Protecting Important Land Areas

During March 2017 the Supreme Court of Appeal of South Africa handed down a decision ensuring the continued environmental protection of the Makhonjwa Mountains in Mpumalanga (also known as the Barberton Greenstone Belt). This was necessary despite the area being placed on South Africa’s tentative list of world heritage sites in 2008, and despite the provincial government taking three separate actions in 1985, 1996 and 2014 to ensure that the area was protected.

In the case of Mpumalanga Tourism and Parks Agency v Barberton Mines (Pty) Limited ((216/2016) [2017] ZASCA 9 (14 March 2017)) the court was asked to decide if the Makhonjwa Mountains had legal protection from mining activities, or if a single flawed government notice meant that the government’s ongoing efforts to protect the area was for nothing.

Barberton Mines was granted a prospecting right in terms of the Minerals and Petroleum Resources Development Act, No 28 of 2002 (MPRDA). When the company wanted to start their prospecting operations they were denied access to the area by the Parks Agency. The Parks Agency alleged that the company’s prospecting right was invalid and fell to be set aside because it was granted over land that formed part of a protected area in terms of the National Environmental Management: Protected Areas Act, No 57 of 2003 (NEMPAA).

The Parks Agency appealed the Minister of Mineral Resource’s decision to grant the prospecting right using the department’s internal process, but the minister rejected this appeal. Barberton Mines then launched a court application in the North Gauteng High Court. The court held that the Makhonjwa Mountains were not protected under NEMPAA, granted Barberton Mines a court order affirming the company’s rights to prospect in the area, and ordered the Parks Agency not to prevent or interfere with the company’s prospecting activities.

Appeal to the Supreme Court

The Parks Agency took the High Court decision on appeal. It argued that the Makhonjwa Mountains is protected under NEMPAA because it is a declared, or designated, protected area. This protection prohibits anyone from conducting commercial prospecting, mining, exploration or production within its boundaries (see section 48).

Barberton Mines counter argued that the actions taken by the provincial government in 1985, 1996 and 2014 were insufficient to declare the Makhonjwa Mountains a protected area in terms of NEMPAA. It argued that the 1985 resolution was invalid because was not issued by the correct authority or published as required, and that the 1996 proclamation was void because it did not adequately describe the area – the resolution only identified the area as “Barberton Nature Reserve”, without any accompanying map or detailed area description.

The Supreme Court of Appeal affirmed that NEMPAA binds the state and trumps any other legislation if there is a conflict on the management or development of protected areas – if an area is validly declared or designated protected area then prospecting operations in the area is prohibited.

The only question that the court had to decide was whether the Makhonjwa Mountains was validly declared as a “protected area” as contemplated by NEMPAA. For this, the court placed emphasis on the 1996 proclamation, finding that it was sufficient to be considered a “declaration” or “designation” required by NEMPAA, albeit that this declaration took place before NEMPAA came into force. The court then turned its attention to Barberton Mines’ argument, and the High Court’s finding, that this proclamation must be found to be void because its description of the area was vague.

The court considered previous cases that dealt with actions to declare laws void for vagueness, including a 1955 Appellate Division case of R v Pretoria Timber Co (Pty) Limited (1950 (3) 163 (A)) that held that “[t]he degree of certainty, clarity or precision that must be present … depends on the circumstances. … The law requires reasonable and not perfect lucidity …”, and a 2006 Constitutional Court case of Affordable Medicines Trust v Minister of Health (2006 (3) SA 247 (CC)) that added that “[t]he doctrine of vagueness must recognise the role of the Government to further legitimate social and economic objectives [a]nd should not be used unduly to impede or prevent the furtherance of such objectives”.

The court stated that common sense must prevail, finding that the 1996 proclamation did not need a “faultless description couched in meticulously accurate terms in order to be valid”, only that the area should be indicated with sufficient certainty.

The court noted that the provincial government had given a particular meaning to the “Barberton Nature Reserve” since 1985. Because the 1996 proclamation is related to the detailed 1985 resolution it couldn’t be argued that people wouldn’t know what area the 1996 proclamation refers to. It is therefore valid for the 1996 proclamation to refer to the area only by name without detailing the exact area description.

