia seemingly having a greater appetite for risk, probably to support the strategic intent to control the full value chain (in the case of minerals, this control would be from extraction

and beneficiation, all the way to marketing and end use) and to develop geopolitical influence.

Resource nationalism is of course, not the only trend, but it remains, probably, the most important driver of recent changes to the Mining and Mineral Laws. With resource nationalism being a populist concept, over-enthusiastic

implementation by African governments could

backfire not only because this could impact on investment decisions, but also because the expectations that are created may not be met, and this could result in disruptive activism. Implementation of resource nationalism could also be impacted by poor governance and

corruption, which, ultimately, contributes to the undesirable cycle of demand for resource nationalism, unfulfilled promises, and disruptive activism in support of further or more stringent resource nationalism measures.

In Zimbabwe, for example, it has been reported

that approximately USD15 billion has been unaccounted for at the Chidzwa Diamond Mine, a

mine run by Mbada Diamonds, linked to the Zimbabwean government and defence force).

Africa however remains attractive as an investment destination, to appropriate investors, and the investment patterns are likely to

continue, particularly in those jurisdictions which support the global move to a “green economy” and those countries which have available reserves of the “battery minerals”.

The cautious approach adopted by investors, seems to be predominantly influenced by:

– regulatory and policy uncertainty

– security threats

– political instability

– increasing royalties and other taxes

– increased costs associated with employment

– commodity cycles and uncertainty

– political instability and risk. However, by far,

one of the biggest factors has been the threat of enforcement (or actual enforcement) of Environmental Laws, and the environmental liabilities (rehabilitation and remediation). The associated

reputational risk also plays a huge role.

The recent claims by Zambian communities

against mining companies, including Vedanta, and the court cases in multiple jurisdictions (Zambia, South Africa and the United Kingdom), will have a sobering effect on mining companies, and could add to the cautious approach to investment.


31

There are several common themes and concerns

regarding recent changes to the Mining Laws and

the potential landscape in various African countries. These common themes include:

– stabilisation arrangements which are generally put in place to attract investments and, theoretically, to support such

investment, until the mine becomes profitable

– Indigenisation Laws, particularly where specific indigenisation levels are required in relation to strategic minerals (which often require higher investments)

– increased royalties

– exchange control and the impacts that this has on procurement, particularly imported goods

– currency fluctuation and the uncertainty that this brings to investment decisions

One of the primary concerns faced by investors is the uncertainty which results from regular

changes to Mining Laws and Regulations, often, because of the particular political climate and socio-economic drivers. Often, regardless of the wording of a particular Mining Law or Regulation, governments and the relevant ministries such as the Ministry of Mines, interpret and apply the

Mining Laws and Regulations to suit the political climate at that time and socio-economic demands at a particular time. It is extremely difficult, in these circumstances, to do business, because often, by challenging the interpretation and application of the Mining Laws and Regulations, this creates an adversarial

relationship between the miner and government. The reality is that the relevant governments hold the power and this power can be used to disrupt mining operations, impact export of the minerals, and repatriation of funds.

Indigenisation Laws, which are often linked to

resource nationalism, remain a concern, because

of the regular changes that are made to the Indigenisation Laws i.e. if they remain stable (no “moving of the goal posts”), investors can factor the requirements into the feasibility studies, and investment decisions. While there has been a generally positive response to the changes in the

Indigenisation Laws in Zimbabwe (including in respect of diamonds and platinum), the concern is that positive changes may be short-lived, as demands are placed on the government of the day. This creates an extremely uncertain investment environment.

The global move towards a “greener economy”

has started impacting on South Africa, particularly in relation to South Africa’s coal subsector. Conscientious investing typically means that certain investors, have taken the decision to divest from “dirty commodities”, and not to make any new investments in the “dirty commodities”.

This, together with increased environmental

compliance and enforcement is of concern to

certain investors.

The global developing trend of enforcing the “polluter pays” principle may also be of concern. The most recent example is of the reported USD4.5 billion spend, to date, by Vale, following

the tailings dam collapse at Brumadinho.

Historically, investors have required higher levels of certainty in relation to the various factors that are taken into account to determine the feasibility of a proposed investment, and whether to continue investing in a particular project or operation.

