Assessing Competitive Resource Tenders as an Option for Mining Rights Allocation in South Africa

The paper examines the debate surrounding the Mineral and Petroleum Resources Development Amendment Bill of 2013, specifically the potential shift from a 'first-in, first-assessed' (FIFA) system to competitive bidding for mining rights. It outlines the advantages of auctions—such as rent maximisation and increased transparency—while warning of risks including high administrative burdens, delays in mine development, and the potential for corruption in weak institutional environments. Using examples from Afghanistan and Liberia, the authors argue that any such system must be clearly enshrined in law to limit ministerial discretion and should ideally be a mixed system based on the availability of geological data.

• Competitive resource allocation systems offer three primary advantages: the ability to secure a larger share of economic rents for the state, the mitigation of the state's informational disadvantage compared to private firms, and increased transparency in the allocation process if well-designed.
• The 'first-in, first-assessed' (FIFA) system is generally more effective for encouraging private sector exploration in areas where the state lacks detailed geological data, as it is administratively simpler and allows for faster application processing.
• Policymakers can implement a mixed system rather than choosing between a pure FIFA or auction approach, using FIFA for unknown areas and competitive bidding for areas where geoscience data indicates high-value deposits, such as lapsed or revoked rights.
• Competitive bidding does not have to rely solely on the highest price; it can incorporate pre-qualification criteria related to social, environmental, and transformation goals, such as those in South Africa's Mining Charter.
• Auction systems can lead to significant delays in mineral development and high transaction costs for the state, as seen in Afghanistan where the Aynak copper deposit produced no copper five years after the contract award.
• Weak institutional capacity can lead to corruption and mismanagement in auction systems, as demonstrated in Liberia where the allocation of the 'western cluster' iron ore deposits faced allegations of impropriety and subsequent legal challenges.
• To ensure predictability and attract investment, the design and implementation of any rights allocation system must be enshrined in legislation to prevent excessive ministerial discretion and the 'rule of law' violations.

APA

Bello, O., Benkenstein, A., & Harvey, R. (2013). Assessing Competitive Resource Tenders as an Option for Mining Rights Allocation in South Africa. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2013/11/Occasional-Paper-159.pdf

Chicago

Bello, Oladiran, Alex Benkenstein, and Ross Harvey. Assessing Competitive Resource Tenders as an Option for Mining Rights Allocation in South Africa. South African Institute of International Affairs, 2013. https://saiia.org.za/wp-content/uploads/2013/11/Occasional-Paper-159.pdf.

Wikipedia

{{cite report |last1=Bello |first1=Oladiran |last2=Benkenstein |first2=Alex |last3=Harvey |first3=Ross |title=Assessing Competitive Resource Tenders as an Option for Mining Rights Allocation in South Africa |publisher=South African Institute of International Affairs |date=November 2013 |url=https://saiia.org.za/wp-content/uploads/2013/11/Occasional-Paper-159.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bello2013assessing, author = {Bello, Oladiran and Benkenstein, Alex and Harvey, Ross}, title = {{Assessing Competitive Resource Tenders as an Option for Mining Rights Allocation in South Africa}}, institution = {South African Institute of International Affairs}, year = {2013}, month = nov, url = {https://saiia.org.za/wp-content/uploads/2013/11/Occasional-Paper-159.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }