A Primer – National Environmental Management Protected Areas Act

The National Environmental Management: Protected Areas Act, No 57 of 2003 (NEMPAA) is a complimentary act to the National Environmental Management Act, No 107 of 1998 (NEMA). NEMPAA aims to provide for the protection and conservation of ecologically viable areas that are representative of South Africa’s biological diversity. This objective is accomplished through the declaration and management of protected these identified areas (section 2).

The restrictions on the development of protected areas in NEMPAA are in addition to any restrictions placed on prospecting or mining of minerals, or exploration or production of petroleum resources, in terms of the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA). In the event of any conflicts between these two acts, the provisions of NEMPAA will prevail if the conflict concerns the management or development of protected areas (NEMPAA section 7(1)(a)).

The MPRDA prohibits any right for the prospecting or mining of minerals from being granted over residential areas, public roads, public railways, public cemeteries, land being used for public or government purposes or over any other area identified by the Minister of Mineral Resources, unless the minister is satisfied that the granting of the right is in the national interest, the operations will take place within the framework of the national environmental policies and the interests of other holders of prospecting or mining rights will not be adversely affected (section 48).

Restrictions Imposed by NEMPAA

In addition to the restrictions under the MPRDA, NEMPAA could potentially affect the mineral and petroleum industry in two ways. First, despite being granted the required mineral right in terms of the MPRDA, no person may conduct prospecting, mining, exploration or any related activities in any:

  • nature reserve or national park;
  • protected environment without the prescribed permissions;
  • world heritage site;
  • marine protected area; or
  • protected forest areas, forest nature reserves and forest wilderness areas that have been declared in terms of the National forests Act, No 84 of 1998 (section 48(1) and 48A(1)(g)).

Further, if an area has been or is proposed to be declared as part of a national protected area or as part of a national park after a mineral right is granted, the responsible minister is empowered to expropriate or cancel a mineral right, servitude or any other privately held right in the land (sections 80, 81, 82 and 84). When cancelling or expropriating any rights the provisions of the Constitution of the Republic of South Africa and the Expropriation Act, No 63 of 1975, are applicable. These require the right holder to be compensated for the expropriated right.


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A Primer – National Environmental Management Act

The National Environmental Management Act, No 107 of 1998 (NEMA) is the principle act that governs environmental management in South Africa. NEMA was enacted with the objectives of ensuring sustainable development and use of natural resources. This act is complimented by other specific environmental management acts, each regulating more specific environmental concerns. These complimentary acts include the NEMA: Protected Areas Act, NEMA: Biodiversity Act and the National Water Act.

During 2013 and 2014 NEMA and the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) underwent a series of amendments. These amendments sought to remove all of the provisions regulating environmental management from the MPRDA and insert provisions to regulate the mineral and petroleum industry into NEMA. This created a single environmental management system that now regulates environmental management in South Africa.

Environmental Authorisations in terms of NEMA

The key provisions in NEMA that are applicable to the mineral and petroleum industry are that must be considered is the requirement to obtain regulatory approval before commencing with certain listed activities (section 23 and 24). Before any prospecting, mining, exploration or production of mineral or petroleum resources, or any other incidental work, can be undertaken a person must granted an environmental authorisation in terms of NEMA in addition to the permit or right required in terms of the MPRDA (section 5A(a) and (b) of the MPRDA and section 24 of NEMA).

The application for the required environmental authorisation is done as part of the application for a right or permit in terms of the MPRDA. When submitting an application for a right or permit in terms of the MPRDA an applicant is required to submit an environmental management programme (section 24N(1A) of NEMA), also referred to as an EMP, within the following periods once an application has been accepted:

  • Prospecting Right: 60 days (section 16(4)(a) of the MPRDA);
  • Mining Right: 180 days (section 22(4)(a) of the MPRDA);
  • Mining Permit: Simultaneously (section 27(2) of the MPRDA);
  • Reconnaissance Permit: 60 days (section 74(4)(b) of the MPRDA);
  • Exploration Right: 120 days (section 79(4)(b) of the MPRDA);
  • Production Right: 180 days (section 83(4)(b) of the MPRDA).

It must be kept in mind that NEMA regulates more than just the mineral and petroleum industry. As a result, some activities that are conducted as part of the mining or production operations might be regulated separately under NEMA. Depending on the circumstances the EMP that is submitted as part of the MPRDA application procedure might have to be extended to address these additional incidental activities or a separate environmental authorisation might need to be considered. Some of the additional listed activities that could be applicable to the mineral and petroleum industry are:

  • the construction of infrastructure for the generation of electricity;
  • the construction of coal storage facilities;
  • construction of facilities for the bulk transportation of sewerage or storm water;
  • construction of canals, bridges, dams, reservoirs and bulk storm water outlets;
  • earth moving activities in, or within one hundred meters of the sea, an estuary or littoral active zone;
  • construction of roads with a reserve wider than thirteen and a half meters or without a reserve wider than eight meters;
  • the physical alteration of more than twenty hectares of undeveloped land for industrial use;
  • construction of railway lines; and
  • the bulk transport of dangerous goods.

Additional Provisions in NEMA to Consider

In addition to the requirement to obtain authorisation to conduct certain activities, NEMA also regulates the following matters that should be taken into consideration:

  • the requirement to provide a “financial provision“, such as a bank guarantee, that can be used to undertake rehabilitation and mine closure (section 24P);
  • performance monitoring and assessment (section 24Q);
  • the management of residue stockpiles and residue deposits, including discard, tailings, dumps and waste rock (section 24S); and
  • the continuing environmental obligations and mine closure requirements (section 24R).

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A Primer – Mineral and Petroleum Resources Development Act

Since 1 May 2004 the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) has been the principle piece of legislation that regulates the South African mineral and petroleum sector. This act will generally be applicable to any project that involves the any prospecting for or mining of minerals, or any exploration for or production of petroleum resources.

The MPRDA was enacted with the objectives of promoting local and rural development, ensuring equal access to minerals, and eradicating discriminatory practices in the industry, while still guaranteeing security of tenure to participants in the industry and increasing the industries international competitiveness.

One of the fundamental changes that were brought about by the MPRDA was the abolishment of the right for persons to privately own minerals and petroleum rights. The state is now the custodian of all mineral and petroleum resources and these resources are held by the state for the benefit of all South Africans (section 3(1)). To ensure security of tenure for holders of mineral and petroleum rights that were held under the previous mineral regime, these holders were granted a five year period to convert their rights to a right issued in terms of the MPRDA.

The Requirement to be granted a Licence for the Intended Activity

Before conducting any prospecting or mining of minerals, or exploration or production of petroleum resources, a person must first be granted a permit or right from the Department of Mineral Resources authorising the intended activity.

The MPRDA regulates minerals and petroleum as defined in the act. These terms are defined broadly but the definitions do contain exceptions.

A mineral is defined as any solid, liquid or gaseous substance occurring naturally in or on the earth or in or under water that was formed by or subjected to geological processes. Importantly, the definition of “mineral” includes sand, stone, rock, gravel, clay and soil, and all minerals in residue stockpiles or residue deposits (including dumps, debris, discard, tailings and slimes) (section 1). The definition of mineral excludes water and peat (section 1).

Petroleum is defined as any liquid, solid hydrocarbon or combustible gas existing in a natural condition in the earth’s crust. The definition excludes coal, bituminous shale, stratified deposits from which oil can be obtained by destructive, distillation, and gasses rising from marshes or other surface deposits (section 1).

The Licence Application Procedure

Before conducting any prospecting or mining of minerals, or exploration or production of petroleum resources, a person must:

  • be granted a right by the Minister of Mineral Resources authorising the intended activity in terms of the MPRDA (section 5A(b));
  • be granted an environmental authorisation in terms of the National Environmental Management Act (NEMA) (section 5A(a));
  • conduct consultations with all landowners and other persons that could be interested in, or affected by, the intended operations; and
  • give the landowner or occupier of the land at least twenty one days’ notice of the intended activities (section 5A(c)).

