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  • GDP, US$bn: 295.0
  • GDP per capita, US$: 5,266.7
  • Population, mn: 54.5
  • Inflation, CPI ave: 6.3
  • FX, LCY/US$: 14.7
  • Budget Balance, % of GDP: -4.0
  • Mining GVA, US$bn: 25.8
  • Mining Industry Value, US$bn: 35.1
Regulatory Risk Rating
38
0
100
Score: 38
Severe Risk
The South African mining code (MPRDA) was constructed, amended, and will be further amended (if current proposals are adopted), with the object of increasing government control over, and increased economic returns from, the mining sector; the Section 11 "transfer of controlling interest" provisions ensure governmental control over the approval of new participants in the industry and infuses BEE influence over foreign holdings. This, of course, was the object. Over the longer term, foreign investment will continue to diminish from Western sources in favour of the BRIC countries that are more accustomed to meeting this dynamic with a countervailing power of direct foreign government influence. For the average investor in the United States, Australia, Canada or Europe, we suggest that great caution be exercised before investing.

Corruption Potential Index

Score: 50
Moderate Corruption Potential

Corruption Risk Index

Score: 79
Low Corruption Risk

Regulatory Risk Rating

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Environmental Overview Commentary plus sign

SOUTH AFRICA - ENVIRONMENTAL REGULATIONS

GENERAL

South Africa, officially the Republic of South Africa, sits on the southern tip of the African continent, with Namibia, Botswana, Zimbabwe, Mozambique, Swaziland and Lesotho bordering. It is the largest country in Southern Africa and the 9th largest on the African continent, with an area of 1.221 million km². Its coastline stretches across two oceans - the South Atlantic and Indian, with only Somalia and Madagascar having longer African coastlines. The South African terrain is primarily an interior plateau, with low-lying coastal regions and mountains in the east, where the Great Escarpment borders the central plateau. The country has a varied climate, broadly speaking it is considered to be semi-arid although multiple climatic zones exist throughout the region.

South Africa is one of the world’s seventeen mega-diverse countries. Its plant life is amongst the richest in the world, with over 20,000 species of plants reportedly found in the region. The country is also home to over 220 species of mammal and over 850 species of bird. While poaching remains an issue in the country, South Africa’s system of national parks and conservation efforts have proved successful in reducing the poaching of species such as elephants, rhinos and the country’s large big cat population.

Pollution of air and water, the introduction of alien species, poaching, climate change, water shortages, soil erosion and desertification are amongst the environmental challenges faced by the country.

PRINCIPAL LEGISLATION AND REGULATOR

The legal framework for environmental assessments and environmental protection in South Africa has been undergoing reform for several years. Most recently, in 2015, the government published the National Environmental Management Laws Amendment Bill for public comment and in November of 2015 promulgated the Financial Provisioning Regulations (FP Reg.), which apply to prospecting, exploration and mining or production operations. The on-going legislative reform is part of the ‘One Environmental System’ effort, which aims to bring the mining industry within the scope of the environmental management system that has applied to other industries for many years, as well as to streamline the overall environmental permitting process. As a result of the on-going reform the EIA process, and more generally the requirements for environmental protection and management, are in a continuing state of flux in South Africa. The system is highly burdensome, complex and reportedly inconsistently applied and enforced by the government.

At present, a wide variety of environmental legislation is pertinent to the mining sector including: the National Environmental Management Act 1998 (NEMA), as amended by the National Environmental Management Amendment Act 2008 (NEMAA) and the National Environmental Management Laws Amendment Act 2014 (NEMLAA); the Mineral and Petroleum Resources Development Act 2002 (MPRDA) as amended by the Mineral and Petroleum Resources Development Amendment Act 2008 (MPRDAA); the Mineral and Petroleum Resources Development Regulations 2004 (MPRDA Reg.); the National Environmental Management Waste Act 2008 (Waste Act); the Regulations Regarding the Planning and Management of Residue Stockpiles and Residue Deposits from a Prospecting, Mining, Exploration or Production Operation 2015 (Mining Residue Regulations); and the EIA Regulations 2014. In addition, the FP Reg. mentioned above apply to applicants and holders of mineral rights and regulate financial provisions for the management, rehabilitation and remediation of environmental impacts, which arise from mining activities and operations (see s. 2 FP Reg.).

