Mines and Energy merger: Too much on Gwede Mantashe’s plate? – Leyden

By Patrick Leyden*

In a move that is likely to be welcomed by the mining industry, President Ramaphosa has appointed Gwede Mantashe as the Minister of Minerals and Energy (which now combines the Ministries of Mineral Resources and Energy).

During his short erstwhile tenure as Minister of Mineral Resources, Mantashe made significant progress in addressing several fundamental issues that have hampered investment into the South Africa mining industry over the last five years. His decisive action in addressing corruption and maladministration within his Department as well as taking steps to promote regulatory certainty were positively received by both domestic and international investors alike. As a result, South Africa gained twenty seven places under the Policy Perception Index and also made considerable gains under the overall Investment Attractiveness Index in the Frasier Institute’s most recent Mining Investment Survey.

However, the President’s decision to combine the Ministries of Mineral Resources and Energy means that Minister Mantashe is going to have to divide his time between the mining and energy sectors. Following Total’s announcement earlier this year of a major discovery of gas condensate off the South African coastline, there is likely to be significant activity within the oil & gas sector in the coming months and years.

Some of the key challenges facing the Minister during his term are likely to be:

Mining

  1. MPRDA Amendment Bill: although the Minister’s (and Cabinet’s subsequent) support of the withdrawal of the MPRDA Amendment Bill is a positive step for the mining sector, it must still be finally withdrawn by Parliament.
  2. Mining Charter III: the publication of the final version of the new Mining Charter in September last year provided some regulatory certainty but the Minerals Council’s subsequent court application to set aside certain provisions of the Charter will likely necessitate further roundtable discussions with relevant stakeholders – a negotiated outcome is generally better than one determined by the courts.
  3. Stakeholder engagement: the Minister has made notable progress in repairing the Department’s strained relationship with the Minerals Council but he will need to continue active engagement with communities, labour and other stakeholders in order to regain their trust.
  4. Exploration and greenfield projects: initiatives aimed at attracting investment into exploration and greenfield projects are critical if South Africa’s mining sector is to avoid being labelled as a ‘sunset industry’.
  5. Corruption and mal-administration: the Minister has made significant progress in this regard but further work is required in order to ensure an administration that is efficient, transparent and accountable.
  6. Beneficiation: policies aimed at promoting domestic beneficiation of minerals will likely remain key to the Department’s goal of diversification and job creation but these policies should not be implemented to the detriment of the upstream mining sector.

Energy

  1. Oil & Gas legislation – in advocating the withdrawal of the MPRDA Amendment Bill, Minister Mantashe maintained that the oil & gas industry should be regulated separately from mining. Given the recent off shore discovery and the imminent withdrawal of the MPRDA Amendment Bill, the Minister is likely to come under pressure to produce this new legislation as a matter of urgency.
  • Patrick Leyden, Director at Herbert Smith Freehills.