The application procedure for a right is designed to ensure that the objectives of the MPRDA are promoted by ensuring that all interested and affected parties are notified of the application and that the black economic empowerment objectives in the MPRDA are also promoted.

All interested and affected parties must be notified of the pending application and are called upon to raise any objection that they may have against the application (section 10). The applicant is also required to hold consultations with the landowners and occupiers of the property and all other interested and affected parties (sections 16(4)(b), 22(4)(b) and 27(5)(a)).

Broad Based Black Economic Empowerment Requirements (Local Participation)

The black economic empowerment objectives in the MPRDA are promoted during the application procedure. The empowerment objectives require the promotion of access to resources and the expansion of opportunities for disadvantaged persons, women and communities to enter into the mineral and petroleum industry.

Before a prospecting right, mining right, exploration right or production right is granted the minister must be satisfied that the granting of the right will substantially and meaningfully expand the opportunities for these groups (sections 17(1)(f), 23(1)(h), 80(1)(g) and 84(1)(i) as read with section 2(d)).

The empowerment requirements are expanded on in the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Metals Industry that was published in 2010. The charter has various elements that must be complied with to ensure that the project will satisfy the empowerment requirements and qualify for a licence.

Generally, in order for the empowerment objectives to be satisfied and the application to be granted a minimum of twenty six per cent of the project should be owned by historically disadvantaged South Africans, and historically disadvantaged South Africans should participate in the management of the company.

Categories of Licences that can be granted in terms of the MPRDA

The following licences can be granted in terms of the MPRDA:

To prospect for minerals:

  • A reconnaissance permission:
    • Granted for a non-renewable period of 1 year (section 14).
    • Allows only for the search of minerals by geological, geophysical and photo geological surveys or through the use of remote sensing techniques (section 5A as read with section 1).
  • A prospecting right:
    • Granted for a maximum period of 5 years (section 17(6)).
    • Renewable for 1 further single period that can’t exceed 3 years (section 18(4)).
    • Allows for prospecting by any means, including methods that disturb the surface or subsurface of the earth, whether on land, under sea or under water (section 5A read with section 1).
    • Diamonds and bulk samples of other minerals that are found during the prospecting operations can only be disposed of with the consent of the minister (section 20(2)). This consent is typically granted in the form of a bulk sampling permit.

To mine for minerals

  • A mining right:
    • Granted for a maximum period of 30 years (section 23(6)).
    • Renewable for further periods. Each further period may not exceed 30 years (section 24(4)).
  • A mining permit:
    • A mining permit is intended for small scale mining operations and may only be issued if (i) the mineral can be mined optimally in 2 years; and (ii) the area is 5 hectares or less.
    • Granted for a maximum period of 2 years (section 27(8)(a)).
    • May be renewed a maximum of 3 times. Each renewal may not be longer than 1 year (section 27(8)(b)).

To explore for petroleum

  • A reconnaissance permit:
    • Granted for a non-renewable period of 1 year (section 74(4)).
    • Allows only for the search of petroleum by geological, geophysical and photo geological surveys or through the use of remote sensing techniques (section 5A as read with section 1).
  • A technical cooperation permit:
    • Granted for a non-renewable period of 1 year (section 77(4)).
    • Allows the holder to conduct a technical cooperation study and grants the holder the exclusive right to later apply for an exploration right over the area (section 77(4) and section 78(1)).
  • An exploration right:
    • Granted for a maximum period of 3 years (section 80(5)).
    • May be renewed a maximum of 3 times. Each renewal may not be longer than 2 years (section 81(5)).

To produce petroleum

  • A production right:
    • Granted for a maximum period of 30 years (section 84(4)).
    • Renewable for further periods. Each further period may not exceed 30 years (section 85(4)).

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A Guide to the Mineral and Petroleum Industry in South Africa

What laws apply to the mineral and petroleum industry in South Africa? What potential pitfalls must a person look out for when they consider entering into these industries in South Africa?

Unfortunately this isn’t an easy or quick question to answer because the applicable laws and regulations will depend on the projects scope and characteristics – the intended mining or production activities, infrastructure requirements and the project location. But there are two acts that can serve as a starting point. The principle act regulating the mineral and petroleum sector is the Mineral and Petroleum Resources Development Act (MPRDA), and the principle act regulating environmental management is the National Environmental Management Act (NEMA).

In any project it may, however, be necessary to consider various other laws and regulations. The purpose of this note is to give a starting point for a more in depth exploration of the laws applicable to the mineral and petroleum industry.

The following list has links to discussions on some of the acts and regulations in South Africa that may be considered. This list is unfortunately incomplete and non-exhaustive.

Mineral and Petroleum Licensing and Permitting

Environmental Management

Water Management

Taxation

  • Income Tax Act, No 58 of 1962 (Income Tax Act);
  • Mineral and Petroleum Resources Royalty Act, No 28 of 2008 (Royalty Act);
  • Mineral and Petroleum Resources Royalty (Administration) Act, No 29 of 2008 (Royalty Admin Act).

Industry Specific Legislation:

  • Diamonds Act, No 56 of 1986 (Diamonds Act);
  • Petroleum Products Act, No 120 of 1977 (Petroleum Products Act);
  • Precious Metals Act, No 37 of 2005 (Precious Metals Act).

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The Perils of Shareholders Agreements in South Africa

How enforceable are the clauses in your company’s shareholders agreement?

Unfortunately, for many shareholders an investigation into the legal aspects regulating shareholders agreements will lead to the conclusion that many of the provisions in their shareholders’ agreements are void.

When buying shares in a private company or forming a new private company, it is common practice to enter into a shareholders agreement with company’s other shareholders. The shareholders agreement is intended to regulate the important internal governance structures of the company like the appointment of directors and the calling of directors and shareholders meetings, and in many instances give important protection mechanisms to minority shareholders.

In many cases shareholders agreements are concluded without the shareholders considering the impact that the company’s constitutional documents (the company’s memorandum of incorporation (MOI) might have on the validity of the shareholders agreement.

This means that it is common for a company’s MOI to render many clauses in a shareholders agreement void and unenforceable if there is a dispute between the shareholders.

To understand why, I will briefly explain how the practice of concluding shareholders agreements without the necessity to consider the company’s MOI developed in terms of the old Companies Act (Act No 61 of 1973), and the significant changes that the new Companies Act (Act No 71 of 2008) had on this practice.

The Historical use of Shareholders Agreements

Under the old Companies Act a company’s constitutional documents were its memorandum of association and articles of association. These documents, and any amendments to them, had to be registered at the Registrar of Companies and became public documents that were open to inspection. An amendment to the articles of association needs to be registered, and this makes the provisions that regulate the company’s internal affairs public.

A shareholders agreement was, however, a private contract that didn’t need to be registered. It could be concluded between the shareholders at any time, even after the company’s incorporation, and it was enforceable between the shareholders and the company even though it was not registered.

A shareholders agreement could be used to regulate important aspects of the company without amending its articles of association and making those provisions public.

Provisions in the shareholders agreements were often in direct conflict with the company’s articles of association. To counteract this a shareholders agreement would typically include a clause stating that if there was any conflict, the shareholders agreement would be the document that takes precedence. Under the old Companies Act a provision like this, making a private shareholders agreement trump the company’s public registered constitutional documents, was permitted in law.

Practically this lead to a situation where a private company’s constitutional documents could effectively be ignored by its shareholders, and the shareholders would merely regulate the affairs of the company through a shareholders agreement.