The NEMAA and MPRDAA collectively provided for the competency over environmental authorisations for all mining activities (including prospecting, exploration etc.) to be transferred from the Minister of Mineral Resources to the Minister for Environmental Affairs, with NEMA, rather than the MPRDA the governing legislation. Transitional administration periods were outlined, managing the process until December 2017 when the Minister for Environmental Affairs under NEMA would become the competent authority for environmental authorisations. However, although such environmental authorisations will now be regulated under the NEMA rather than the MPRDA as planned, the NEMLAA surprisingly reversed the transition of power from the Department of Mineral Resources (DMR) to the Department of Environmental Affairs (DEA). Thus as it stands the Minister of Mineral Resources, now operating under the NEMA, is responsible for environmental authorisations, as well as waste management licences under the Waste Act, for mining and related activities. Meanwhile the Minister for Environmental Affairs is the appeal authority.

EIA PROCESS

According to section 5A(a), MPRDA “No person may prospect for or remove, mine, conduct technical co-operation operations, reconnaissance operations, explore for and produce any mineral or petroleum or commence with any work incidental thereto on any area without…a environmental authorisation.” In addition, Listing Notice 1, published in accordance with section 24D, NEMA identifies any activity requiring a prospecting right under section 16, MPRDA and any activity requiring a mining permit under section 27, MPRDA (as well as certain decommissioning activities) as requiring an environmental authorisation (see Activity Numbers 20, 21 and 22, NEMA Listing Notice 1, 2014). While the Listing Notice is silent as to activities under a Mining Right the terms of the MPRDA clearly indicate that such applicants must also acquire an environmental authorisation prior to the commencement of activities (s. 24F, NEMA; see also ss. 16(1), 22(1), 27(2) and 38A(2), MPRDA).

Every environmental authorisation must, as a minimum, ensure that: adequate provision is made for the on-going management and monitoring of the impacts of the activity on the environment throughout the life cycle of the activity; the property site or area is specified; and provision is made for the transfer of rights and obligations (s. 24E, NEMA). Prior to submitting an environmental authorisation application, applicants must appoint an Environmental Assessment Practitioner (EAP) to manage the application, who must meet the requirements outlined in the EIA Regulations (see Reg. 12 and 13, EIA Regulations). The EAP must then determine the level of assessment applicable to the application, taking into account any notices, guidelines or advice from the competent authority (Reg. 15(1), EIA Regulations). Reg. 16 outlines general requirements for applications and, in line with Reg. 16 (3)(b), the DMR has published a template document to be completed by the EAP, which further details the requirements of the application. Where applicable, applications for environmental authorisations may only be submitted after the DMR has accepted the application for the right or permit under the MPRDA. Applications for authorisations on private land require the written consent of the landowner before an application is made (Reg. 42(1), EIA Regulations).

Two types of assessment are provided for within the EIA Regulations: a ‘Basic Assessment’ and a ‘Scoping and Environmental Impact Reporting’ Assessment. In the case of mining and prospecting activities, at present, only a ‘Basic Assessment’ is required (see s. 3(2), NEMA Listing Notice 1, 2014) alongside the application. However the requirements of the DMR’s template form, issued pursuant to Reg. 16 (3)(b), vary slightly from the requirements of the EIA Regulation regarding the ‘Basic Assessment’. Therefore applicants are advised to follow the format of the template form and contact the DMR if unsure about any of the requirements within the NEMA, EIA Regulations or form itself. Regardless the requirements of the EIA Regulations are detailed below and the template form is included under ‘Environmental Law and Regulations’ on this web page.

The requirements for a Basic Assessment are detailed in Reg. 19 and Appendixes 1 and 4, EIA Regulations, a summary of which is provided below:

Application Requirements (Reg. 19, EIA Regulations): Applicants are given 90 days from the date on which the application is received by the Minister to submit:

  • A basic assessment report (BAR) and an environmental management programme report (EMPR) and including any specialist reports compiled, which have been subjected to a public participation process (PPP) of at least 30 days and have incorporated any relevant comments received during said process. Alternatively, if the PPP resulted in significant changes or new information relevant to the BAR and / or EMPR applicants may submit a notice to the Minister that, within 140 days from the date the application was received, following a second PPP, the BAR and EMPR (and closure plan if required) will be submitted. Both the BAR and the EMPR must comply with the requirements of the FP Reg. (see ‘Additional Requirements’ below).

