South Africa intends to suspend the granting of applications for prospecting and mining rights as well as any renewals pending a court case to review new mining laws, the Mineral Resources Minister Mosebenzi Zwane said on Thursday.
Such a move could seriously hamper growth and investment in South Africa’s mining sector, already beset by policy uncertainty, depressed prices, soaring costs and often violent social and labour strife.
“The moratorium would ensure that any applications … are concluded in terms of the 2017 Mining Charter,” Zwane said in a statement.
The Charter is part of a wider empowerment drive in South Africa designed to rectify the disparities of apartheid that persist more than two decades since the end of white minority rule in 1994.
The Chamber of Mines said it believed the move to suspend new mining and exploration rights was “unlawful”, damaging to the sector and was beyond the minister’s powers under the Mineral and Petroleum Resources Development Act.
“The effect of the notice is to pave the way for the Minister to issue a further notice to prevent the issuing of new mining and exploration rights which will have an immediate negative impact on investment in the sector,” Chamber said.
Zwane and the Chamber have been at loggerheads over the implementation of a new mining law, which includes raising the level of black ownership in mining firms.
Mining shares fell to more than one-year lows when Zwane released the revised mining charter last month, giving resource firms 12 months to meet a new 30 percent minimum for black ownership, up from 26 percent.
The Chamber has applied to the High Court to prevent implementation of the mining charter.
On Friday, the chamber said the minister had given a written undertaking that the new code would not be implemented until a court ruled on the case.
The latest move by Zwane opened up a new area of contention.
The Chamber, which has complained that mining companies were not properly consulted about the revisions to the charter, said if the minister did not back down on the mining moratorium, it would challenge the move in court.
“The Chamber is writing to the Minister to request his immediate withdrawal of the notice, failing which the Chamber will apply for an urgent interdict to suspend and review the notice,” the Chamber said.
The mining code was introduced in 2002 to increase black ownership in the mining industry after years of exclusion under apartheid. The sector accounts for about 7 percent of South Africa’s economic output.
Ratings agency Moody’s said the new rules seeking to accelerate black ownership in South Africa’s mining industry would deter investment, raise costs and diminish cashflow generation. The mining minister has defended the new code, calling it a “win-win” for all.