SA mining industry decimated by regulatory uncertainty

Parliament should review the minerals and mining legislation and regulations as a first step towards having its members meet their obligations under the oath they swore to uphold the Constitution. Applying the rule of law would eliminate the unconstitutional discretionary powers contained in the mining laws that are the primary cause of the uncertainty that hangs like a cloud over the South African mining industry. The benefits would be that the mining industry would regain its former economic stature, the economy would grow, investment would increase and so would employment.

Mining executives made a strong case for decreasing the regulatory uncertainty in the mining industry at the recent Mining Indaba. South African opinion makers, including the members of the embattled mining industry, should support the ideal of the rule of law and attempts to ensure that anyone involved in writing legislation and regulations does so in accordance with the law. This will only become possible if people with influence in public affairs become fully aware of what the term means, realise the significance of the fact that it is a founding provision of the Constitution, and recognise that all South African legislation and regulation must be consistent with it. These are, moreover, the individuals who must be constantly reminded of the perils of inattention.

The importance of the rule of law: “If the ideal of the rule of law is a firm element of public opinion, legislation and jurisdiction will tend to approach it more and more closely. But if it is represented as an impracticable and even undesirable ideal and people cease to strive for its realisation, it will rapidly disappear. Such a society will quickly relapse into a state of arbitrary tyranny.” (Friedrich Hayek, The Constitution of Liberty)

In South Africa it is not so much that the ideal is “represented as an impracticable and even undesirable ideal” but that its true significance has not been realised or understood by the general public or the electorate. Some law-makers, while aware of the constraints imposed by the rule of law, have sought, deliberately, to subvert it.

Owners of minerals, mining, and prospecting rights, and their employees, have been very badly treated by legislation and regulations post-2001 that, unconstitutionally, placed far-reaching discretionary powers in the hands of the Department of Mineral Resources. What is more, the legislation did not limit those powers as required by the rule of law. Such instances of failure to respect the rule of law are at the root of authoritarian government.

Section 1(c) of the Founding Provisions in Chapter 1 of the Constitution, states that among the values upon which South Africa is founded is, “Supremacy of the constitution and the rule of law (emphasis added). Yet the executive branch of government has succeeded in passing legislation through Parliament, such as the minerals legislation granting arbitrary powers that conflict with the rule of law. As Professor Friedrich Hayek warned, arbitrary decision-making by governments would occur if the people cease to strive for the realisation of the ideal of the rule of law.

For law to be consistent with the imperatives of the rule of law it must be clear, predictable, accessible, non-contradictory and not be applied retrospectively. Any law or regulation that makes provision for discretionary powers, must also incorporate the objective criteria by which those powers are to be exercised. The enabling legislation must also stipulate the purpose or purposes for which the powers may be exercised. In addition, and this is an important factor in evaluating conditions for mining in South Africa, all law must apply the principle of equality before the law.

The uncertainty which the mining executives complain about is a direct and predictable consequence of the exercise of arbitrary discretionary powers. Conducting a major and complex business, such as mining, under circumstances of perpetual regulatory uncertainty, adds significantly to the costs and reduces the profitability of the undertaking.

Everyone involved in a SA mining enterprise, including shareholders, managers and employees, pays part of the cost imposed by regulatory uncertainty. They would be justified in claiming that, apart from those costs they do not enjoy the benefits promised them in the Bill of Rights which, “enshrines the rights of all people in our country and affirms the democratic values of human dignity, equality and freedom”.

Members of South Africa’s Parliament have sworn to uphold the country’s constitution and legal system and yet many are either unaware of what they have sworn to uphold or have chosen to ignore what they said in their oath. Given political dynamics, the opposition political parties have little chance in the foreseeable future of halting the advance of authoritarian government. One real hope of protecting the freedom of citizens lies with the Constitution, the courts and the force of public opinion. Although the rule of law is a Founding Provision of the South African Constitution and should act as a powerful brake on excessive interventionism by the executive branch of government, it has not been effectively enabled to play its proper deterring role.

Parliament, after reviewing the mining and minerals legislation and regulations, should continue their review to eliminate any other instances of legislative provisions that are inconsistent with the rule of law. If Parliament pursued such a course, the members would fundamentally improve South Africa’s legal system and perform a great service to the citizens of South Africa, enable higher economic growth, jobs growth and reduce poverty.

Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with recognition to the author.
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