The common sense approach adopted by the court is ultimately correct because minor errors in a government declaration shouldn’t prevent the government bodies from performing their important constitutional duties and achieving their social and economic objectives. The Nature of the error is, however, an important consideration. In this case the error had no real effect on the public’s ability to understand the declaration, but this doesn’t mean that in the future the court would turn a blind eye an error that truly introduces uncertainty.

The Parks Agency’s appeal was ultimately successful, effectively preventing Barberton Mines from conducting prospecting in the area which, if not certain before, is now a confirmed “protected area” under NEMPAA.

On a side note, the Supreme Court of Appeal appears to endorse the view that mining operations in a protected area might be permitted in under the MPRDA if the activities are in the national interest (section 48). The court wasn’t asked to decide this issue, but this may be an area of the law open for future debate.


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

The unedited featured photograph by Jamie Hagan was published under a Creative Commons Zero Licence.

Prospecting Right Applications: The Queuing Conundrum

The laws governing mining rights in South Africa is founded on three principles: (i) the State is the custodian of all minerals; (ii) any person may apply for a right to prospect on a first come first served basis; and (iii) a use it or lose principle applies to rights. These principles ensure a system that encourages active prospecting and prevents people from holding onto rights without using them to prevent others from actively prospecting.

The application procedure is a system of queuing – the first to submit an application is in the front of the queue, and all subsequent applications form a queue behind the first which can only be considered once the first application has been rejected.

An unresolved legal question was whether a company can submit a non-compliant application as a placeholder in the queue, and then later amend the application to make sure it is compliant.

The recent Gauteng High Court decision in Aquila Steel (South Africa) Limited v the Minister of Mineral Resources and others (72248/15) promised guidance on the proper application of the principles governing the application procedure, which it indeed gave, but an important aspect of the decision mustn’t be overlooked. The laws that the court applied to come to its decision have been amended.

In this note I’ll consider if the court’s decision, and if the amendment of the the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) will affect its application.

The Courts Reasoning in the Aquila Steel Judgement

This case dealt with two conflicting prospecting rights granted over the same land for the same mineral.

On 19 April 2005 Ziza Limited (Ziza) submitted a prospecting right application. The application was, however, incomplete because it didn’t comply with the prescribed requirements – it omitted the prescribed plan showing the land over which the application applied.

On 18 April 2006 Aquila submitted prospecting right application, which was granted on 11 October 2006.

On 26 February 2008 Ziza’s prospecting right application was granted. There were now two rights granted over the same land for the same minerals.

On 14 December 2010 Aquila applied for a mining right. This application was, however, now refused by the Department of Mineral Resources (DMR) because of Ziza’s prior application that the DMR said was in queue before Aquila’s.

The court had to decide which application was first in queue and should be considered.

Aquila argued that Ziza’s application was not complete and that the defects meant it had to be rejected by the DMR – this rejection would result in the application falling out of the queue and leave Aquila’s application as next in line. Ziza counter argued that a defect in an application doesn’t mean that the application automatically fails and has to be rejected by the DMR, but that a defective application can be amended to remedy defects without losing its place in the queue.

Does a prospecting right applicant lose their place at the front of the queue if their application doesn’t comply with the formal requirements of the MPRDA? To answer this question the court applied the wording of section 16(3) of the MPRDA as it read at the time when the applications were submitted and decided:

If the application does not comply with the requirements of this section, the Regional Manager must notify the applicant in writing of the fact within 14 days of receipt of the application and return the application to the applicant.” (own emphasis).

The crux was to determine what notifying and “returning the application to the applicant” meant. Did this mean the application was rejected, or that the process was merely suspended to allow the applicant to amend the application without losing its place in the queue?

The court considered the objective of the act to prevent sterilisation of minerals. This would be hindered if the return of the application allowed the applicant to amend a defective application – the act didn’t specify any timelines that the amendment must be done, meaning that an applicant could delay the entire procedure by not amending the application (or taking years to amend as in the present case), effectively sterilising the minerals by preventing other companies from applying for prospecting rights over the land.

The court also considered the practicalities of “returning the application”. This means the DMR has no record of the application other than the day that it was received and returned. Crucially the DMR wouldn’t have records of the minerals or land that the application related to.