While certain investors still require high levels of certainty, there is a growing group of investors that are prepared to invest, despite uncertainty regarding certain investment criteria. However, most if not all investors require specific levels of certainty in relation to criteria such as the required levels of indigenisation, security of

tenure, and a legal system which gives the investor an opportunity to challenge any adverse decisions of the government, in a fair, reasonable and transparent manner.

Regular changers to the Mining Laws and those laws which impact materially, such as exchange

control, are probably where governments go

wrong, particularly where changes to the Mining Laws and related laws, are made with little or no consultation or in complete disregard to bilateral or multilateral treaties, and without having regard to international conventions.

Investors cannot of course expect indefinite

consultation, particularly in those African countries where governments are facing increasing pressure by their citizens to participate and benefit from natural resources.

The starting point, is always, for there to be policy certainty, because policies provide the framework for regulatory certainty. For African

governments to increase investment, not only directly in relation to the Natural Resources Sector, but also for example, infrastructure development, policies which are clear, are necessary. Sometimes, for example, it is not necessarily about the percentage of

indigenisation, but rather, that there is certainty around indigenisation requirements with the expectation, that those requirements will remain stable, for a particular period.

Transparency is critical – all processes, including applications for prospecting or mining rights and how those rights can be impacted upon, must be

readily available and accessible to stakeholders.

Just as important however, is the need for fair administrative processes, where rights may be impacted upon or where the exercise of administrative discretion, can impact on or disrupt operations.


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Lastly, the rule of law remains a critical factor,

together with accessibility to a court system

which is independent, unbiased, and which can determine disputes quickly.

A government which is willing to listen to all stakeholders and respond appropriately, is more likely to attract investment. The recently

published new Mining Code in Mali, is a good example. Initially, stabilisation arrangements where not specifically addressed, but, shortly after publication, it was confirmed that stabilisation period would be limited to 10 years. There will of course be extensive debate on whether a 10 year stabilization period (down

from the previous 30 year period), is appropriate

– not all stakeholders will be happy with the 10 year period.

While there are significant challengers being faced by the Zimbabwean government, the announcement of the intention to repeal the Indigenisation and Economic Empowerment Act,

in March 2019, and the changes to the Indigenisation Laws, is another example of an African government grappling with those challenges, which could present road blocks to investment.

The Indigenisation and Economic Empowerment

Act was implemented by former Zimbabwe

President, Robert Mugabe in 2008. It required that 51% of mines had to be black Zimbabwean owned, which limited foreign ownership. The Act was subsequently amended to limit requirement to platinum and diamond mining companies.

The initial amendments which limited the

indigenisation requirements to diamond and platinum mining companies only, and the subsequent announcements that the Act will be repealed and replaced, were driven by concerns that the requirements were impacting on growth and development. The announcements by President Mnangagwa that Zimbabwe was “open

for business” had to be supported by the

implementation of meaningful change in the investment framework, including the Zimbabwean Mining Laws. The announcement that the Act will repealed means that the restrictions, including in relation to diamond and

platinum mining companies, will be done away with, and hopefully open up investment opportunities, for Zimbabwe.

Zimbabwe will however also need to radically overall its Mining Laws, to attract further investment, including in respect of an aging and crumbling infrastructure. It can do so by

amending its policy and regulatory framework so that this policy and regulatory framework,

supports investment, while benefitting the Zimbabwean people.

African countries that can create a legal landscape with the least amount of “red tape”, are likely to attract more extensive investment.


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In Uganda, for example, there are no restrictions on foreign investment in mining, provided that

the mining activities benefit the local communities. This has attracted large investment from companies such as Rio Tinto,

and in the third quarter of 2018, Uganda recorded and all-time high in terms of its GDP from mining. Botswana is another example where, because of its legislative framework, mining companies believe that they are able to function effectively and efficiently. Around 40% of the GDP of Botswana is a result of mining, and

this is substantially due to the relatively certain policy and regulatory environment.

Rwanda has more recently made amendments to its Mining Laws and Regulations in a bid to

attract foreign investment, which is aimed at promoting partnership between foreign investment companies and local companies. The

new Mining Laws were introduced in Rwanda in 2018, and it is still too early to tell whether the new Mining Laws will attract the expected investment.

The most important thing that mining companies can do, before investing in a country, and to mitigate the risks, is to have a proper

understanding of the relevant landscape in the relevant country – there has to be a realistic view, and expectations must be managed

accordingly.

