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Former President Thabo Mbeki recently ordered the Department of Minerals and Energy to conduct a health and safety audit of all mines. South Africa’s deep mines and lack of safety history are causing increasing concern, and government and industry have finally begun taking steps to increase the health and safety of mineworkers nationwide.

The Treasury recently released the third draft of the Mineral and Petroleum Resources Royalty Bill for a final round of public comment and parliamentary review. The Treasury has modified the royalty calculation so as to take profitability into account. However, the bill may still suppress the expansion of companies already paying royalties to third parties (other than the state).

The government has published the latest version of the Mineral and Petroleum Resources Development Amendment Bill proposing changes to the Mineral and Petroleum Resources Development Act. Certain aspects of the latest bill remain contentious and suggest a continued shift of regulatory power to the government and the Department of Minerals and Energy in the mining industry.

The Mineral and Petroleum Resources Development Act eliminated private ownership of minerals and declared that all minerals belong to the South African nation, with the South African government as the custodian of these minerals. The question has arisen as to whether the enactment of the act effectively expropriated mineral rights from individual South African landowners.

The concept of state custodianship under the Mineral and Petroleum Resources Development Act gives rise to the notion that private companies should pay royalties to the state in consideration for the right to carry out mining activities on South African land. The Mineral and Petroleum Resources Royalty Bill tries to reconcile the objectives of the act with the broader economic objectives of the mining sector.

Pursuant to the Mineral and Petroleum Resources Development Act, holders of old order rights must apply to the Department of Minerals and Energy Affairs for their conversion into new order rights. However, the conversion of old order prospecting and mining rights has been a slow process and tensions are mounting within the mining industry as to the reasons for the delays.

South Africa's 2006 budget was announced on February 15 2006 by the minister of finance. This update highlights the changes that are likely to affect foreign energy investors. Among other things, the government intends to appoint a taskforce to investigate the possibility of sharing windfall gains with the public (eg, sharing Sasol's profits with motorists).

South Africa accounts for nearly half of the world's reserves of gold, platinum group metals and vanadium, and has the vast majority of the world's chromium and manganese reserves. South Africa is thus likely to continue to attract significant capital from foreign investors. Recent legislative reform (eg, the Mining Law) mainly implemented fiscal and anti-discriminatory measures.