SA mining sector celebrates Constitution’s value as bulwark against political “discretion”, crony capitalism
This week an opportunistic bid by the politically connected Gupta family ended very badly for them and their supporters at the Department of Mineral Resources. They have lost every round in a four year court action, but kept going because the value of the prize was potentially billions of rand. Yesterday's judgement was the final nail in the Gupta coffin. The court's decision over the family's attempted hijacking of mineral rights in Kumba's massive operating iron ore producer has much wider implications. For one thing, it brings a level of certainty for the mining industry. For another, it's another slap-down for the discretionary powers of politicians and a serious setback for crony capitalists. Points emphasised in our CNBC Africa interview today with top mining lawyer Robert Legh of Bowman Gilfillan. South Africa's Constitution is a powerful tool for equity and justice. – AH
ALEC HOGG: The Constitutional Court has ruled that only the Sishen Iron Ore Company, which is a subsidiary of Kumba, may apply for the rights to 21.4% of its Sishen mine in the Northern Cape. Those rights once belonged to ArcelorMittal. Robert Legh, a Partner at Bowman Gilfillan, has come in to help us understand this very complicated court action, which began when the Guptas decided they could grab themselves a slice of a very big iron ore mine. They've been put to the sword, but why has it taken so long, Robert?
ROBERT LEGH: Alec, litigation is complex and these are very complicated issues that have been teased out through the courts. The fact is that ICT Trading (the Gupta company) has actually lost three times around in this together with the Department of Mineral Regulation (DMR), but the MPRDA is a complex piece of legislation. I think this provides quite a lot of certainty, which has been lacking and the DMR has taken a kind of discretionary approach to the allocation of mining rights. What the earlier courts did, is they looked through what I'd call an old-fashioned prism, and what's refreshing about this judgment, is that it looks at the legislation through a new Constitutional prism, but with a view that is actually rational and commercial and, I think, provides some certainty to mining companies going forward.
ALEC HOGG: Not just locals, but international investors too…
ROBERT LEGH: Absolutely. Look, this is not a panacea. It's very fact-specific and it relates to the conversion of mining rights, from old order mining rights to new order mining rights, and that was a transitional phase. It's not going to guide the DMR in terms of the allocation of new rights, going forward. However, they may be a whole range of other disputes relating to similar factual matrices, which may now be resolved. I think it does send quite a strong message. If you look at the judgment of Mr Justice Jafta, it makes it clear that it recognises the fundamental restorative aspect of the legislation. But at the same time basically saying mining companies in place cannot be dislodged through some kind of administrative fiat by the DMR allocating rights to people whose mining capacity is doubtful – or at all. The one note of caution that I would add is that this… I think it puts an end to the session ICT dispute once and for all. The arrangements between Kumba and AMSA (Arcelor Mittal SA) have now been sorted out in terms of their supply agreements. I think this story goes away. There is however, before Parliament, an Amendment to the Act, which I think was drawn up as a consequence of the earlier losses sustained by the Minister in the previous cases aimed at giving the Minister these kinds of discretionary rights that the court has indicated that based on the current law, was not appropriate.
ALEC HOGG: That's interesting….
ROBERT LEGH: That's a challenge. That legislation is controversial. There are certainly question marks over its constitutionality, and there's quite a big government push to get it through.
ALEC HOGG: Robert, is there a parallel here with what Herman Mashaba and the Free Market Foundation are trying to do on the discretion that the Labour Minister has? They're taking that to the Constitutional Court, just for the one word. This seems…the Constitutional Court has now ruled…perhaps discretion by politicians is not something that they'll be able to take as a right in future.
ROBERT LEGH: We live in a Constitutional Democracy. Ministers and officials are given discretion, but they have to exercise that discretion fairly and within a constitutional framework. In the old world – the National Party world of government – the law was often…'die wet is wat die Minister sê', and fortunately, it's not in our new world. You're going to find this constant tension between government and administrators exercising discretion, and administrative law challenges have become a huge part of the legal environment. My hope is that perhaps the DMR sits back and reflects a little bit on this judgement. As I say, I think it puts an end to this dispute, but this industry is crying out for certainty. You don't need to read very far to see that our mining industry has suffered through under investment in the last few years because of a lack of certainty. I think there should be some careful soul-searching as to what happens with this legislation, this Amendment legislation presently before Parliament.
GUGULETHU MFUPHI: Robert, do you think this perhaps sets the tone for turning the tide regarding mining legislation in the country?
ROBERT LEGH: What the views of the DMR are on mining legislation compared to the Constitutional Court, they offer different…they're independent. The court is independent. Hopefully, there have been a few things that have happened this week that might make people in government sit up, but the mining industry cries out for some greater certainty in how these things are implemented. When you're making 30/50/60-year investments, you do want some certainty as to your mining authorisations. If you speak to any senior mining executive, it's a challenge. People are looking and investors are investing their dollars elsewhere at the moment.
ALEC HOGG: SA is a Constitutional Democracy, as you said earlier. We have a fantastic Constitution. Nobody, anywhere in the world probably has a better one. I guess as a young democracy, we have to go through these processes. People will take a chance – politicians are people, too – and this seems to be an instance of… Perhaps the DMR just went through all the processes to get clarity, rather than supporting the Guptas.
ROBERT LEGH: I can't comment on the specific politics of the particular case. There are many inferences one way or another. I think what is very positive about this case is that it's actually the first time this piece of legislation has come under the close scrutiny of the Constitutional Court. They have really interpreted it in a constitutional way, in a sensible way, and in a way that will provide certainty for people in the mining industry.