What is absolutely critical to successful investment is to have a good understanding of

the community landscape. Unless mining companies invest and develop mines in such a way that they are granted the “social license” to mine, investors and the mining companies can expect to face lengthy delays, and disruption to the implementation of the project, and, once the mine is up and running, disruption to mining

operations, including getting the minerals to market.

Community activism is extensive, and potentially

disruptive. This can be avoided by not only identifying the need to engage with communities, but also to understand the needs and wants of particular communities (social and

socio-economic projects cannot simply be implemented without understanding what the needs and wants of the community are), and delivering on promises made. For example, it is not simply good enough to build a structure for a school – everything that is required to make the

school function properly, must also be provided, such as furniture, IT, qualified teachers, and proper administration and funding.

Recent cases in South Africa (Duduzile Baleni

and Others, and the Minister of Mineral Resources and Others, and Grace Masele Mpane Maledu and Others, and Itereleng Bakgatla

Minerals Resources (Pty) Ltd and Others) have also highlighted the importance of understanding decision–making structures within communities and the acknowledgement that, different communities have different decision making structures and requirements.

These principles also apply elsewhere in Africa.

Hidden costs of implementing mining projects must also be considered. These hidden costs may come in the form of additional taxes, import and export duties, exchange control regulations,

regulations around which minerals can be sold, and to whom, and the often, extensive costs involved in complying with a particular country’s Mining Laws. Investors and mining companies should also be mindful of the additional costs incurred as a result of delays, particularly where the processes contemplated in the Mining Laws,

are not complied with, properly, or at all, because they are not understood properly.

Most, if not all of the African countries that are

mineral rich, face the challenge of having a dual mining system namely a formal mining sector, and an informal (small scale an artisanal) mining sector. Often, the two are not aligned, and clash.

While formal or large scale miners cannot always be said to comply with the Mining Laws (including the Environmental Laws) in a country, it is often the artisanal and small scale miners that flout the Mining and Environmental Laws, essentially, making them illegal miners.

This must however be distinguished from the

true “illegal mining” activities which are carried out, often, side by side with lawful mining

operations at existing mines, where the illegal miners are facilitated by those employed in the formal or legal mining sector, and at abandoned mines.

This is likely to be a significant challenge to the Mining Sector, within Africa generally, and it is necessary to regularise the small scale and artisanal mining, and the true “illegal miners” by creating regulatory frameworks which facilitate easy access, administration and management. This may not be easy. In certain instances, the

small scale and artisanal mining forms part of a greater corrupt and criminal network, often supported by members of government, protected

by the defense force and police services in that country.

The reality is that Africa is a mineral resource–rich continent, including “battery minerals”, and

there will always be investors who are willing to take the risks, regardless of the level of uncertainty.

Africa is therefore likely to continue seeing significant investment in the Mining and Natural Resources Sector and, as of necessity,

infrastructure which supports, ultimately, getting the mineral to market.

2020 is likely to see further investments in countries such as Angola, Uganda, Rwanda, and Egypt, based on the view (and possible perception), that these countries still offer a good return on investment.


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Growth and development of the Mining Sector in

Africa is heavily dependent on exploration spend.

Exploration is high risk, with low return and African countries will need to create incentivised frameworks which encourage investment on exploration.

The Mining and Natural Resources Sector in

South Africa has faced significant challenges including a policy and regulatory landscape, which has been the subject of change, and challenge by stakeholders, the significant increase in costs of electricity, fragile infrastructure, increased costs of employment, and community activism.

While Mining Charter 3, which was published on

27 September 2018 was a significant improvement on previous drafts, it has still not satisfied all stakeholders, and discussions between industry representatives and government, are ongoing.

Some mines have not recovered from the

economic downturn and the uncertain commodity cycles, and many mines remain on care and maintenance.

There has also been extensive corporate activity (mergers and acquisitions), which has added to uncertainty, in the short to medium term.

Restructuring, as a result of mergers and acquisitions, has impacted on the number of employees employed in the Mining and Natural Resource Sector, and the restructuring as also led to the reduction in the number of contractors that are engaged.

All of this, has a significant impact on mining

communities, particularly with the “multiplier effect” i.e. the concept that, for each mineworker, up to another 10 persons, benefit.

The initial euphoria that followed the election of President Ramaphosa, has also been tempered by the state of the South African economy,

generally.

