Contentious draft legislation which critics contend will stifle growth and investment in the local oil and gas sector was passed by MPs in the National Assembly on Wednesday.
The mineral and petroleum resources development amendment bill seeks, among other things, to allow the state a 20% free stake in all new energy projects, as well as allowing it to buy an unspecified additional share at an “agreed price”.
It came under immediate fire in the House from the Democratic Alliance, whose chief whip, Watty Watson, attempted to prevent debate on the measure through a motion to have it removed from the order paper because it was incorrectly tagged.
Put to vote, this motion was defeated.
In a declaration in the House, DA MP James Lorimer said he had received a legal opinion the bill was unconstitutional.
“This opinion says that the provision [in the bill] that allows the state to be given a 20% free carry interest in any oil or gas drilling operation, amounts to an additional tax.”
Any bill that introduced a tax could only be a money bill, which had to be introduced by the minister of finance, as required by the Constitution.
“[It] should not be tagged a section 76 bill, as this has been. So this bill has been wrongly tagged, and introduced, and thus is unconstitutional.
“As it stands, it is doomed, and we are wasting our time,” he said.
Speaking later during debate on the measure, he warned it could severely damage South Africa’s mining and energy sector.
“We have before us a bill that even in the most benign interpretation is going to severely damage our mining and energy industry.
“It can simply be described as a charter for crony enrichment, that will cost us investment and will cost us jobs,” he said.
The bill was approved last week by Parliament’s mineral resources portfolio committee, despite strong objections from opposition parties.
In a statement at the time, Lorimer said the practical effect of passing it would be that any oil and gas venture would have to turn over a significant portion of any finds it made for free.
“It could then be forced to hand over the remaining rights to those finds at a forced sale price,” he said.
In a statement earlier this week, Offshore Petroleum Association of SA chairperson Sean Lunn said the bill’s proposed measures “will have a chilling effect on investment in a high-risk and capital-intensive industry such as ours”.
Independent Democrats MP Lance Greyling told the House on Wednesday that the bill was of “major concern” for the fledgling oil and gas sector.
It would, if enacted, “ensure this industry never gets off the ground in South Africa” because investors would not put money into it.
He described it as “absolutely ludicrous”.
Freedom Front Plus MP Anton Alberts said the amendment bill “smacks of nationalisation by stealth”.
The Inkatha Freedom Party said it would abstain from voting on the bill.
Responding to debate on the measure, Mineral Resources Minister Susan Shabangu said the bill would not deter investors.
“We’ve just completed a visit to Canada; the MPRDA is accepted by international investors.”
She said those MPs opposed to the measure were not interested in change.
“You’re stuck in the past,” she told them.
The bill was passed by the National Assembly, after calls for a division from the DA.
It was finally passed by 226 votes to 66, with eight abstentions, and will now go to the National Council of Provinces for concurrence.