Changes to Shareholders Agreements under the New Companies Act

The new Companies Act has, however, dramatically changed the possible scope and effectiveness of shareholders agreements in two ways:

  • it has altered how conflicting clauses the MOI and a shareholders agreement are resolved; and
  • it has curtailed what the shareholders are entitled to regulate in a shareholders agreement by now providing that some issues can’t be changed or regulated at all (unalterable provisions), and that some issues can be regulated but only if they are regulated in the MOI (alterable provisions).

The New Companies Act: Conflicts between the MOI and Shareholders Agreements

Shareholders agreements aren’t prohibited under the new Companies Act, but it does limit the potential ambit of shareholders agreements by requiring that any shareholders agreement must be consistent with the provisions of the act and with the company’s MOI (section 15(7)).

If there is any inconsistency between the shareholders agreement and either the Companies Act or the company’s MOI, then the conflicting provision in the shareholders’ agreement is void and will be unenforceable (section 15(7)).

A clause in a shareholders agreement that provides that the shareholders agreement will take precedence over the memorandum of incorporation if there is a conflict is void, first because the clause would itself be a provision that is inconsistent with the act (section 15(7)), and secondly because it would fall afoul of the acts anti avoidance provisions by attempting to defeat or reduce the effect of the acts prohibitions or requirements (section 6(1)). These types of provisions would not provide any assistance to the shareholders if they attempt to enforce a conflicting provision in a shareholders agreement.

Under the new Companies Act shareholders are still entitled to enter into shareholders agreements, but they must now inspect the company’s MOI before concluding these agreements to make sure that the shareholders agreement doesn’t conflict with the MOI.

If there is a conflict between what is in the MOI and what is in the shareholders’ agreement, the clause in the shareholders’ agreement is void and gives the shareholders’ no protection.

The New Companies Act: Unalterable and Alterable Provisions

A legal aspect that is related to the requirement that a shareholders agreement must be consistent with the company’s MOI, is the introduction of the concept of “unalterable” and “alterable” provisions by the new Companies Act.

The new Companies Act contains provisions and principles that are stipulated as unalterable. A company’s MOI can’t contain any clause that negates, restricts, limits, qualifies, extends or alters the substance or effect of an unalterable provision (section 15(2)(d)). Any attempt to alter these unalterable provisions in the MOI will be void (section 15(1)).

Likewise, these unalterable provisions of the Companies Act can’t be negated or altered by the shareholders in a shareholders agreement because these provisions in the shareholders’ agreement would be contrary to the act, and void (section 15(7)).

Opposed to unalterable provisions, the new Companies Act contains provisions and principles that are specifically stipulated as being alterable. These alterable provisions may, however, only be altered if they are expressly altered by the company in its MOI (section 19(1)(c)(ii)). (A company did have a two year transitional period to update its MOI, but this period ended on 30 April 2013. I have previously written an overview of the Companies Acts transitional period for shareholders agreements here.)

Any attempt by the shareholders to alter an alterable provision by concluding a shareholders agreement will be void because these provisions in the shareholders’ agreement would be contrary to the act (section 15(7)).

Limitations Placed on Shareholders Agreements

A shareholders agreement:

  • can’t be used to alter an unalterable provision in the Companies Act; and
  • can’t be used to alter an alterable provision in the Companies Act; and
  • can’t conflict with any provision in the company’s MOI.

These legal restrictions didn’t exist under the old Companies Act, meaning that shareholders agreements prepared according to the old Companies Act could be void under the current act. Also, it means that when preparing new shareholders agreements care should be taken to ensure that the new shareholders agreement complies with the new Companies Act.

Unfortunately it is not possible to give a complete list of unalterable and alterable provisions in this article, but a list of the most common clauses that are found in shareholders agreements, that may be void because they conflict with the Companies Act are briefly discussed.

Unalterable Provisions

The following provisions can’t be altered at all, and any clause in a shareholders agreement that conflicts with them will be void:

  • A private company must restrict the offer of shares to the public (section 8(2)(b));
  • A private company must restrict the transferability of its shares (section 8(2)(b));
  • If a company has more than 2 shareholders, a meeting may not begin or a matter may not be decided, unless 3 or more shareholders are present (section 64(3);
  • Private and public companies must provide for the election by shareholders of at least 50% of the directors, and 50% of any alternate directors (section 66(4)(b));
  • A company may only pay remuneration to its directors for their service as directors if the remuneration has been approved by special resolution within the previous 2 years (section 66(8) and (9));
  • The Companies Act takeover regulations apply to private companies if the percentage of the issued securities of that company that have been transferred within the period of 24 months immediately before the date of a particular affected transaction or offer exceeds the prescribed percentage (section 118(1)).

Categories of Provisions that are Alterable Only in the MOI

These are alterable provisions that can only be altered in a company’s MOI. An attempt to regulate these matters in a shareholders agreement will be void.

These aspects of a company and its management can only be regulated in the MOI:

  • Management of the Company:
    • the removal of the boards power to make binding interim rules that are incidental to the governance of the company (section 15(3));
  • Amendment of the MOI:
    • the change in the requirements that must be met to amend the company’s MOI (by default the MOI can be amended by a special resolution which may be proposed by shareholders that hold 10% of the voting rights) (section 16(1) and (2));
  • Shareholders Rights and Protections:
    • the addition of shareholders rights to access information relating to the company and its management (by default only certain listed information and documents can be accessed by shareholders) (section 26(3));
    • the addition of an obligation for a private company to have its annual financial statements audited (section 30(2)(b));
    • the alteration of shareholders rights to appoint concurrent proxies, and the proxies right to further delegate authority (section 58(3));
  • The Regulation of Shareholders Meetings:
    • the right to call a shareholder meeting (section 61(3), (4) and (11));
    • the location of shareholder meetings (section 61(9));
    • the notice period required for a shareholder meeting (section 62(1));
    • participation at a shareholder meeting by electronic communication (section 63(2));
    • quorums (section 64(1) and (2));
    • meeting adjournments (section 64(4), (5) and (6));
  • Regulation of the Board of Directors
    • the minimum number of directors to be appointed (section 66(2) and (3));
    • the procedure used to appoint directors (section 66(4) and 68(2));
    • minimum qualifications and grounds of ineligibility or disqualification of directors (section 69(6));
    • the power to appoint board committees (section 72(1));
  • The Regulation of Directors Meetings:
    • the right to call a directors meeting (section 73(1));
    • participation at a directors meeting by electronic communication (section 73(3));
    • the notice period required for a directors meeting (section 73 (4));
    • quorums (73(5)(b))
    • voting of directors (section 73(5)(c) and (d));
    • casting votes (section 73(5)(e));
  • Company’s Shares
    • the classes of shares that a company is permitted to authorise, and the rights attaching to the shares, must be contained in the MOI (section 36(1));
    • the board has a wide discretion regarding the company’s securities, including:
      • the power to alter the authorised share capital of the company, classify, and reclassify shares (section 36(3));
      • the power to issue secured or unsecured debt instruments (section 43(2));
      • the power to issue debt instruments that may grant the holder grant special privileges, such as voting at general meetings, and the allotment of shares (section 43(3));
      • the power to issue any of the company’s shares as capitalisation shares (section 47(1))
  • Boards Power to Issue Securities Other than Shares:
    • The board has the power to issue secured or unsecured debt instruments at any time.
    • The board has the power to issue debt that grants special privileges, which may include the privilege to (i) attend and vote at general meetings; (ii) appoint directors; or (iii) allotment of securities, redemption by the company, or substitution of the debt instrument for shares of the company (section 43(3)).
  • Boards Power to Give Financial Assistance for the Subscription of Securities (section 44)
  • Boards Power to Give Loans and Financial Assistance to Directors and Related Parties (section 45)

Ensuring that the Shareholders Agreement complies with the Companies Act

When buying shares in a private company or forming a new private company, it is important to ensure that when a shareholders’ agreement is entered into, that the shareholders agreement is fully valid.