 

  • A closure plan must also be submitted where the application for environmental authorisation relates to the decommissioning or closure of a facility. The closure plan must also comply with the requirements of the FP Reg. and meet the requirements of Appendix 5, EIA Regulations.

 

BAR Requirements (Appendix 1, EIA Regulations): Generally speaking the environmental outcomes, impacts and residual risks of the proposed activity must be well defined in the BAR, which aims to identify the best location for the activity, the impacts of the activity and the mitigation and management measures for such impacts (see. s. 2 (a)-(j), Appendix 1, EIA Regulations). The full content requirements of the BAR are listed in Appendix 1 and include:

  • Details of the EAP and his / her expertise; the location of the activity; a description of the activity and the need and desirability of it; activity context and environmental factors – including full details of the regulatory framework applicable; the time period for the environmental authorisation; the proposed site for the activity and reasons for its selection; a description of the process undertaken to identify risks and impacts; an assessment of all risks and impacts; an environmental impact statement; a summary of the findings and recommendations of any specialists reports; the proposed impact management objectives; a description of any assumptions or gaps in knowledge; a reasoned opinion as to whether an authorisation should be granted and any applicable conditions; an oath or affirmation regarding the content from the EAP; and details of financial provisions.

 

EMPR Requirements (Appendix 4, EIA Regulations): EMPR must comply with section 24N, NEMA which, together with Appendix 4, lists the content requirements and objectives for the EMPR which include:

  • Details of the EAP and his / her expertise; a description of the aspects of the activity covered by the EMPR; a description of the impact management objectives, outcomes and actions; the method and frequency of monitoring impact management; the individuals responsible for the implementation of impact management; the time period for measures of impact management to be implemented; the mechanisms for impact management and compliance monitoring; and an environmental awareness plan.

 

Where an environmental impact assessment process is undertaken as part of the application it must be done so in accordance with Appendix 3, EIA Regulations and include the content outlined in section 24(4)(b), NEMA. Part A of the DMR’s template form ‘Scope of Assessment and Environmental Impact Assessment Report’ suggests that an EIA is required and the template provides clear guidance on the necessary content.

All applications must be submitted to the Minister via the DMR (Reg. 6(2), EIA Regulations). Section 24O, NEMA lists the considerations which the Minister may take into account when considering the application, including: any pollution, environmental impacts or environmental degradation likely to be caused if the application is approved or refused; measures that may be taken to protect the environmental from harm; measures that may be taken to prevent, control or mitigate likely harm and impacts; the ability of the applicant to implement mitigation measures; the ability of the applicant to meet the financial provision requirements; and comments from organs of the state that have jurisdiction over any aspect of the activity. (For a full list of considerations see s. 24O(1), NEMA). In addition, specific consultation requirements are placed upon the Minister, who is required to submit a request for comment by registered mail to the Director-General or provincial head of department of any state department that administers a law relating to a matter affecting the environment. Departments then have a period of 30 days to submit any comments relating to the application (see s. 24O(2) – (3), NEMA).

Upon receipt of the reports and information listed above the Minister must, within 107 days, grant or refuse the environmental authorisation and provide confirmation in writing (Reg. 20(1), EIA Regulations). Within a further five days the Minister must then confirm to the applicant in writing the decision, the reasons for the decision and, if necessary, available appeals (Reg. 4(1), EIA Regulations). In return the applicant must, within eight days of the decision on the application, provide all registered interested and affected parties with the decision and reasons and, if necessary, available appeals (Reg. 4(2), EIA Regulations). Authorisations may be suspended and withdrawn by the Minister (see Regs. 36 – 40, EIA Regulations).

Before the Minister can grant an environmental authorisation, applicants must comply with the terms and obligations prescribed in the FP Reg. (s. 24P(1), NEMA). (See also ‘Additional Requirements’ below).

