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

"This paper aims to inform the current debate, focusing in particular on competitive resource allocation systems (also referred to as mineral rights auction or tender systems), which certain stakeholders have proposed as an alternative to the existing FIFA system. The focus on competitive resource allocation systems is also informed by Minister of Mineral Resources Susan Shabangu’s 2012 budget vote speech, in which she stated that the Department of Mineral Resources intended to begin a process of auctioning lapsed or revoked mining licences.The literature on resource allocation systems generally recognises three likely advantages of competitive resource allocation systems. They can secure a larger share of economic rents of mineral resources to the state, address informational disadvantages of the state vis-à-vis private companies, and, when well designed, engender greater transparency in the rights allocation process. Competitive bidding systems produce best results where existing geoscience data indicates the presence of potentially high-value mineral deposits. Well-structured competitive bidding systems have the advantage of stipulating clear and transparent allocation rules that limit opportunities for favouritism and abuse. However, this requires that evaluation criteria, timelines, geological data and other critical information related to bids are clear to all potential bidders."