Evaluating the regulatory alignment between special economic zones and governmental beneficiation objectives in South Africa

Abstract

For a long time, South Africa has been leveraging its mineral wealth to obtain national growth and development. However, despite the abundance of minerals, the extraction thereof does not necessarily translate into direct benefit for the South African society as a whole. Local beneficiation has been touted as vital in ensuring that these mineral resources create national value beyond the mere extraction thereof. A plethora of policies have been introduced to foster local beneficiation. However, as these are mere policies, there is little by way of enforceability. This study examines the regulatory instruments governing beneficiation in contrast with the various goals set out in policies for beneficiation. The Musina-Makhado Special Economic Zone (MMSEZ) project is then used as a practical example of how beneficiation is currently being fostered in South Africa. Specific focus is placed on whether the MMSEZ model can achieve the goals for beneficiation as set out in the policies. This is done by doctrinal legal research methodology, using primary legislation policies and commentary on the policies. Additionally, site-specific agreements relating to the MMSEZ aided in the study as practical application. The study raises various issues that can impact how beneficiation should be regulated to ensure benefit. From a review of the legislation and policies providing for beneficiation, it becomes apparent that the definition of beneficiation as contained in the Mineral and Petroleum Resources Development Act No. 28 of 2002 (MPRDA) is narrow in that it only regards downstream linkages within it definition of ‘beneficiation’. When contrasted with the various policies providing for beneficiation, it becomes evident that the meaning ascribed to beneficiation by the various governmental sectors is far broader than as defined in the MPRDA. The study also examines the extent of the Minister of Mineral Resources’ powers to regulate beneficiation and concludes that they are limited to mineral rights holders only. As a consequence, beneficiation plants are effectively unregulated insofar as compliance with the goals for beneficiation is concerned. As an example of the far-reaching effect of the lack of definitive regulation, the MMSEZ's structure and critique thereof are examined. In contrasting the goals for the MMSE and those set for beneficiation, it is clear that there is significant overlap. However, once the critique is examined, the study shows that insofar as the beneficiation plants themselves are concerned, the contribution of these plants to obtaining the goals for beneficiation was dubious at best. The study suggests that there is a missing link between the lofty ideals and assumed benefits arising from local beneficiation and the necessary mechanism to enforce the achievement of such benefit. It suggests that, as the powers of the Minister of Mineral Resources are limited to mining right holders only, while beneficiation affects various governmental departments, a centralised regulatory authority should oversee beneficiation. By broadening the definition of beneficiation, the intrinsic upstream and side stream linkages could also be regulated by this centralised regulatory authority.