ADDITIONAL REQUIREMENTS

The FP Reg. were promulgated in 2015 with the aim of regulating financial provisions for the costs associated with the undertaking or management, rehabilitation and remediation of environmental impacts from prospecting, exploration, mining or production operations (Mineral Activities) and potential future environmental impacts. The FP Reg. apply to all holders of rights or permits as defined under the MPRDA (Rights Holders). Rights Holders must determine and make financial provision to guarantee the availability of sufficient funds to undertake rehabilitation and remediation of the adverse environmental impacts of Mineral Activities “to the satisfaction of the Minister” (Reg. 4, FP Reg.). The method for determining the amount of financial provision required is detailed in Regulation 6 and requires detailed costing of the measures required for annual rehabilitation, final rehabilitation, decommissioning and closure (based on a decommissioning and mine closure plan) and remediation of latent or residual environmental impacts (based on an environmental risk assessment report). Calculations must be reviewed and financial provisions adjusted accordingly on an annual basis (Reg. 11, FP Reg.); all determinations, reviews and assessments must be undertaken by a specialist (Reg. 9 (1), FP Reg.) and various financial vehicles are available for the financial provision (see Reg. 8, FP Reg.). Rights Holders must ensure the financial provision is, at any given time, equal to the sum of implementing the necessary measures for a period of at least 10 years (Reg. 7, FP Reg.). Rights Holders must submit various documentation to the Minister including an annual rehabilitation plan and environmental risk assessment report as detailed in Reg. 12, FP Reg. which must be signed off by the CEO or equivalent and an independent auditor (Reg. 13(3), FP Reg.). The Minister may only grant an environmental authorisation when the financial provision has been determined and the relevant plans and reports submitted to the Minister, alongside proof of payment or arrangements to provide the financial provision prior to commencing Mineral Activities (Reg. 14(1), FP Reg.; see also Reg. 10, FP Reg.). The Minister must acknowledge receipt of documentation within 10 days and approve or reject the documentation within 60 days (Reg. 15(1), FP Reg.). In the case of rejection, Rights Holders have 45 days to submit revised documentation. Transitional arrangements are made for financial provisions made under the old MPRDA Regulations 2004 (see Chapter 4, FP Reg.). The sum of the financial provision and the details as to how the sum was reached must also be contained within the EMPR discussed above, copies of which must be accessible on the internet if possible, at the site of the Mineral Activities and accessible to the public on request (Reg. 13(1), FP Reg.). Contraventions of the FP Reg. are punishable by up to 10 years imprisonment, an appropriate fine or both (Reg. 19, FP Reg.).

According to section 24S, NEMA residue stockpiles and residue deposits must be deposited and managed in accordance with the Waste Act, on any site demarcated for that purpose in an EMPR or environmental management plan (EMP). In July 2015, the government promulgated the Mining Residue Regulations under the Waste Act, which aim to regulate the planning and management of residue stockpiles and residue deposits from prospecting, mining and exploration or production operations. Rights Holders with operations to which the Mining Reside Regulations apply must first obtain a Waste Management Licence under the NEMWA, for which the Minister of Mineral Resources remains the competent authority. A Basic Assessment (as discussed above) will need to be conducted as part of the application for a waste management licence for the establishment or reclamation of residue stockpiles or deposits resulting from activities which require a Prospecting Right or Mining Permit under the MPRDA (‘Category A Activities’) (see s. 3, List of Waste Management Activities, 2013 and s. 2, List of Waste Management Activities Amendments, 2015). However, residue stockpiles or deposits resulting from activities which require a Mining Right, Exploration Right or Production Right (‘Category B Activities) under the MPRDA require a ‘Scoping and Environmental Impact Reporting’ Assessment as provided for under the NEMA (see s. 4, List of Waste Management Activities, 2013 and s. 3, List of Waste Management Activities Amendments, 2015). Full requirements for the assessment are provided for under Part 3, EIA Regulations. Stockpiles must be designed by a registered civil or mining engineer (Reg. 7(1), Mining Residue Regulations) and specific requirements apply to site selection (Reg. 6, Mining Residue Regulations). Contraventions of the Mining Residue Regulations are punishable by up to 15 years imprisonment, an appropriate fine or both (Reg. 14, Mining Residue Regulations).

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Mining Overview Commentary plus sign

SOUTH AFRICA - MINING REGULATIONS

GENERAL

South Africa, officially the Republic of South Africa, is located in southern Africa on the tip of the African continent. The country is bordered by Namibia, Botswana and Zimbabwe to the north; Mozambique and Swaziland to the northeast; the South Atlantic Ocean and Indian Ocean to the south, east and west; and Lesotho which the country surrounds entirely.

