An overview of the policy and regulatory framework for South Africa’s mining industry.
This briefing has been published by Lucas Moalusi and Godfrey Malesa of Fasken Martineau, South Africa, who have agreed to Simmons & Simmons making it available to elexica subscribers.There’s never been a more pertinent time to reflect on the current landscape of the mining industry in South Africa than now.
The year 2018 was an eventful year for the mining industry. The year saw the election of Cyril Ramaphosa as the new President of the ruling African National Congress (ANC) and his appointment as a new President of South Africa.
During his first cabinet reshuffle, President Ramaphosa appointed Gwede Mantashe as the new Minister of Minerals, replacing Mosebenzi Zwane.
In addition, 2018 also saw:
- The publication of the new Broad-Based Black Economic Empowerment Charter for the South African Mining and Minerals Industry, 2018 (the new Mining Charter) (a Government document setting out Black Economic Empowerment targets and the blueprint for transformation of the mining industry).
- The withdrawal of the Mineral and Petroleum Resources Development Amendment Bill [B15D-2013] (the Amendment Bill).
- The handing down by our Courts of a number of ground-breaking judgments that changed the face of mining in South Africa.
Prior to the appointment of President Cyril Ramaphosa, the South African mining industry had been undergoing some challenges. Chief among the challenges faced by the mining industry was the policy and regulatory uncertainty that had plagued the industry for a number of years. At the heart of the uncertainty was, among other things:
- The delay in finalising the Amendment Bill. The Amendment Bill has been the subject of legislative processes dating back to 2013.
- The publication in 2017 of the Reviewed Broad-Based Black Economic Empowerment Charter for the South African Mining and Minerals Industry, 2017 (the 2017 Mining Charter), by the then Mineral Resources Minister Mosebenzi Zwane. The 2017 Mining Charter was met with objection from the industry, leading to multiple Court challenges. It also led to a fundamental breakdown of trust between the industry and the Department of Mineral Resources.
Policy and Regulatory Uncertainty
In August 2018 the Minister of Mineral Resources Gwede Mantashe submitted a formal request to the Speaker of the National Assembly and the Chairperson of the National Council of Provinces for the withdrawal of the Amendment Bill. The Amendment Bill has hung-over the South African mining industry since 2013. For over five years, the non-finalisation of the Amendment Bill contributed to the regulatory uncertainty in the mining industry. The withdrawal of the Amendment Bill was approved by the South African Cabinet in September 2018. The withdrawal has been welcomed by the industry.
The withdrawal of the Amendment Bill should be seen as a positive step towards restoring policy and regulatory certainty in the industry. Mining companies can now operate under the provisions stated in the current Mineral and Petroleum Resources Development Act.
In June 2017, the then Minister of Mineral Resources Mosebenzi Zwane gazetted the 2017 Mining Charter, which stakeholders contended took almost no account of the input by the industry.
The Mineral Council of South Africa (formerly the Chamber of Mines) sought an urgent interdict preventing the then Minister of Mineral Resources from implementing the 2017 Mining Charter, to which he ultimately agreed, pending a judicial review of the 2017 Mining Charter.
Following the intervention by President Cyril Ramaphosa and the appointment of Gwede Mantashe as the new Minister of Mineral Resources, the Mineral Council of South Africa agreed to postpone the Court application for the judicial review and the setting aside of the 2017 Mining Charter in order to allow the parties to engage and find an amicable solution.
On 27 September 2018, after a seven-month engagement process with stakeholders in the industry, Minister Gwede Mantashe, gazetted the final version of the new Mining Charter for implementation. The new Mining Charter is based generally on consensus among the mining stakeholders and has generally been welcomed and accepted by the mining industry.
The new Mining Charter has gone a long way to bring policy and regulatory certainty to the industry. However, it remains to be seen whether it will bring about the meaningful transformation of the industry, reduce the kinds of fears that have seen investors recently give South Africa a miss, and effectively stabilise the industry.
Landmark judgments delivered in 2018
The year 2018 also saw a number of landmark judgments affecting the mining industry been delivered by our Courts.
On 4 April 2018, the High Court (Gauteng Division, Pretoria) handed down its judgment in the matter between the Chamber of Mines of South Africa v Minister of Mineral Resources and Director-General, Department of Mineral Resources, regarding the highly contentious "once empowered, always empowered" principle. The "once empowered, always empowered" principle relates to mining companies being able to claim recognition for previous Black Economic Empowerment (BEE) transactions, notwithstanding that the Black Economic Empowerment entities involved have since sold their interests or shares, thereby bringing such mining companies below the required Black Economic Empowerment ownership threshold.
The High Court ruled that a mining right holder will be able to retain its empowerment status even if its empowerment partner(s) disposes of its stake in mining right holder. Consequently, the highly contentious “once empowered, always empowered” principle applies to mining companies whose Black Economic Empowerment partners have exited.
The Minister has petitioned the Supreme Court of Appeal for leave to appeal the judgment.
Another judgment which has had a profound impact on the mining industry is the High Court (Gauteng Division, Pretoria) judgment of Baleni and Others v Minister of Mineral Resources and Others. In this judgment, the High Court held that the Minister of Mineral Resources could not award a mining right at Xolobeni (in the Wild Coast region of the Eastern Cape Province) unless the "full and informed consent" of the community had been obtained. The effect of the judgment is that it prohibits the Minister of Mineral Resources as custodian of the South African mineral wealth in terms of the MPRDA, from granting any prospecting and mining rights to a new applicant in the mining industry without the consent from a community holding an informal right to land in terms of Interim Protection of Informal Land Rights Act 31 of 1996.
For many years, the practice has been that the mining laws of the country require mining companies to consult affected communities - but do not require explicit consent from landowners or communities to mine. The Minister of Mineral Resources, Gwede Mantashe has expressed concern over the judgment and has confirmed that he will appeal the judgment.
Aligned with bringing about policy and regulatory certainty is the issue relating to ‘land expropriation without compensation’. Both the National Assembly and the National Council of Provinces of the Parliament of South Africa adopted the report compiled by the Joint Constitutional Review Committee that section 25 of the Constitution of the Republic of South Africa be amended to make expropriation of land without compensation more explicit. Section 25, the so-called ‘property clause’ deals with property rights, and it makes it clear that expropriation of property is permissible to effect land redistribution or to achieve some other public purpose or for the public interest. Now that the report has been adopted, a Bill can be introduced to Parliament to amend section 25 of the Constitution.
There is no clear detailed policy on land expropriation without compensation yet. Consequently, it is not yet known whether unused mining land or abandoned mines will be in the expropriation of land without compensation mix.
It is important for the South African Government to finalise legislation and policies that deal with expropriation in order to bring legal certainty and to enable foreign investors to make informed decisions.
The year 2018 saw the South African Government taking positive and decisive steps to bring about policy and regulatory certainty in the mining sector so as to create a climate conducive for investment. The publication of the new Mining Charter and the withdrawal of the Amendment Bill have gone a long way towards creating certainty for the mining industry. The positive and decisive steps taken so far inspire some optimism that South Africa’s mining industry does indeed have a better future. The mining industry has entered 2019 with a lot more certainty than in 2018.
While 2018 was positive regarding efforts to bring about policy and regulatory certainty to the industry, more is still needed to create an investor friendly environment, which will ensure the long-term sustainability of the industry. One of the keys to unlocking the industry is to ensure that South Africa’s mining policies are clearly defined and more straightforward.
South Africa has all the ingredients to ensure that its mining industry attracts investors and flourishes again as a central pillar of the Country’s economy.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.