A comparison between the shareholders’ agreement and the company’s MOI must be done:

  • no changes can be made to an unalterable provision of the Companies Act at all;
  • if the shareholders want to change the application of any alterable provisions, this must be done in the MOI because the provision will be void if it is only in the shareholders’ agreement;
  • if there is any inconsistencies between the MOI and the shareholders’ agreement, the provision in the shareholders’ agreement will be void.

An important observation to take away from this discussion is that the MOI, not the shareholders’ agreement, should be the primary focus for shareholders.

How enforceable are the clauses in your company’s shareholders agreement?


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When the Minister of Mineral Resources Ignores You

If a commercial transaction is concluded with a person that holds a right issued by the Department of Mineral Resources (“the department”) care must be exercised to ensure that the required regulatory approvals needed for the implementation of the transaction has been granted.

Examples of commercial transactions that need ministerial approval in terms of the Mineral and Petroleum Resources Development Act No 28 of 2002 (MPRDA) before they can be implemented include agreements that would result in:

  • a transfer a prospecting right or mining right, for example a sale, cession or donation of the right;
  • a transfer any interest in prospecting right or mining right, for example the transfer of an undivided share in a right; and
  • a transfer a controlling interest in a company holds a prospecting right or mining right, for example a sale of shares agreement or an issue and allotment of new shares resulting in a change of control (section 11(1) of the MPRDA).

To get consent to implement these transactions a formal application must be submitted to the department. Unfortunately, the legislation does not provide any maximum time limits that are applicable when considering the application. In most cases an application submitted to the department is approved without too much delay, but in some cases months, if not years, may pass without the application for consent being considered.

Delays in the approval process can have drastic consequences on commercial transactions because without the required consent they can’t become effective and can’t be implemented by the parties.

What can a person do if there is a significant delay in the approval process after the application for ministerial consent has been submitted?

The most common answer is for a person to bring an application to court, and ask the court to grant an order forcing the department to perform its duty. This court relief is referred to as a mandatory interdict, or a mandamus.

In many situations this relief would be a sufficient; the matter is referred back to the department for consideration within a court specified time line.

The purpose of this article is, however, to explore alternate legal remedies that could be used if there is a significant delay in the approval process. Particularly:

  • Can a person bring a court application for a court order granting an application that was submitted in terms of the MPRDA, without the need to refer the matter back to the minister for consideration?

The General Right to Just Administrative Action

Any action taken by an organ of state must be (i) lawful; (ii) reasonable; and (iii) procedurally fair. If an action does not meet with these requirements a person who has been affected by the action has the right to approach a court to “review” the infringing action, and ask the court for appropriate relief.

This right of judicial review stems from the Constitution of the Republic of South Africa 1996 (the Constitution), and is given effect by the Promotion of Administrative Justice Act 3 of 2000 (PAJA) (in particular see section 33 of the Constitution).

Both actions and inactions of the government can be reviewed by a court. This is because an “administrative action” is defined to include any decision taken, or the failure or refusal to take a decision, by an organ of state when exercising a public power or performing a public function in terms of legislation (the definition of “administrative action” as read with the definition of “failure” contained in section 1).

A court has wide powers when reviewing an administrative decision (see section 8 of PAJA). In cases where the government’s administrative action amounts to the failure or refusal to take a decision, then the court may grant any order that it just and equitable, including an order:

  • directing the taking of a decision; or
  • declaring the rights of the parties in relation to the taking of a decision.

Accordingly, if the minister fails to consider an application that has been submitted by a person in terms of the MPRDA, the ministers inaction will be “an administrative action”, and falls within the ambit of PAJA. Under these circumstances a person should be able to approach the court for appropriate relief.

The right to approach a court directly for relief in terms of PAJA is, however, curtailed if the applicable legislation, such as the MPRDA, contains an internal appeal procedure (section 6(2)(g) and 7(2)(a) of PAJA).

Court Action Versus the Department’s Internal Appeal Process

A person’s right to approach the court to review an administrative decision in terms of PAJA is not unlimited. A person can’t approach a court until any internal appeal process in the applicable law, such as the MPRDA, has been exhausted (section 7(2)(a) of PAJA).

It is intended that a person’s first port of call should be the legislated internal appeal procedure. A person can only approach a court if the applicable act doesn’t have an appeal procedure, or after the appeal procedure has been followed.

Exceptions to this rule do, however, exist, and a person is entitled to approach the court directly without first exhausting the internal appeal procedure is there are “exceptional circumstances” (section 7(2)(c) of PAJA).

To phrase these requirements differently, a court can be approached to review an administrative action if:

  • an internal appeal was submitted but it was unsuccessful (section 7(2)(a) of PAJA); or
  • the particular law has no internal appeal procedure that is applicable; or
  • the particular law has an internal appeal procedure, but there are exceptional circumstances that are applicable, the court exempts the applicant from having to follow the internal appeal procedure (section 7(2)(c) of PAJA).

What is the correct legal process if the minister fails to consider an application that has been submitted by a person in terms of the MPRDA?

This will depend on whether the MPRDA contains an internal remedy that can be relied on when the minister fails to take any action.

Can the MPRDA’s Internal Appeal Procedure be used when the Minister Fails to Take a Decision?

Is there an internal appeal in situations where the minister fails to take a decision, or does the internal appeal procedure in the MPRDA only apply to decisions that have actually been taken? Is it correct to argue that the internal appeal procedure must be followed in a situation where the minister fails to make a decision in terms of the MPRDA?

If the internal appeal procedure doesn’t apply to a failure to take a decision then there will be no requirement to institute an internal appeal. In these circumstances a person will be entitled to approach the court immediately without having to prove that there are exceptional circumstances that allow the court to exempt the person from the internal appeal requirements.

In order to answer this question the internal appeal procedure that is set out in the MPRDA must be examined.

The Internal Appeal Procedure in terms of the Mineral and Petroleum Resources Development Act

The MPRDA has an internal appeal process that can be relied on in some circumstances (section 96). This internal appeal process can be summarised as follows:

  • A person is prohibited from applying to court for the review of an “administrative decision” of the department until they have exhausted the remedies set out in the MPRDA (section 96(3)).
  • A person whose rights or legitimate expectations have been materially and adversely affected, or who is aggrieved by any “administrative decision”, may appeal within 30 days of becoming aware of such administrative decision (section 96(1)), setting out:
    • the actions appealed against; and
    • the grounds on which the appeal is based (regulation 74(2)).
  • A copy of the appeal will be dispatched by the department to:
    • the person in the department responsible for the administrative decision, who must then within 21 days submit written reasons for the administrative decision appealed against (regulations 74(5)(a) and 74(6)); and
    • any other person, whose rights may be affected by the outcome of the appeal, who must then within 21 days submit a replying submission indicating the extent and nature of his or her rights, and how they will be affected by the appeal (regulations 74(5)(a) and 74(7)).
  • The department will then dispatch the written reasons and any replying submissions that it received to the appellant, and the appellant is then afforded 21 days to reply to these reasons and submissions (regulation 74(8)).
  • Within 30 days from the receipt of the appellant’s response, the minister or director-general must either:
    • confirm the administrative decision concerned;
    • set aside the administrative decision concerned;
    • amend the administrative decision concerned; or
    • substitute any other administrative decision for the administrative decision concerned (regulation 74(9).
  • The lodging of an appeal does not suspend the administrative decision, unless it is suspended by the director-general or the minister (section 96(2)(a)).

Does this Procedure Apply when the Minister Fails to Take a Decision?

As discussed, a person does not have the right to approach a court to review any administrative action unless any internal appeal procedure in the MPRDA has been exhausted or unless there are exceptional circumstances that allow the court to exempt the person from the internal appeal requirements.

The MPRDA does have an internal appeal process (section 96), but does the MPRDA’s internal appeal procedure apply in situations where the minister fails to take a decision?