According to the World Bank, South Africa has the second largest economy by GDP in Africa (Nigeria having the largest); however it is also a dual economy, with one of the highest levels of inequality in the world. Mining has, of course, been a key industry in South Africa for years, since the discovery of diamond (1867) and gold (1887) deposits in the 19th century. Today the country is reported to have the world’s most valuable mineral resources with an estimated worth of USD$2.5 trillion. According to the Chamber of Mines in 2014 the sector contributed R18 billion (around USD$1.2billion (Mar 2016)) to the country’s GDP and employed almost 500, 000 people. Alongside gold and diamonds other key mineral resources include chrome, ilmenite, manganese, palladium, platinum, rutile, vanadium, vermiculite and zircon.

South Africa ranked in 78th place out of 109 jurisdictions surveyed in the Fraser Institute’s Policy Perception Index, 2015. The country has suffered a considerable decline in ratings over recent years and the challenges facing the minerals sector are numerous. In the past decade issues faced include: a lack of skills both within government and industry (largely as a result of the continued emigration of skilled workers); an increasing tendency of the government to articulate mining policy through guidelines and charters, rather than legislation (and a failure on behalf of government to provide sufficient clarity when ambiguities invariably arise); the imposition of black economic empowerment (BEE) in ownership and management structures; disaffected labour relations; uncertainty and unreliability of power supply; and an increasing ‘take’ by the South African government. In the latter regard this unrelenting long march in the economic expropriation of mineral assets is likely to continue for some time to come owing to a variety of political factors.

There is little doubt that the Fraser Institute rating will continue to fall should the Mineral and Petroleum Resources Development Bill 2013 (MPRDA Bill) ever be adopted. However progress with reconsideration of the MPRDA Bill, following President Zuma’s referral back to Parliament in early 2015 has been slow. At the time of writing (March 2016) it is believed that further parliamentary committee meetings to consider the MPRDA Bill have been scheduled throughout the coming year, with little indication of when it will be finalised; an issue which is causing great uncertainty in the industry. (For further discussion of the MPRDA Bill and the latest proposed amendment to the Mining Charter specifically in relation to Historically Disadvantaged South Africans (HDSA) see ‘Future Amendments’ below).

PRINCIPAL LEGISLATION AND REGULATOR

At present the primary legislation relevant to the South African minerals industry is the Mineral and Petroleum Resources Development Act 2002 (MPRDA), alongside the Mineral and Petroleum Resources Development Regulations 2004 (MPRDA Reg.) and the Broad Based Socio-Economic Empowerment Charter (Mining Charter).

The Department of Mineral Resources (DMR), headed by the Minister of Mineral Resources (Minister) is responsible for overseeing the mining industry in South Africa. According to section 3, MPRDA mineral resources in South Africa are the property of the State and the Minister is responsible for granting mineral rights in the country. The DMR also has numerous Regional Offices (headed by Regional Managers) to which the Minister and the DMR can delegate responsibilities.

GRANTS AND FORMS OF MINERAL TITLE

Mining titles are granted under the MPRDA on a first-come / first-serve basis; however according to section 9, MPRDA, preference may be given to Historically Disadvantaged South Africans (HDSA) if multiple applications are received on the same day.

The MPRDA provides for the following:

  • Reconnaissance Permission (RP): A RP allows the holder permission to enter the relevant land and conduct reconnaissance operations. The holder must give written notice to the landowner or occupier at least 14 days before entering the land (s. 15(1), MPRDA). An RP does not give the holder a priority right to be granted a prospecting right, mining right or mining permit (s. 15(b), MPRDA). A RP is valid for one year, is non-renewable and cannot be transferred or mortgaged.

 

  • Prospecting Right (PR): A PR allows the holder exclusive right to prospect and explore for minerals subject to conditions set out in the PR (ss. 17(6) and 19(1)(a), MPRDA). A PR gives the holder a priority right to be granted a mining right for the area subject to the PR and an exclusive right to remove minerals for which permission has been granted (ss. 19(1)(b) and 18(1)-(5), MPRDA). A PR is valid for the period specified in the right, which cannot exceed five years and is renewable once for a period not exceeding three years (ss. 17(6) and 18(4), MPRDA).

 

  • Retention Right (RR): A RR allows the holder exclusive right to be granted a mining right in the retention area and for the mineral specified. A six monthly progress report, including details on market conditions and the need to hold a RR must be submitted to the Minister (ss. 35(1) and (2)(b)(i), MPRDA). A RR is valid for the period specified within the right, which may not exceed three years and is renewable once for a period not exceeding two years (ss. 32(4) and 34(3), MPRDA). A RR cannot be transferred or mortgaged.

