Minerals bill criticised

An expert says the bill poses a risk to future investment in the emergent oil and gas industry.

Mineral Resources Minister Susan Shabangu. Picture: EWN.

JOHANNESBURG - Controversial new mining legislation is not only out of step with best international practice but poses a risk to future investment in the emergent oil and gas industry, ENS Africa oil and gas expert Luke Havemann said on Thursday.

The Mineral and Petroleum Resources Development Amendment Bill was passed in the National Assembly in Cape Town on Wednesday.

It provides for the government to claim a free 20 percent stake in any new oil, gas or mining project.

Mineral Resources Minister Susan Shabangu says the bill is vital to ensure all South Africans benefit from the country's mineral wealth.

But the proposed law was met with caution by members of the industry and opposition parties.

Havemann says government taking a 20 percent stake is reasonable and is something that has been in the pipeline for a long time.

"This is actually not really the heart of the issue in this instance - we have seen that coming for some time. The real problem is what took place during the course of last week where there was an amendment made to the bill at the last minute."

He says the changes were made without consultation.

"It was something that was pushed through rapidly without fair consultation."

Havemann said last week, the removal of a further participation interest of up to a maximum of 30 percent meant government was able to acquire a further interest of up to 80 percent.

"This is where claims of expropriation and nationalisation have come into play."

He says there could be a legal challenge to the changes and adds at the same time, investors could decide to start looking elsewhere.

"There is potential for legal intervention. The Democratic Alliance is talking about bringing litigation into this issue."

Havemann says the overarching legislation is problematic.

"Just the very fact that we govern our oil and gas resources under the same piece of legislation as our terrestrial mining is out of step with best international practice."

He says the change points to a sense of entitlement.

"As the custodian of resources, the state has to act in the best interest of the populous in striking the right balance between attracting industry, which has to perform a very high risk and very capital intensive endeavours, and at the same time acquiring reasonable profits from that to invest back into the country."

The bill now has to go to the National Council of Provinces and then to President Jacob Zuma for a signature.