The court concluded that a “return” was a rejection meaning the application fell out of the queue. An applicant could amend the application but the resubmitted application must be treated as a new application and fall behind any other applications in the queue.

Ziza’s non-compliance meant that its application fell out of the queue. Aquila’s application would accordingly have to be considered because it was the next application in the queue.

Current Position under the MPRDA

The Aquila case applied the provisions of the MPRDA as they read between 2005 and 2013, the years when the decisions were taken. This means that the court’s reasoning may not apply to decisions taken after the amendment of the act.

The MPRDA was amended on 13 June 2013, and the amended provisions must be applied to any decisions taken by the DMR after this date. Section 16(3) now reads:

If the application does not comply with the requirements of this section, the Regional Manager must notify the applicant in writing of the fact within 14 days of receipt of the application.” (own emphasis).

The amendment removes the requirement to return a non-compliant application – the very requirement that the court considered when deciding the Aquila case.

Under the amended section the DMR must only notify the applicant that its application is non-compliant. The DMR still can’t accept non-compliant applications, but it now doesn’t have an obligation to return them. Does the non-return of the application change the application of the Aquila judgement and mean that there is no rejection of the application? Does this now give an applicant an opportunity to remedy its applications non-compliance without losing its place in the queue?

In my opinion the amended section 16 of the MPRDA does not change the application of the Aquila decision. The amended section doesn’t alleviate the concerns in the Aquila judgement around the sterilisation of minerals if the applicant possibly has an unlimited period to remedy its applications non-compliance.

In terms of the amended section the applicant is still notified of the non-compliance. This notification itself would be an administrative action taken by the DMR, and would be a rejection of the application in line with the Aquila judgement. The non-return of the application merely alleviates the DMR’s burden and costs associated with returning voluminous applications.

Conclusion

The Aquila judgement highlights the need for prospecting right applicants to make sure that their application complies with all the formal requirements of the MPRDA before submission.

If an application is non-compliant the DMR must reject the application. The applicant can remedy the defects, but the resubmitted application will be regarded as a new application, and fall last in the application queue.

There have been amendments to the MPRDA removing the DMR’s obligation to return the non-compliant application, but this amendment would not alter the application of the legal principles decided in the Aquila judgement.


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The Effect of Local Zoning Laws when Applying for a Mining Right

When a person is applying for a prospecting or mining right in South Africa, emphasis is placed on ensuring compliance with the provisions of the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) and other applicable national legislation that regulates environmental management.

An area of legal compliance that is sometimes overlooked is the need to comply with provincial and local land use and zoning restrictions. These can prevent mining operations even if a mining right has been granted in terms of the MPRDA. If there is a town planning ordinance that restricts the right to mine unless the land is appropriately zoned for mining, then the holder of a mining right or permit must get land use planning authorisation before starting with operations.

The failure to consider land zoning could therefore have dire consequences on a project.

To understand the interaction of national, provincial and local legislation in South Africa, some background on the different spheres of government is useful.

The Interaction between National, Provincial and Local Legislation

In South Africa the power to pass laws is divided into three government spheres – national, provincial and local (section 43 of the Constitution). Each sphere is allowed to pass legislation governing the areas that it exercises control over. The control might be exclusive or concurrent control that is exercised jointly.

The national legislature has the power to pass laws that govern any matter as long as the matter is not in the exclusive control of the provincial government (section 44(1)(a) of the Constitution). The provincial government has more limited powers – it exercises concurrent power with the national legislature in some areas, but it also has exclusive powers in other areas (section 44(1)(b) of the Constitution).

Areas of concurrent national and provincial competence include the administration of indigenous forests, the environment, regional planning and development, and urban and rural development (schedule 4 of the Constitution). The areas where the provincial government exercises exclusive legislative competence, and where the national legislature has no power to govern, include provincial planning, and provincial roads and traffic regulation (schedule 5 of the Constitution). A full list of the different functional areas is included at the end of this note.

When applying national and provincial legislation you have to ask, if an activity is permitted by national legislation can that activity then be restricted by provincial legislation or local by-laws? In the context of mining, if a person is permitted to mine in terms of the MPRDA, which is national legislation applicable throughout the entire Republic, can they then be prevented from mining if provincial legislation places additional requirements that must be met before starting with the mining activities?