 

  • Mining Right (MR): A MR allows the holder exclusive right to mine for minerals, subject to conditions set out in the right (ss. 5(1)-(4), MPRDA). A MR also gives the holder exclusive right to apply for and be granted a renewal of the MR in respect of the mineral and area covered by the original right (s. 25(1), MPRDA). Applicants for a MR must simultaneously apply for an environmental authorisation (s. 22(1), MPRDA). The Minister may grant a MR for a period not exceeding 30 years, with further periods of renewal possible again for periods not exceeding 30 years (ss. 23(6) and 24(4), MPRDA). A MR may also be subject to beneficiation conditions prescribed by the Minister (s. 26(1)-(3), MPRDA).

 

  • Mining Permit: A MP allows the holder the exclusive right to mine for minerals, subject to conditions set out in the right (s. 27(7)(d), MPRDA). A MP is issued to applicants who can demonstrate that a mineral may be mined optimally within a period of two years and the right is restricted to an area of five hectares (s. 27(1), MPRDA). The Minister may grant a MP for a period not exceeding two years, with three periods of renewal possible not exceeding one year per renewal (s. 27(8)(a), MPRDA). A MP cannot be transferred or mortgaged (s. 27(8)(b), MPRDA).  

 

Subject to the first-come principle, the Minister “must” grant a PR, MR or MP if the miner has sufficient financial resources, the technical ability to conduct the proposed operation and has met certain largely objective criteria (ss. 17(1)(a)-(f), 23(1)(a)-(f) and 27, MPDRA). A major caveat to the right to mine is the requirement that the Minister be satisfied that the grant of a MR will further the objects of sections 2(d) and (f) of the MPRDA. Those objects are to further opportunities for HDSA and to promote and advance the “the social and economic welfare of all South Africans.” The result is a mining code that introduces uncertainty and potential political interference in the mineral development process.

A holder of a mining right must comply with conditions attached to the mining title, including minimum expenditure and development requirements, notification to private landowners, and rehabilitation and compensation payments (ss. 17, 23, 27 and 54, MPRDA). Miners must also adhere to the Mining Charter and its amendments, which aim to empower and improve the socio-economic welfare of HDSA. Amongst other things, the Mining Charter sets targets of mine ownership for HDSA, which the Minister must have in mind when granting mining titles (Part 2.1, Mining Charter 2010). Non-compliance with the provisions of the Mining Charter will render a mining company in breach of the MPRDA. Under section 47, MPRDA, the Minister has the power to suspend or cancel rights where a holder of such rights is in breach of the Act.

DEVELOPMENT CONSIDERATIONS

Landowners, lawful occupiers and interested and affected third parties are consulted by the Regional Manager (RM) upon receipt of an application for a mineral right; the results of such consultation are included within the relevant environmental reports and forwarded to the Minister with the application (see s. 22(4)(b), MPRDA). A holder of a PR or MR, together with his or her employees, may enter the land to which the right relates. They may also bring onto the land any plant, machinery or equipment and build or construct, on any surface or underground or under the sea, infrastructure that may be required for the purpose of mining activity (s. 5(3)(a)), MPRDA). Section 54, MPRDA provides for the payment of compensation to owners or lawful occupiers in certain circumstances. According to section 54 (1) if the holder of a mineral right is prevented from commencing or conducting activities because the owner or lawful occupier: refuses to allow access; places unreasonable demands in return for access; or cannot be found in order to apply for access, the holder must inform the RM. If, following consultation with the relevant parties, the RM is of the opinion that the owner or lawful occupier is likely to suffer loss or damage as a result of the proposed activities and / or operations, the RM shall request that the parties attempt to reach an agreement for the payment of compensation for such loss or damage. In the event that agreement cannot be reached the matter shall be referred to the court or addressed by arbitration. Expropriation is possible under the terms of the legislation.

Environmental requirements for mineral activities have been reformed considerably over the last few years and changes are currently on-going. At present, applicants for mineral rights under the MPRDA must acquire an environmental authorisation under NEMA before commencing activities. The assessment process for environmental authorisations is to be conducted by an Environmental Assessment Practitioner and the DMR have provided a template application form which details the requirements of the assessment. The Minister is currently responsible for the granting of environmental authorisations and the test of impact for EIA approval appears to be that “the mining will not result in unacceptable pollution, ecological degradation or damage to the environment” (see s. 23(d), MPRDA). Appeals are possible and are handled by the Minister of Environmental Affairs (s. 43 (1), NEMA).

