Mining prospecting rights being ‘sterilised’ by bureaucratic delays

Written by Ciaran Ryan. Posted in Journalism

Hundreds tied up in bottlenecked licensing system that is long overdue for replacement. From Moneyweb.

The Minerals Council says up to R20bn in potential investments is being tied up due to regulatory hurdles. Image: Shutterstock
The Minerals Council says up to R20bn in potential investments is being tied up due to regulatory hurdles. Image: Shutterstock

In response to a recent parliamentary question by the DA’s James Lorimer, Mineral Resources and Energy Minister Gwede Mantashe revealed how bureaucratic delays are choking the issue of mine prospecting licences.

Lorimer asked how many prospecting right renewal applications were sterilised and therefore unavailable to other applicants while awaiting bureaucratic processing.

Lorimer wanted to know how many licences had “not yet been processed, returned, granted, refused” within (a) 60 days of receipt of the application, (b) 12 months and (c) three years.

Mantashe’s reply: 19, 84 and 236 respectively.

What’s alarming about this answer is the number of prospecting rights tied up for three years or more – 236.

“They [the prospecting rights] absolutely are being sterilised,” says Lorimer.

“The reply is typically contemptuous. It actually admits rights are sterilised while saying they are not.”

He adds: “As usual – this is bad policy, badly implemented.”

Broken system

Peter Leon, global co-chair for Africa at Herbert Smith Freehills, concurs: “This shows how broken the licensing system is and where mandatory time limits are necessary. It is a problem because [correctly] a prospecting right gives the holder the exclusive right to apply for a mining right as well as a priority right on renewal. This follows international best practice on security of tenure.

“The problem is that if the Department of Mineral Resources and Energy [DMRE] does not process renewal applications in a timely manner, this effectively sterilises the right as no one can else can apply for a prospecting right.”

This is no small matter, with the Minerals Council saying that up to R20 billion in potential investments is being tied up due to regulatory hurdles, which has strangled SA’s mine exploration over the last decade.

Read:Namibia scraps black ownership rules for mining exploration licences (Oct 2018)

Africa’s pandemic-hit mining sector faces exploration challenge (Feb 2)

Mantashe wants to increase the country’s share of global exploration expenditure to at least 3% in the next five years, but this will require some urgent reform, says Herbert Smith Freehills in a recent note.

Specifically, the DMRE will have to address weaknesses in the SA Mineral Resources Administration (Samrad) system, an online database used to manage mining permits and rights.

The Minerals Council offered to pay part of the cost of replacing the Samrad system.

Credibility issue

Says Leon: “For years the DMRE’s credibility has suffered. Key factors include permitting backlogs caused by the ineffective Samrad system, management issues, as well as maladministration in some of the DMRE’s regional offices.

“In addition, delays relating to applications for the transfer of rights [also submitted through Samrad] have resulted in delays of up to six to 18 months, further affecting investment into the sector.

“The opaqueness of the current Samrad system has discouraged exploration by junior miners and hindered investors and interested and affected parties from obtaining critical information from the DMRE.”

Some 60% of African countries make use of management software to automate mineral title workflows, improve compliance and expedite the overall mineral right application process.

Read: Mining exploration finally gets some love from regulators (Oct 2020)

Establishing and operating an open online electronic mining cadastral (land mapping) system is an important means of regaining investor confidence.

“As these systems reduce human inputs by incorporating automated processes, they significantly enhance the reliability as well as the transparency of the mineral regulatory system itself,” adds Herbert Smith Freehills.

The DMRE’s hand may be forced in part by a recent court decision (Baleni and Others v Regional Manager Eastern Cape Department of Mineral Resources and Others) that requires interested and affected parties to receive copies of mining right applications. Prior to this, interested and affected parties had to make use of the cumbersome mechanisms of the Promotion of Access to Information Act to access the information.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.