South Africans are however extremely resilient, and there are indications that the Mining and Natural Resources Sector is improving.

Similarly, the optimism that followed the ousting of former Zimbabwean President Robert Mugabe, was relatively short lived, and it was soon

realized that changing a president did not necessarily translate into substantial change, in the short term, or for that matter, a dramatic increase in the return of foreign investment to Zimbabwe.

The removal of former President Mugabe, did

not, magically, restore the economy of

Zimbabwe and nor did it detract from the significant challenges faced by Zimbabwe.

The primary challenges include the poorly maintained infrastructure, unstable and unreliable power generation and transmission, as well as currency fluctuations, particularly following the announcement that Zimbabwe

would revert to the Zimbabwean dollar.

Further challenges include concerns regarding the ability to import and export goods and services, and pay for them based on exchange rates, which are uncertain, a potentially unstable political environment, and a policy and regulatory system, which is in desperate need of

an overall.

Despite these challenges, because Zimbabwe is a natural resource rich country, investors remain interested in Zimbabwe.

Like most mineral-rich resource countries, the Mining and Natural Resources Sector can be the catalyst for growth and development and can

provide the basis for a strong economy.

Both investors and the Zimbabwean Government seem to be mindful of the related benefits, which come from the Mining Sector, including broader revenue and taxes, infrastructure development, and an extensive network of services and goods suppliers and providers.

The mining landscape in Zimbabwe, like most African countries, is made up of both small scale and artisanal mining, and large-scale (formal) operations. While the extraction of minerals such as platinum group metals is suited to large-scale mining, there are other minerals in Zimbabwe,

such as gold, that is more suited to small scale mining.

Both the small scale and artisanal miners, and large scale miners, will need to work together, to contribute to expedited growth and development in Zimbabwe. The role of the small scale and artisanal miners cannot be underestimated.

However, small scale and artisanal mining must be carefully managed, to ensure that proper benefits flow to communities and the Zimbabwean Government, and that there is a strong compliance ethic, which is aimed at avoiding, for example, environmental harm. Regularisation of the artisanal and small scale

mining, in an environment, which facilitates access, and management, is critical, in avoiding small scale and artisanal miners, resorting to illegal mining. Lawful mining must be made as easy as possible for small scale and artisanal miners. Illegal mining brings with it a host of

challenges including environmental impacts, social and socio-economic and related impact, and losses to the fiscus.

It is therefore necessary for Zimbabwe to radically change and upgrade it mining laws. Historically, Zimbabwe separated its Diamond Laws from other Mineral Laws, and shortly after

former President Mugabe’s removal from office,

various groupings in Zimbabwe, began working on changes to mineral policy and Mining Laws. If this momentum can be maintained, and if it results in the implementation of laws which facilitates and encourage investment, Zimbabwe may become an investment destination of

choice.


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As was the case in South Africa following the appointment of President Cyril Ramaphosa, there was a wave of optimism with the appointment of Zimbabwe’s President Emerson Mnangagwa, in July 2018. The optimism that followed the ousting of former Zimbabwe President Robert

Mugabe was however short lived, and it was soon realized that the ousting of President Robert Mugabe would not result in substantial change in the short term, or that there would be an immediate, substantial return of foreign investment to Zimbabwe. Former President

Mugabe’s removal, in itself, also did not detract

from the significant challenges that Zimbabwe faced, including poorly maintained infrastructure, which had not been maintained for decades, an unstable and unreliable power generation and transmission system, as well as currency fluctuations, particularly following the announcement that Zimbabwe will revert to the

Zimbabwean dollar for trading. There are also challenges and concerns regarding the ability to import qoods and services, and pay for them based on uncertain exchange rates, the repatriation of funds from Zimbabwe, and a potentially unstable political environment and an

uncertain policy and regulatory system.

In 2018, a substantial number of investors, financial institutions, service providers and conference organisers focused on investment in Zimbabwe. Only the most resilient investors are now seriously focused on Zimbabwe, both in relation to existing investment and new

investments.

The reality however is that Zimbabwe has vast natural resources including the so called “battery minerals”, which are a key focus for many countries, and therefore, investors.

The natural resources sector of any mineral – rich country is not only an important barometer

of the health of the economy of that particular country, but is also an important catalyst for transformation (indigenization), growth and development. It is also the source of revenue for delivery on promises made for redistribution of

actual and perceived wealth. Zimbabwe is no different, and the Zimbabwean government has

openly stated that Zimbabwe is “open for business”.