Applicants for environmental authorisations must also comply with the terms of the Financial Provisioning Regulations 2015. The regulations require that all Rights Holders under the MPRDA make financial provision for the management, rehabilitation and remediation of the environmental impacts of Mineral Activities. Amounts must be calculated and determined by a specialist in line with the provisions of the regulations. Rights Holders must ensure the financial provision is, at any given time, equal to the sum of implementing the necessary measures for a period of at least 10 years (Reg. 7, FP Reg.). Upon submission of the required documentation the Minister has 60 days within which to approve or reject the financial provisions outlined within the documentation. Annual reviews of the financial provision are required.

Activities resulting in residue stockpiles and residue deposits to which the Mining Residue Regulations apply must first obtain a Waste Management Licence under the National Environmental Management Waste Act. An environmental assessment will be required as part of the application for the licence – a Basic Assessment will be needed for the establishment or reclamation of residue stockpiles or deposits resulting from activities which require a Prospecting Right or Mining Permit under the MPRDA, while residue stockpiles or deposits resulting from activities which require a Mining Right, Exploration Right or Production Right under the MPRDA require a ‘Scoping and Environmental Impact Reporting’ Assessment. A registered civil or mining engineer must design the stockpile.

FUTURE AMENDMENTS

It is worth noting that the MPRDA Bill, discussed above, proposes some major amendments to the MPRDA. Particularly noteworthy is the introduction of a “free carry interest” in favour of the government in all new prospecting and mining rights, as well as the option to acquire a further interest. While there are jurisdictions that have a similar two-tiered system (Ghana being one example), none of those countries face the challenges discussed in the introduction above. Undoubtedly, the consequence of such a provision will be a continued engagement by South Africa of countries such as India, China and Russia in the stead of western FDI (where capital markets measure risk and return on an investment-specific and comparative basis, rather than strategically with a view to fostering country benefits in other industry sectors).

In addition the following are also of note:

  • First come / first serve principle: first-come principle will be removed and replaced with a competitive bidding process (s. 5, MPRDA Bill).

 

  • Transfer of share restrictions: the transfer of any interest in a listed company which holds either a prospecting or mining right will first require approval from the Minister, irrespective of how much interest is transferred or where the company is listed (s. 8 MPRDA Bill). On this point it is worth noting that whilst the MPRDA Bill attempted to clarify the circumstances in which one must obtain governmental consent for changes of shareholdings of companies “holding” prospecting or mining rights, it merely perpetuated the ambiguity as to whether or not the law is intended to apply to indirect holdings. In other jurisdictions, the law is plain that a corporation “holds” an asset when it has the power or control over the asset whether direct or indirect.

 

  • Strategic minerals: will grants the Minister the authority to declare certain minerals as strategic minerals, following such declaration the mineral will then be subject to conditions tailored to satisfy national requirements, demand and pricing (s.19 (y). MPRDA Bill).

 

  • Export restrictions: the exportation of certain 'designated' minerals (a term as yet undefined) will require Ministerial approval (s. 21(d), MPRDA Bill).

 

  • Prohibition and restriction of mineral rights: this would give the Minister wide discretion in relation to the prohibition or restriction of the granting of mining titles for strategic minerals, which can be exercised at any time.

 

President Zuma raised several concerns about the MPRDA Bill in voicing his reasons for referring the bill back to parliament at the beginning of 2015 including: that the Minister is given excessive powers to amend and repeal certain legal instruments; that the bill is likely unconstitutional due to the elevation of various codes, guidelines and charters to the level of national legislation; that the bill appears to be inconsistent with various trade agreements; and that proper consultations had not been carried out. It will therefore be interesting to see the bill in its final form, following parliament’s reconsideration.

In addition, on 15th April 2016, the government published a draft amendment to the Mining Charter; the draft will be published for a 30-day period during which time public comments can be made and consultation processes conducted. One of the key changes within the draft, which was published without consultation, is the replacement of the term HDSA (Historically Disadvantaged South Africans) with “black people”. Mining companies will therefore be required to ensure that at least 26% of shares in any mining right be owned by black people. Broadly speaking the draft seeks to achieve increased empowerment via various measures including increasing the requirements for black senior staff and introducing stricter requirements in relation to the use of black empowerment compliant companies for goods and services.

ENVIRONMENTAL REGULATION

See South Africa - Environmental Overview Commentary.

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