A Conflict between Land Use and Zoning Restrictions, and the Right to Mine

The question whether local land use and zoning restrictions can restrict a person’s right to mine in terms of a mining permit was considered in 2012 by the South African Constitutional Court in the Maccsand case (CCT 103/11 [2012] ZACC 7).

Maccsand was granted two mining permits. One to mine the “Rocklands dunes” in a residential area zoned as public open space, and the second to mine the “Westridge dunes”, also in a residential area but situated on three erven zoned as public open space and rural areas. The City of Cape Town brought legal action against Maccsand to stop all mining activities on the dunes until the land was rezoned to allow for mining.

The legal action to stop the mining activities was brought because Maccsand had not complied with the provincial Land Use Planning Ordinance 15 of 1985 (LUPO), which prohibits the use of land for purposes that are not permitted in the zoning scheme or regulations. LUPO provides that if a person wants to undertake mining activities, these activities can only be undertaken if the land zoning scheme permits it or if a departure is granted.

It was argued in support of Maccsand that a right to mine can’t be limited by local land use and zoning restrictions because the regulation of mining fell in the national sphere of government. It was argued that the permit granted in terms of the national legislation authorising mining could not be limited by local land use and zoning restrictions because the limitation would be an intrusion by the local sphere of government into an area falling in the national sphere.

The court recognised that there is a natural overlap between land use and mining because mining will always take place on land, but stated that overlaps in the competencies of national and local government may be permitted. LUPO governs the use of all land in the Western Cape Province, which is a function of the local sphere of government in terms of the Constitution – it doesn’t regulate mining.

Because of the overlap of competencies between the MPRDA and LUPO, the granting of a mining right doesn’t automatically exclude the application of LUPO, and it doesn’t mean that the MPRDA trumps the provisions of LUPO – indeed the MPRDA itself states clearly that a mining right is subject to any other applicable law, such as LUPO (section 23(6) of the MPRDA).

The court found against Maccsand, holding that there is no conflict between the MPRDA and LUPO, and that it is permissible under the Constitution if mining can’t take place in terms of the MPRDA until the land is rezoned in terms of applicable land use and zoning restrictions.

The Need to Assess Restrictions According to the Operations Location and Time of Commencement

The Maccsand case dealt with a provincial ordinance enacted by the Provincial Counsel of the former Cape of Good Hope, but it illustrates an important legal principle applicable in all of South Africa’s provinces – the right to conduct mining activities in terms of the MPRDA can be restricted by provincial and local land use and zoning restrictions.

The different provinces in South Africa have different land use and zoning restrictions. This means that a mining right holder must look at the provincial legislation applicable in the province where operations are intended in order to determine if there are provincial restrictions restrict mining operations. If so, then it is necessary to determine what approvals are needed from the local authority before starting operations.

Over and above determining if there are land use and zoning restrictions, it is also necessary to determine what provincial legislation that was applicable at the time that operations commenced because the present legislation might not always be applicable.

This was illustrated in the Mtunzini Conservancy v Tronox KZN Sands (Pty) Ltd case (Mtunzini Conservancy v Tronox KZN Sands (Pty) Ltd and another [2013] 2 All SA 69 (KZD)). The facts of this case were strikingly similar to the Maccsand case, but the court distinguished the two cases and held that in the Mtunzini Conservancy case the current provincial legislation could not be used to prevent Tronox from continuing with its mining operations.

In 1988 Tronox was granted a single right to mine mineralised sand dunes over two discontinuous areas of land, referred to as the Hillendale and Fairbreeze properties. When the right was granted in terms of the old Minerals Act, No 50 of 1991, Tronox planned to mine the Hillendale property first and then later mine the Fairbreeze property. This was reflected in the company’s mining authorisations.

In 2012 when the company started to plan its mining activities on the Fairbreeze property the Mtunzini Conservancy objected, and brought legal action against Tronox to stop all mining activities on the dunes. The Mtunzini Conservancy relied directly on the Maccsand case and argued that Tronox couldn’t start with any construction activities on the Fairbreeze property until it was granted development approval in terms of the provincial KwaZulu-Natal Planning and Development Act No. 6 of 2008 (the PDA).

