Zuma says resources bill may be unconstitutional, wants revision

Photo credit: GovernmentZA / Foter / CC BY-ND
Photo credit: GovernmentZA / Foter / CC BY-ND

Copyright 2015 Bloomberg.

Andre Janse van Vuuren and Mike Cohen

(Bloomberg) — South African President Jacob Zuma referred proposed changes to the country’s mining and energy legislation back to Parliament, saying they may violate the nation’s constitution.

The 2002 Mineral and Petroleum Resources Development Amendment Bill was passed by lawmakers last year and referred to Zuma for assent and signing into law. Proposals included giving the state the right to a free 20 percent stake in new energy ventures and to buy an unspecified additional share at an “agreed price.” Exxon Mobil Corp. and Total SA are among those that objected to it on the grounds it’s too vague and will undermine their businesses.

“After careful consideration of the bill and the submissions received, the president is of the view that the bill as it stand would not pass constitutional muster,” his office said in an a statement on Friday.

South Africa’s constitution compels the president to assent and sign bills that are referred to him by the National Assembly unless he has reservations about their constitutionality, the presidency said.

“It’s an excellent piece of news,” James Lorimer, a lawmaker for the main opposition Democratic Alliance, said by phone from Johannesburg. “It’s a gravely flawed piece of legislation. The pity is it hasn’t happened sooner. People haven’t been making investment decisions.”

Nascent Industry

While South Africa had proven reserves of 15 million barrels of oil at the end of 2013, according to Oil & Gas Journal, there is no significant production. About 70 percent of the nation’s crude needs are met through imports with the balance processed from coal and gas.

Mineral Resources Minister Ngoako Ramatlhodi, who was appointed in May, said the country should consider drafting separate laws to regulate the fledgling oil and gas industry to encourage investment. He asked Zuma to hold off on signing the changes into law pending a review by a committee comprising himself and the ministers of finance, trade and industry, energy and economic development.

“Until we have seen the comment and seen the input, it is very difficult to comment,” Roger Baxter, chief operating officer of the Chamber of Mines, the main industry body, said by mobile phone. “It could be a very specific item” that the president is concerned about, he said.

Due Process

The bill might have been referred back to lawmakers because due process wasn’t followed when it was processed by the National Council of Provinces, parliament’s second chamber, Peter Leon, head of Africa mining and energy projects at law firm Webber Wentzel.

“I know this may cause some uncertainty, but hopefully it will result in a better piece of legislation,” he said by phone. He has yet to see the reservations that the president has about law.

Mac Maharaj, the presidency’s spokesman, and Department of Mineral Resources spokeswoman Phuti Mabelebele didn’t answer calls seeking comment. Mosa Mabuza, the department’s deputy director-general for mineral policy and promotion, didn’t answer his mobile phone.

“We don’t know what the reasons are, but it’s a good thing to redebate the changes,” Andrew Mitchell, a director at Fasken Martineau LLP in Johannesburg, said by phone. The bill in its current form would have put undue delays on changes in the shareholding of mines by unlisted entities, among other issues, he said.