An “administrative action” is defined in PAJA to include the failure to take a decision, but the MPRDA’s appeal procedure doesn’t use this term. The MPRDA’s internal appeal procedure states that it applies to “administrative decisions”, a term that is not defined.

The wording and context of the internal appeal procedure supports a conclusion that the term “administrative decision” can only relate to decisions that have actually been taken, and doesn’t apply to a failure to take a decision:

  • The MPRDA requires that any “decision taken” must be taken within a reasonable time, must be in writing, and must be accompanied by written reasons for the decision (sections 6(1) and (2)). In a situation where the minister has failed to consider an application there will be no “decision” taken. This non-decision is not capable of being reduced to writing, and similarly it will not be possible to give any reasons for the non-decision.
  • An internal appeal must be lodged within 30 days of becoming aware of the administrative decision (section 96(1)). It is impossible to comply with this requirement if no positive action is taken, especially when the MPRDA does not prescribe a fixed duration during which the decision must be taken. If the minister has an indeterminable amount of time to consider the application, when must this 30 day period be calculated from?
  • The internal appeal procedure is worded to apply to an administrative decision that “was taken” (section 96(1)(b)). The language of the section clearly implies that there must have been some form of act by the minister, not just a failure to take a decision.
  • The internal appeal procedure does not automatically suspend the decision that is appeal against (section 96(2)(a)). In a situation where there has been no decision at all, this provision can’t be applied because there is nothing to suspend.
  • As part of the internal appeal procedure, a person must be provided with written reason by the person who took the decision that is appealed against (regulations 74(5) and 74(6)). In a case where no decision has been taken at all, it is not possible for the department to comply with the regulation and give “written reasons for the administrative decision”.

The conclusion that the term “administrative decision” can only relate to decisions that have actually been taken, and not to a failure to take a decision, can also be demonstrated by considering what the final appeal procedure could be if the term “administrative decision” did include the failure to take an action.

  • What would the legal situation then be if the minister either failed or refused to consider the appeal in the required time lines?
  • An internal appeal would be submitted, and it would request that the minister either (i) amends the department’s failure to take a decision; or (ii) substitutes the failure to take a decision with a positive decision to grant the application (regulations 74(9)(c) and (d)).
  • What would the legal situation then be if the minister ignored an application that was submitted an internal appeal would have to be lodged with the department against this failure to take a decision.
    • Would this failure to consider the appeal fall also under the definition of an “administrative decision” in terms of the MPRDA? Would a person be prevented from applying to a court to review the failure to consider the appeal until the internal remedies in the MPRDA have been exhausted, requiring the appellant to lodge a second internal appeal against the ministers failure to determine the first appeal (section 96(3))?
    • Must the person now bring an application to court, and ask the court to grant an order forcing the minister to perform their duty and determine the first appeal (ie a mandamus)? If so, then the person has now expended considerable time and resources to bring a court action just to place it in the same position where it was immediately after lodging the appeal, namely its appeal has been lodged and the minister is now compelled (in terms of the court order this time) to comply with the required time lines.
  • When the minister considers the appeal, the minister may decide that the appeal fails, and to substitute the failure to take a decision with a decision to refuse the application.
    • In this case the person will then have to lodge an internal appeal against the ministers decision to refuse the application.
    • Once the internal appeal procedure has been exhausted, the applicant would then only be entitled to approach a court to review the administrative action.

This process is a far cry away from that an internal appeal process should achieve; a quick and cost effective method to resolve irregularities before instituting legal action.

I would submit that the term “administrative decision” in terms of the MPRDA has a narrower definition than “administrative action” under PAJA, and that this term should not be interpreted to include situations where there has been a failure to take a decision, but only to include situations where a decision has indeed been taken which is prejudicial.

The Alternative: Reliance on Exceptional Circumstances to Bypass an Internal Appeal Process

Even if the above argument is rejected, PAJA allows a person to bypass any applicable internal appeal process if there are exceptional circumstances that would allow the court to exempt the non-compliance with the internal appeal procedure (section 7(2)(c)).

It would be prudent for any person who wants to bring a court action without first lodging an internal appeal to ask the court to grant an exemption from having to lodge in internal appeal, as an alternative to the argument that there is no internal appeal.

The “exceptional circumstances” that are typically accepted by the courts when granting an exemption from complying with internal appeal procedures are discussed in the next section.

Appropriate Legal Action and Possible Relief

If the minister ignores an application that has been submitted and does not consider it at all, an affected person will be able to approach the court in terms of PAJA directly without first exhausting the internal appeal procedure because the internal appeal procedure will not be applicable in these circumstances. As an alternative, an affected person can ask the court for an exemption from the internal appeal process if there are exceptional circumstances that are applicable.

An affected person can approach the court as soon as there has been an unreasonable delay in taking a decision (sections 6(2)(g) and 6(3)(a) of PAJA). It is possible to ask the court to grant any order that it just and equitable (section 8(2) of PAJA), including an order:

  • substituting or varying an administrative action (section 8(1)(c)(ii)(aa));
  • directing the taking of a decision (section 8(2)(a)); or
  • declaring the rights of the affected person (section 8(2)(b). (It might be noted that the legal action listed has relief in terms of both sections 8(1) and 8(2) of PAJA, even though the failure to take an administrative action falls in the ambit of section 8(2). I submit that the wording of section 8(2), permitting the grant of any order that is just and equitable, would not preclude the court from substituting its decision where the minister has failed to act. See the discussion by C Hoexter (Hoexter, C. 2012. Administrative Law in South Africa. Cape Town: Juta, at pg. 557) for further argument in support of this submission).

There has been a lot of recent discussion about the legal doctrine of the separation of powers; how the courts (judiciary) should not overstep its role and perform acts that fall into the realm that should be occupied ministers (the executive). PAJA does, however, directly empower the court to come to the aid of a person when the executive acts unlawfully, and allows the court to effectively make a decision on behalf of the minister when the minister fails to take a decision in a reasonable time (see sections 8(1)(c)(ii)(aa) and 8(2)(a) of PAJA; de Ville, JR. 2003. Judicial Review of Administrative Action in South Africa. Durban: LexisNexis Butterworths, at pg. 370; Hoexter, C. 2012. Administrative Law in South Africa. Cape Town: Juta, at pg. 552).

There are four situations where a court will be prepared to substitute its decision with the decision of the minister, without referring the matter back to the minister for decision. These are:

  • when the end result is a forgone conclusion;
  • when any further delay will cause unjustifiable prejudice;
  • when the original decision maker has exhibited bias or incompetence; or
  • where the court is as well qualified as the original authority to make the decision (Hoexter, 2012, pgs. 552 – 557).

For many applications the MPRDA doesn’t allow the minister to use any discretion when considering the application. The power granted to the minister is not a discretionary power; the minister must grant consent if the requirements for transfer are complied with. If the requirements are met the result is a forgone conclusion; the minister must grant the application.

Applications where the minister is compelled to grant a compliant application include applications for consent to transfer a right (section 11(2)), applications for prospecting rights (section 17(1)) and applications for mining rights (section 23(1)).

For these categories of applications it can be argued that, (i) the court is as qualified as the minister to make the decision, and (ii) that the end result of the application is a foregone conclusion. Once the court has had the opportunity to review and consider the application that was submitted, the court will be as well qualified as the minister to determine if the application placed before it meets the objective criteria the applicable section, and grant the application if all the requirements are met.

In addition to meeting these two requirements for substitution of a decision by the court, a person may also be able to advance reasons to show the court that further delay will cause unjustifiable prejudice.

Based on these considerations I submit that a person would be entitled to approach a court for direct relief and ask the court to substitute its decision with the minister’s decision.

Conclusion (Too Long; Didn’t Read)

What should be done if an application has been submitted to the Department of Mineral Resources, and the department has failed to take any action or consider the application?