The court distinguished the Mtunzini Conservancy case from the Maccsand case based on when the mining operations started and the applicable provincial legislation that was applicable at the relevant time. When the company started with its mining operations in the Maccsand case, unauthorised mining was already prohibited by the provincial legislation (LUPO). This was not the case in the Mtunzini Conservancy case.

In the Mtunzini Conservancy case, when the company started its mining operations in 1988 there was no provincial legislation in place that restricted the intended operations without requiring additional provincial authorisations – the restriction that were being relied on by the Mtunzini Conservancy were only introduced after Tronox had already started its mining operations.

The court held that the application of PDA is not retrospective, and the law that was applicable when the right to mine was granted in 1988 continued to apply. When Tronox was granted the right to mine the Fairbreeze property in 1988 it had complied with all legislation and had been granted all of the necessary authorisations in terms of the then applicable legislation. The court accordingly held that the KwaZulu-Natal Planning and Development Act did not restrict mining operations that had commenced before the act became effective, and that the company’s right to mine the Fairbreeze property is not restricted by the provisions of the PDA which came into effect after the start of the mining operations.

An Approach When Considering Local Land Use and Zoning Restrictions

The following approach has been suggested when considering zoning restrictions:

  • is there a town planning scheme promulgated over the land;
  • if so, has the land been zoned for a particular use;
  • if so, does the zoning permit mining;
  • if not, does the town planning scheme have a general exemption for mining;
  • if not, does the town planning scheme make provision for existing land uses, and is the mining activities covered by these provisions;
  • if not, could it be argued that the town planning scheme legally invalid (Dale et al South African Mineral and Petroleum Law Issue 17 app-248).

If the outcome of this line of questioning shows that mining activities on the intended land are restricted, then the holder of a right will have to ensure that the land is rezoned to permit mining before any mining activities take place on the property.

Don’t Overlook Local Zoning Laws

Because provincial and local land use and zoning restrictions can prevent mining operations, it is important to consider these early in project planning process in order to ensure that prospecting and mining operations are not halted before they have even had the chance to start.


Provincial Legislation to Consider

I have included a list of provincial legislation that might become applicable below for the sake of completeness.

Eastern Cape

  • Land Use Planning Ordinance 15 of 1985 (of the former Cape Province);
  • Ciskei Land Use Regulation Act 15 of 1987.

Northern Cape

  • Northern Cape Town Planning and Development Act 7 of 1998;
  • Spatial Planning and Land Use Management Act 16 of 2013.

Western Cape

  • Land Use Planning Ordinance 1985 (Western Cape);
  • Western Cape Land Use Planning Act 3 of 2014.

Free State

  • Township Ordinance 9 of 1969 (as amended by the Township Ordinance Amendment Act 10 of 1998).

Gauteng

  • Gauteng Planning and Development Act 3 of 2003;
  • Town Planning and Townships Ordinance 15 of 1986 (Transvaal);
  • Division of Land Ordinance 20 of 1986;
  • Transvaal Board for the Development of Peri-Urban Areas Ordinance 20 of 1943.

KwaZulu Natal

  • KwaZulu-Natal Planning and Development Act 6 of 2008;
  • KwaZulu Land Affairs Act 11 of 1992;
  • KwaZulu Ingonyama Trust Act 3 of 1994;
  • KwaZulu Amakhosi and Iziphakonyiswa Act 9 of 1990.

Limpopo

  • Town Planning and Townships Ordinance 15 of 1986 (Transvaal);
  • Transvaal Board for the Development of Peri-Urban Areas Ordinance 20 of 1943;
  • Venda Proclomation 45 of 1990.

Mpumalanga

  • Town Planning and Townships Ordinance 15 of 1986 (Transvaal);
  • KwaNdebele Town Planning Act 10 of 1992.