Investors and the Zimbabwean government also seem mindful of the ancillary benefits of the mining sector, including revenue and taxes, infrastructure development, a network of services and goods suppliers and providers, as

well as the multiplier effect, which is the general principle that for each person working at a mine, up to 10 other persons can be supported.

It will be absolutely critical for the Zimbabwean government to implement an investment–

friendly framework which supports the

announcement that it is “open for business”. This includes a reviewed policy and regulatory framework for mining and minerals in Zimbabwe.


36

The announcement of the intention to repeal the

Indigenization and Economic Empowerment Act

by the Zimbabwean government in March 2019 was driven by various factors, including investor, political and legal motivations.

The Indigenisation and Economic Empowerment Act was implemented by former President Robert

Mugabe in 2018, and required that 51% of mines had to Black Zimbabwean owned, which limited foreign ownership. The Indigestion and Economic Empowerment Act was subsequently amended, to limit the requirement to platinum and diamond mining companies. The initial amendments, limiting the requirement to

diamond and platinum mining companies only,

and the subsequent announcement that the Indigenization and Economic Empowerment Act would be repealed and replaced seems to support the general approach by the Zimbabwean government, to facilitate investment in Zimbabwe, including in the Mining

and Natural Resources Sector.

Various legal and political groupings in Zimbabwe have been actively motivating for legislative and policy change. These groupings are supported by international organisations, such as the World Bank, and there has been a

strong focus on redrafting Zimbabwe’s Mining and Mineral Laws. While this is a positive move,

the Indigenisation and Economic Empowerment Act will be replaced by a new Act, which is unclear at this stage, and as is the case with most, if not all new laws, it will not satisfy all stakeholders, and there may be lengthy periods

of disputes, which will contribute to investment uncertainty.

A sector–specific challenge that will be faced by Zimbabwe as it grapples with the creation of a new investment landscape, is the parallel large and small scale mining operations in Zimbabwe.

While the extraction of mineral such as the

Platinum Group Metals, is ideally suited to large

scale mining, there are other minerals, such as gold, which is more suited to small scale mining. Both large scale and small scale mining will play an important role in Zimbabwe going forward and it will be necessary for stakeholders to work

together to ensure that these large and small scale miners can work side by side. There is a critical role to be played by small scale miners in support of growth, development and transformation, provided that small scale and artisanal mining is regulated in such a way that it encourages small scale miners to mine

lawfully, and makes it easier for them to do so. There are a number of examples in other

jurisdictions (such as Ecuador and Peru) where small scale mining was not regulated appropriately, and the small scale and artisanal miners often resorted to illegal mining, with all the negative consequences that flow from this,

including environmental impacts, social and socio-economic and related impacts, and losses of revenue to government.

It will be necessary for Zimbabwe to radically change and upgrade its mining laws to achieve the success of both the small scale and large

scale miners.

Investors and companies that want to do

business in Zimbabwe will need to have a proper understanding of the policy and legal landscape in Zimbabwe, and the political landscape. Proper investment decisions can only be taken with a detailed understanding of the in-country risks.

There are substantial opportunities in Zimbabwe, and many investors will, with a proper understanding of the risk, regard Zimbabwe as a good investment destination.

Protecting your global interests

Mining and Environmental - South Africa

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Key contacts

For further information, please contact:

Warren Beech

Partner

T: + 27 10 003 1455 M: +27 83 656 6584 warrenbeech@ eversheds-sutherland.co.za

Themba Khumalo

Partner

T: + 27 10 003 1460 M: +27 82 407 0063 thembakhumalo@ eversheds-sutherland.co.za

Nicholas Veltman Partner

T: +27 10 003 1477

M: +27 83 301 9892 nickveltman@ eversheds-sutherland.co.za


T: + 27 10 003 1459

M: +27 71 3612 410 ebenvanzyl@ eversheds-sutherland.co.za

Refiloe Vengeni Senior Associate

T: + 27 10 003 1455 M: +27 72 6515 790 refiloevengeni@

eversheds-sutherland.co.za

Pascale de Froberville Associate

T: + 27 31 940 0501 M: + 27 82 746 3218 pascaledefroberville@

eversheds-sutherland.co.za

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