  • If time is not of the essence in the underlying commercial transaction, a court application can be brought asking for an order to force the department to perform its duty. The matter would then be referred back to the department for consideration within a court specified time line.
  • If time is of the essence, a person can approach a court for direct relief and ask the court to grant the application, effectively substituting its decision with the minister’s decision. In order to be successful it must be argued that:
    • the MPRDA’s internal appeal process does not apply to situations where the minister fails to take a decision, alternatively that there are exceptional circumstances that would allow the court to exempt the non-compliance with the internal appeal procedure; and
    • the end result is a forgone conclusion; or
    • when any further delay will cause unjustifiable prejudice; or
    • when the original decision maker has exhibited bias or incompetence; or
    • where the court is as well qualified as the original authority to make the decision.

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South African Mining and Prospecting Rights May Expire Sooner than Anticipated

Prospecting and mining rights in South Africa are granted in terms of the Mineral and Petroleum Resources Development Act No 28 of 2002 (MPRDA) for a fixed duration. Prospecting rights are granted for a maximum period of 5 years renewable for a further single period not exceeding 3 years, and mining rights are granted for a maximum period of 30 years renewable for further 30 year periods.

In the case of the Minister of Mineral Resources vs Mawetse (SA) Mining Corporation (Pty) Ltd ((20069/14) [2015] ZASCA 82), the South African Supreame Court of Appeal was was asked to determine what date the duration of a right should be calculated from. The court held that the duration of rights must not be calculated from the date that the right was notarially executed, or calculated with reference to the termination dates that are contained in the right itself. The court determined that the duration of the right should be calculated from the date that the applicant for the right was informed that the right would be granted.

Application Procedure

To understand the reasoning of the court, and why the decision will lead to uncertainty in practice, the procedure followed by the Department of Mineral Resources (DMR) when a company applies for a right in terms of the MPRDA should be outlined:

  • An applicant for a mining right or prospecting right must make payment of a non-refundable application fee and lodge its application in the prescribed manner at the offices of the regional manager in whose region the land is situated.
  • The regional manager must accept the application for consideration if the formal requirements for its lodging have been complied with and if no other person holds or has submitted an application for a prospecting right or mining right over the land for the same mineral.
  • After the acceptance of the application the regional manager must make it known that an application has been received, must call on interested parties to submit comments on the application, and must notify the applicant that it must submit the required environmental reports.
  • If the requirements for the grant of the right have been complied with, the applicant will be notified that the right has been granted, will be advised of any conditions attached to the grant of the right, and will be requested to make itself available at the regional offices to notarially execute the right.
  • The DMR’s practice is to calculate the duration of a right from the date of its execution, and record the expiry date calculated using this method as a clause in the in the right.

Facts and Legal Decision

The facts of the Mawetse case are the following:

  • In November 2006 Dilokong Chrome Mine (Pty) Limited applied for a prospecting right.
  • In December 2006 the regional manager issued a letter of acceptance, and requested Dilokong to give effect to the empowerment provisions of the MPRDA and submit supporting documents to evidence its compliance.
  • In July 2007 the deputy director general of the DMR wrote to Dilokong to confirm that the right had been granted for a period of four years.
  • During November 2007, on the date on which the prospecting right was to be executed, Dilokong was informed that the right would not be executed by the department because Dilokong had failed to comply with the empowerment criteria.
  • The environmental management plan submitted by Dilokong was never approved and the prospecting right was never executed.
  • In September 2009 Mawetse applied for rights in respect of the same mineral and land as Dilokong’s application. Mawetse’s application was, however, rejected on the basis that Dilokong had been granted rights over the area.

The decision to reject Mawetse’s application was taken on review. One of Mawetse’s contentions was that there was no conflicting right because Dilokong’s right had been granted for four years, and more than four years had already lapsed since Dilokong’s application had been aproved. In response Dilokong argued that the period that its right was granted for had not started running because the right had not yet been executed, and had not become effective.

The court stated that a right is granted for a limited period and expires through the effluxion of time. To determine if a right has expired, it is necessary to determine the date that the right was granted. The court held that there are three distinct legal processes that must be distinguished from each other, namely (i) the granting of the right; (ii) the execution of the right; and (iii) the coming into effect of the right.

The court rejected the argument advanced by Dilokong that the DDG’s approval had not started running because the right had not been executed and had not become effective, stating that this argument was untenable because it would mean that the area was effectively sterilised in favour of Dilokong. The court held that the period of Dilokong’s prospecting right must be calculated from the date on which it was informed that its application was successful and that the right was granted, namely in July 2007.

The court held that Dilokong’s prospecting right, which had been granted during July 2007, had lapsed due to its expiry, notwithstanding that the right had not been executed and that the right had not become effective.

Practical Implications of the Decision

The decision in the case of Minister of Mineral Resources v Mawetse (SA) Mining Corporation (Pty) Ltd has two important implications for mineral rights granted in terms of the MPRDA:

  • first, the departmental practice of calculating the duration of a right from the date of the rights execution is not sanctioned by the provisions of the MPRDA; and
  • secondly, a right, including the exclusive right to apply for a renewal thereof or the exclusive right to apply for a mining right in the case of a holder of a prospecting right, will lapse on the expiry of the period which is calculated from the date on which the decision to grant the right was communicated to the applicant, not calculated from the date of execution of the right.

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Searching for Minerals in South Africa: Applications for Prospecting Rights

The South African mineral and petroleum sector is regulated primarily in terms of the South African Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA).

In terms of the MPRDA the state is the custodian of all mineral resources in South Africa and are held for the benefit of all South Africans; no person may prospect for any mineral unless that person has been granted a relevant right by the state, acting through the Minister of Mineral Resources (section 3(1) as read with 5A)”.

The MPRDA provides for two different rights which allow the holder to search for minerals. Prospecting rights allows the holder to conduct “prospecting operations”, while reconnaissance permissions allows the holder may conduct “reconnaissance operations”.

The work which is permitted under a prospecting licence is more substantial than that permitted under a reconnaissance permission. Reconnaissance permissions only allow the holder to search for minerals by geological, geophysical and photo geological surveys and by using remote sensing techniques. Prospecting rights allow the holder to disturb the surface or subsurface of the earth. The MPRDA defines prospecting as:

"intentionally searching for any mineral by means of any method:

(a) which disturbs the surface or subsurface of the earth, including 
    any portion of the earth that is under sea or under other water; or

(b) in or on any residue stockpile or residue deposit, in order to 
    establish the economic existence of any mineral and to determine 
    the extent and economic value thereof; or 

(c) in the sea or other water on land."

The conduct of any reconnaissance or prospecting without the first obtaining the required reconnaissance permissions or prospecting right constitutes an offence. On conviction a person who is found to have been in contravention of the act may be liable for payment of a fine or to imprisonment for a period not exceeding six months, or to an fine and imprisonment (section 98(a)(viii) as read with 99(2)).

It is therefore imperative that any person who intends to search for minerals in South Africa ensures that they obtain the required right.

I will briefly set out the application procedure to apply for a prospecting right. It should be noted that some of the provisions in the MPRDA currently regulating applications for prospecting rights will be amended in terms of the Mineral and Petroleum Resources Development Amendment Act, No 49 of 2008, parts of which are already in operation and parts of which will only come into operation in the future. Further substantial amendments have a also been proposed in terms of the Mineral and Petroleum Resources Amendment Bill B
15B-2013.

Care should be taken to ensure that the correct procedure which is applicable at the time of submitting the application is followed.

Procedure followed in the Application for a Prospecting Right

A person who wishes to apply for a prospecting right in terms of the MPRDA must make payment of the non-refundable application fee and lodge an application in the prescribed manner at the offices of the regional manager in whose region the land is situated (section 16(1)).