North West

  • Town Planning and Townships Ordinance 15 of 1985 (Transvaal);
  • Town Planning and Townships Ordinance 15 of 1986 (Transvaal);
  • Transvaal Board for the Development of Peri-Urban Areas Ordinance 20 of 1943;
  • Bophuthatswana Land Control Act 39 of 1979

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2015 Financial Provision Regulations, and Pre-existing Rehabilitation Provisions

To prospect or mine for minerals, or to explore for or produce petroleum resources, a person must have have a licence granted in terms of the MPRDA (the principle act governing mining and production rights) and an environmental authorisation granted in terms of National Environmental Management Act, No 107 of 1998 (NEMA) (the principle act governing environmental management). To get these a guarantee, termed a “financial provision”, must be given to cover the possible cost associated with the management, rehabilitation and remediation of environmental impacts that result from the operations. The financial provision ensures that there is enough funds available to rehabilitate the environmental impacts that the operations may have had once the operations end.

The financial provisions were regulated by the MPRDA, but in the last few years the laws have been amended to bring the regulation of financial provisions under the ambit of NEMA. The new 2015 Financial Provision Regulations published under NEMA came into effect on 20 November 2015.

Some companies are now in a position where they have given the required financial provision, but under the old MPRDA regulations that are not applicable any more. The question is, what steps must now be taken to comply with the new regulations?

The short answer is that the current financial provision is regarded as being issued and approved in terms of the regulations (regulation 17(4)), but steps must be taken in the very near future to review the financial provision and align it with the new requirements (regulation 17(4)).

Methods used to provide the financial provision under the regulations

The three vehicles that were used under the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) to give the financial provision are all still available under the 2015 Financial Provision Regulations (GN R1147 in GG 39425 of 20 November 2015) (the regulation). These are:

  • financial guarantee issued by a registered bank, insurer or underwriter;
  • cash deposited into an account administered by the Minister of Mineral Resources (Minister); or
  • a contribution to a trust fund established specifically for this purpose (MPRDA regulation 53(1) and regulation 8(1)).

Even though the available vehicles haven’t changed, the format of the financial guarantee and trust deed are now prescribed in the regulations (see appendix 1 and 2), and the permissible uses of trusts has been changed by the new regulations. A full discussion of these falls outside the scope of this note.

Time frame to conduct the review

A holder of a right that was issued before 20 November 2015 (a holder) must conduct a review, assessment and adjustment of its financial provision to ensure that it complies with the new regulations (regulation 17(5)):

  • within 3 months of the end of its first financial year after November 2015; or
  • within 15 months after November 2015 (regulation 17(5)(a) and (b)).

The time frame must be regarded as either/or, so for the first review the holder can choose the most suitable time frame that fits its purposes. The financial provision must then be reviewed annually after the first review (regulation 17(5)(b)).

Procedure to conduct the review

The review, assessment and adjustment of a financial provisions approved under the MPRDA is largely the same as the procedure that is applicable to new financial provisions approved in terms of the regulations (in terms of regulation 17(5) regulation 11 must be applied).

The procedure can be broken down into the following steps.

Step 1: Preparation of the prescribed reports and plans. The holder must prepare the following reports and plans:

  • an annual rehabilitation plan setting out the annual requirements for rehabilitation and remediation;
  • a final rehabilitation, decommissioning and mine closure plan setting out the requirements for the decommissioning and closure of the at the end of life of the operations; and
  • an environmental risk assessment report setting out the requirements for the remediation of latent and residual environmental impacts, including the pumping and treatment of polluted or extraneous water (regulation 11(1)(a), (b) and (c)).

The minimum contents of these plans and reports are prescribed in the regulations (see appendix 3, 4, and 5), so a holder must ensure that the plans and reports are compliant, and that they contain the prescribed minimum information (regulation 12(1), (2), and (3)).

Step 2: Assessment of the adequacy of the current financial provisions. The holder must do an assessment of adequacy in light of the reports and plans, and identify any necessary adjustments that must be made to the financial provisions (regulation 11(2)).

Step 3: Independent audit. The reports, plans and assessment of adequacy must be audited by an independent auditor (regulation 11(3)(a)).

Step 4: Inclusion of the assessment into the environmental audit report. The assessment of adequacy must be included in the environmental audit report that is required in terms of the Environmental Impact Assessment Regulations 2014 (regulation 11(3)(b)).