The application for a prospecting right must be accompanied by the following documents:

  • a plan of the land to which the application relates prepared in accordance with accepted standards, which must include, inter alia, the north point, scale and the co-ordinates, location, name, number, extent and boundaries of the land (regulation 2(2) plan);
  • a full prospecting work programme, prepared in accordance with regulation 7;
  • documentary proof of the applicant’s technical ability and financial resources to comply with the prospecting work programme;
  • title deeds in respect of the land;
  • copies of the applicants identity document if the applicant is an individual or constitutional documents if the applicant is a company.

The regional manager is obliged to accept the application for consideration if the formal requirements for its lodging have been complied with and if no other person holds or has submitted an application for a prospecting right or mining right over the land for the same mineral. This requirement ensures that persons cannot obtain prospecting rights in the same area where rights have already been granted to another person for the same minerals. Nothing, however, precludes a person from submitting an application for a prospecting right in respect of a different mineral that is not included in a holder’s existing right (section 16(2)).

Within fourteen days after the acceptance of the application the regional manager must make it known that an application has been received and must call on interested parties to submit comments within thirty days of the notice. If objections are received they must be forwarded for consideration to the Regional Mining Development and Environmental Committee in order for them to consider the objections and advise the minister appropriately (section 10).

The regional manager must also within fourteen days after the acceptance of the application notify the applicant in writing that they are required to submit an environmental management plan and that they are required to notify the land owner, lawful occupier or any other affected party in writing of the application and consult with the aforesaid persons (section 16(4)).

The applicant must deliver the result of its consultations to the regional manager within thirty days (section 16(4)(b)).

Once the regional manager has received the environmental management plan and the consultation outcomes the regional manager must forward the application to the minister for the minister’s consideration (section 16(5)).

The minister is obliged to grant the prospecting right within thirty days of receiving the application from the regional manager if:

  • the applicant has the financial and technical capability to conduct the proposed prospecting optimally in accordance with the prospecting work programme;
  • the estimated expenditure is compatible with the proposed prospecting operation and duration of the prospecting work programme;
  • the prospecting will not result in undue pollution, ecological degradation or damage to the environment;
  • the applicant has the ability to comply with the provisions of the Mine Health and Safety Act, No 29 of 1996 (MHSA);
  • the applicant is not in contravention with any relevant provisions of the MPRDA; and
  • the applicant will substantially and meaningfully expand opportunities for historically disadvantaged persons to enter into and actively participate in the mineral industry (section 17(1)).

A prospecting right can be granted for an initial period not exceeding five years, and may be renewed once for a further three year period provided that a renewal application is submitted and the requirements of the act are complied with (section 17(5) and 18(4)).

A prospecting right becomes effective on the date on which the prospecting right is executed. Once the prospecting right has become effective the holder is granted various rights, including the right to enter land with their employees for the purposes of conducting their prospecting work (section 17(5)
as read with the definition of “effective date” and section 5).

Consequences of Not Following Correct Procedures

Section 96 the MPRDA provides an internal appeal procedure which may be used by any person whose rights or legitimate expectations have been materially and adversely affected by the granting of a prospecting licence. This right of appeal can be exercised at any time after a prospecting right has been granted, provided that it is exercised within thirty days of the person becoming aware of the grant of the licence (section 96(1)).

The internal appeal procedure, or subsequent court review which may be taken in terms of the Promotion of Administrative Justice Act, No 3 of 2000 (PAJA), may result in the prospecting licence being set aside if the correct procedure was not adhered to by the applicant when applying for the prospecting licence. This includes if there was a failure to conduct adequate consultations with affected persons.

In order to ensure that the grant of a prospecting right cannot be set aside on appeal or judicial review it is imperative that an applicant follows the correct procedures are complied with during the application process.


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Overview of the South African Protection of Information Bill

The methods used to collect and store information and data have evolved over time.

In the past personal information was collected primarily through direct means by companies that people did business with. The collected information would be stored to enable the company to provide a service to the customer and to bill the customer after service delivery. The high cost of storing information typically meant that a company would only store information that was strictly necessary for these purposes and that the information would be stored for a limited time once it was no longer needed.

In the last two decades new technologies, including the internet and mobile devices, have dramatically changed the way in which people interact with each other and with companies, leading to an increase of the number of ways which companies can collect personal information about data subjects; a cell phone application which has access to your precise GPS coordinates, phone book and text messages; an internet website tracking its visitors; an in-store loyalty card which tracks shopping habits; an internet search engine which logs and stores each of your search queries; a social network application for your tablet computer which redirects your personal and business email to its own servers.

In many cases people are either unaware that data collection is happening or are unaware of the scope of the data collection. The falling cost to store information electronically now means that this personal information which is collected can be stored for longer periods of time, perhaps indefinitely.

Once this personal information has been collected, which could include individual’s names, gender, phone numbers, home address, email addresses, or shopping and internet browsing habits, the question has often been whether this information still belongs to the private individual or whether the information now belongs the company collecting the information? What can a company use the collected information for after collection?

In South Africa a person’s right to privacy has been entrenched in section 14 of the South African Constitution 1996, which provides that “[e]veryone has the right to privacy”, before going further to cater for specific circumstances. The South African Protection of Personal Information Bill, or POPI, which may become law soon takes further steps to entrench the right to privacy and to protect personal information which is collected and stored.

The Protection of Personal Information Bill draws on years of research and contains many broad principles which were developed and incorporated into the European Union’s Data Protection Rules. It seeks to introduce measures to ensure that personal information is protected, but aims to balance this objective against the right to access to information and the principle of free flow of information.

The bill accomplishes its objectives by codifying the rights that persons have in their own personal information and specifying eight conditions, or principles, that must be complied with by persons when collecting, storing and processing the personal information.

The Protection of Personal Information Bill may have far reaching consequences on some businesses operating in South Africa. Businesses should evaluate the information which is currently being collected to determine whether the bill will apply to the activities of the business. If the bill does apply a business will have to evaluate and determine what technical and organisational measures need to be taken to ensure that the legislation can be complied with once it is enacted.

Application of the Protection of Personal Information Bill

In terms of section 3, the Protection of Personal Information Bill applies to any activity concerning personal information which is either conducted in South Africa, or which is conducted outside South Africa by a responsible party which is domiciled (a resident) in South Africa.

The bill binds both public and private bodies, extending to any South African state department or administration, state functionary, state institution, private companies, private partnerships, sole proprietors and any other individual.

The activities relating to personal information which are regulated in terms of the bill include:

  • collection;
  • receipt;
  • recording;
  • storage;
  • retrieval;
  • dissemination; and
  • use.

The definition given to “personal information” ensures that the legislation will have a wide application.

Personal information is defined as any information relating to an identifiable, living natural person or existing juristic person, including a person’s:

  • name;
  • gender;
  • sexual orientation;
  • religion;
  • education;
  • identifying number;
  • e-mail address;
  • telephone number
  • personal opinions; and
  • correspondence.

There are, however, some exclusions, such as the exclusion of data relating to a purely personal or household activity, data which has been de-identified and data collected by a public body involving national security and the investigation or proof of criminal offences.

Rights Granted in Terms of the Protection of Personal Information Bill

The section 5 of the Protection of Personal Information Bill briefly sets out the rights granted in terms of the bill which are elaborated and expanded on in further chapters. The rights granted in terms of the bill include:

  • the right to be notified that personal information is being collected;
  • the right to be notified if there has been any security compromises and if personal information has been unlawfully accessed;
  • the right to establish if a person or entity holds any personal information and if so request access to the personal information;
  • the right to know the identity of third parties who have had access to the personal information;
  • the right to request the correction, destruction or deletion of personal information;
  • the right to object to the processing of personal information;
  • the right to submit a complaint to the Information Regulator, which is to be established in terms of the bill; and
  • the right to institute civil law suits to claim damages suffered as a result of a contravention of the bill.

Conditions for the Lawful Processing of Personal Information

Chapter 3 of the Protection of Personal Information Bill sets out eight conditions, or principles, which must be complied with when processing personal information.

Failure to comply with these conditions when collecting and processing information protected by the bill would constitute an interference with the rights of the individual in terms of section 73 and may result in civil liability in terms of section 93 for damages suffered by the individual.

Contravention of other chapters of the bill can also result in administrative penalties or a criminal conviction punishable by fines or imprisonment of up to ten years for some offences.

These conditions for the lawful processing of personal information are:

Condition 1: Accountability

The first condition provides that the responsible party, namely the public or private body which determines the purposes and means for processing personal information, must ensure that personal information is processed lawfully and that the conditions are complied with at the time when the purposes and means of data processing is determined and during the processing itself.

Condition 2: Processing Limitation

The second condition sets limits on the methods which may be used when collecting personal information and on the scope of processing the information. Focus is placed on the protection of privacy and prevention of excessive collection and processing.

This condition provides that personal information may generally only be collected directly from the individual and not from other third party sources.

It also provides that personal information may only be collected and processed if:

  • the individual has consented;
  • it is necessary to perform in terms of a contract concluded directly with the individual;
  • it protects a legitimate interest of the individual or the person collecting or processing the information; or
  • it is necessary for the proper performance of a public law duty by a public body.

Data subjects are also granted the right to object to the collection and processing of personal information, including the specific right to object to direct marketing from companies which they are not already an existing customer of.

Condition 3: Purpose Specification

The third condition sets limits on the reasons for the collection of personal information and limits the duration that the records may be retained.

This condition specifies that personal information may only be collected for specific and explicitly defined purposes and that data subjects must be informed of the purpose for collecting the information.

Once the personal information has been collected it may not be retained any longer than what is necessary for achieving the defined purpose. After the personal information is no longer required it must be either destroyed or “de-identified” in a manner which would make identification of the individual impossible either on its own or if combined with other information.

Condition 4: Further Processing Limitation

The fourth condition limits the use of personal information once collected, providing that all processing must only be in accordance with, or compatible with, the purpose for which the information was originally collected.

Condition 5: Information Quality

The fifth condition ensures that reasonable steps must be taken by the responsible person to ensure that all personal information which is collected or processed is complete, accurate, not misleading and updated where necessary.

Condition 6: Openness

The sixth condition ensures openness of records relating to the processing of personal information by requiring responsible persons who collect and process personal information to retain records of the processing operations in terms of the Promotion of Access to Information Act.

This condition also requires that data subjects are notified of their rights in terms of the bill. Steps must be taken before the actual collection of personal information to ensure that an individual is aware of:

  • what information is being collected;
  • the name and address of the responsible party collecting or processing the information;
  • the purpose of collecting the information;
  • the consequences of not providing access to the personal information; and
  • if the information is to be transferred to another country, the level of protection afforded to the information in that country.

Condition 7: Security Safeguards

The seventh condition introduces safeguards to protect the integrity and confidentiality of personal information once it has been collected.

In terms of this condition any person collecting or processing personal information must take appropriate and reasonable technical and organisational measures to ensure that personal information is not lost, damaged or unlawfully accessed or processed. This requires the responsible party to take measures to identify internal and external risks, establish and maintain safeguards and continually update procedures and safeguards in response to new risks or deficiencies.

Data subjects must also be informed of any security breaches as soon as reasonably possible.

Condition 8: Data Subject Participation

The final condition applicable to the lawful processing of personal information provides data subjects with the right to participate in the collection and processing of their personal information.

This condition provides data subjects with the right to:

  • request whether or not a person is in possession of personal information belonging to the data subject;
  • request a record of the personal information held;
  • request information regarding all third parties who have had access to the personal information;
  • request the correction or deletion of inaccurate personal information; and
  • request the deletion or destruction of personal information.

This work by Clinton Pavlovic is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

How Existing Human Rights Law Applies to Modern Digital Surveillance

A group of worldwide privacy organizations and advocates have adopted and released a document entitled “The International Principles on the Application of Human Rights to Communications surveillance“.

The document sets out how existing international human rights laws applies in the digital environment and details thirteen principles that must be adhered to by any government in order to comply with current international law.

Importantly, the document addresses the distinction between collection of the content of a communication and the collection of the “communications metadata”, and concludes that the distinction between the two are no longer appropriate; metadata and other non-content data deserves equal protection because it may reveal even more about an individual than the content of the communication itself.

The thirteen principles, based on current international law, outlined in the document are summarized below.

Legality

Any limitation to the right of privacy must be prescribed by a publicly available legislative act, and subject to periodic review.

Legitimate Aim

Laws should only permit surveillance by specified state authorities.

Any surveillance must be conducted to achieve a legitimate aim that corresponds to a predominantly important legal interest that is necessary in a democratic society.

Necessity

Surveillance should not be widespread, but must be restricted only to what is necessary to achieve the legitimate aim.

Surveillance should only be conducted when it is the only method to achieve the legitimate aim, or is the method that is least likely to infringe on the persons human rights.

Adequacy

The surveillance must be able to fulfil the legitimate aim.
Proportionality

Before any state engages in surveillance for the purposes of a criminal investigation it must establish before an independent court that:

  • there is a high degree of probability that a serious crime has been or will be committed;
  • evidence of that crime will be obtained by the surveillance;
  • other less invasive techniques have been exhausted;
  • the information gathered will be limited to that which is relevant to the alleged crime; and
  • the information gathered will only be accessed by the specified authority and used only for the purposes for which permission was granted.

If the surveillance will not put the person at risk of criminal prosecution the state must establish before an independent court that:

  • less invasive investigative techniques have been considered;
  • the information accessed will be confined to what is reasonably relevant and any excess information will be destroyed or returned; and
  • the information gathered will only be accessed by the specified authority and used only for the purposes for which permission was granted.

Competent Judicial Authority

All determinations relating to surveillance should be made by a competent, impartial and independent court which is separate from the authority conducting the surveillance.

Due Process

In the determination of human rights everyone is entitled to a fair and public hearing. The mere risk of flight or destruction of evidence shall never be considered as sufficient to justify retroactive authorization.
User Notification

Users must be notified of a decision authorizing surveillance to enable them to appeal the decision. Delay in notification is justifiable if:

notification would would seriously jeopardize the purpose of the surveillance; or
authorization to delay is granted by the judicial authority; and
the individual is notified within a reasonably practical time period.

Transparency

States must be transparent about the use and scope of surveillance techniques used. States should publish transparency reports detailing the type and nature of surveillance, including the number of surveillance requests approved or rejected, in order for individuals to fully comprehend the scope, nature and application of the laws permitting surveillance.

Public Oversight

Independent oversight mechanisms, which has access to all potentially relevant state information including secret and classified information, must be established. This is to ensure that the state is acting within its lawful authority.

Integrity of Communications and Systems

States should not compel service providers or hardware or software providers to build in surveillance capabilities into their systems; compromising security for the state always compromises general security which would make these systems more vulnerable to attack by unauthorized third parties.

Service providers should not be compelled to collect information purely for state surveillance purposes.

Individuals have the right to express themselves anonymously, and states should not require service providers to identify their users as a precondition
for providing services.

Safeguards for International Cooperation

When concluding multinational mutual legal assistance treaties, states must ensure that when the laws of more than one state applies to the communication then the law which provides the greatest protection to the individual is applied. This prevents states from circumventing their own domestic legal restrictions.

Safeguards Against Illegitimate Access

Legislation criminalizing illegal surveillance by public and private persons, and providing for significant criminal and civil penalties if contravened, must be enacted.

Legal protection must be provided to whistle blowers.

Information obtained in contravention of the principles must be inadmissible as evidence in any proceedings.


This work by Clinton Pavlovic is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.