Step 5: Submission. A holder must submit the following to the Minister:

  • the independent auditor’s report that sets out the results of the assessment of adequacy;
  • proof of payment or proof of arrangements to make any adjustments to the financial provision; and
  • the prescribed environmental and rehabilitation plans and reports (regulation 11(3)(c)).

Approval of the updated financial provision by the Minister

After receiving the updated financial provision, the Minister has 30 days to:

  • approve the financial provision;
  • refer the provision back to the holder for revision; or
  • refuse to approve the financial provision (regulation 17(10)).

If the Minister refuses to approve the updated financial provision he must provide reasons for the refusal, and he may appoint an independent assessor to review the assessment at the cost of the holder (regulation 17(15)(b) and (c)).

If the Minister refuses to approve the updated financial provision the holder is regarded as being non-compliant with section 24P of NEMA (regulation 17(15)(a)).

Procedure to top up a shortfall in the financial provision

If the review and assessment procedure shows that there is a shortfall in the financial provision, the holder must:

  • increase the financial provision within 90 days from the date of the audit report (regulation 17(16)(a)); and
  • submit proof of payment, or proof of arrangements, to make any adjustments to the financial provision (regulation 17(5) and 11(3)(c)).

The transitional arrangements provide relief to holders if they are unable to increase their financial provision to cover a shortfall. If a holder is not able to increase its financial provision the holder and the Minister may enter into a payment agreement where the holder agrees to increase the financial provision over a period of 5 years or less (regulation 17(7)). The payment agreement must be reviewed annually by the Minister (regulation 17(7)).

Procedure if there is an excess in the financial provision

If the review and assessment procedure shows that the financial provision has an excess of funds, the holder can’t reduce the financial provision, but must defer that excess against future assessments (regulation 17(16)(b)).

Procedure to withdraw a financial guarantees provided under the MPRDA

The regulations that apply to the withdrawal of new financial guarantees approved in terms of the new regulations apply equally to the withdrawal of financial guarantees previously approved under the MPRDA (regulation 17(17)).

If a financial institution wants to withdraw a guarantee:

  • the financial institution must give the Minister at least four months written notice of its intention by registered mail (regulation 8(3)(a)); and
  • the Minister must then give the holder 60 days to provide an alternate arrangement for the financial provision (regulation 8(4)).

If the holder can’t provide an alternate arrangement within the 60 day period, the Minister must call on the financial guarantee. This money is then held by the Minister until an alternate arrangement can be provided for the financial provision (regulation 8(5)).

If the holder does provide an alternate arrangement then the Minister must release the first guarantee within 7 days of receiving the alternate financial provision (regulation 8(6)).

The public’s right of access to information

The holder must make any approved amendment to its environmental management programme available to the public (regulation 17(19)). This may must be:

  • published on the holders public website, if the holder has one;
  • available at the site office of the operations; and
  • accessible to the public on request (regulation 13(1)).

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A Primer – Financial Provisions for Environmental Rehabilitation

On 20 November 2015 the Financial Provisioning Regulations 2015 was published and became effective (GN R1147 in GG 39425 of 20 November 2015).

The regulations intend to regulate the financial provisions that holders of rights and permits must give in terms of the National Environmental Management Act, No 107 of 1998 (NEMA) for the cost associated with the management, rehabilitation and remediation of environmental impacts that result from prospecting, exploration, mining or production operations that are undertaken in South Africa (regulation 2 and 3).

This note highlights some of the regulations that holders of rights and permits should be aware of. A note setting out the transitional arrangements for financial provisions can be found here.

The Requirement to provide a Financial Provision

Before conducting any prospecting or mining for minerals, or exploration or production of petroleum resources, a person must be grant granted an environmental authorisation in terms of NEMA (section 5A(a) of the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA).

One requirement of being granted the environmental authorisation is that the applicant must provide the prescribed financial provision (section 24P(1) of NEMA). This financial provision is intended to cater for the rehabilitation, closure and on-going post decommissioning management of negative environmental impacts that may arise from the operations.

No prospecting or mining for minerals, or exploration or production of petroleum resources can take place unless the financial provision is in place and an environmental authorisation has been granted.

Methods that can be used to provide the Financial Provision

There are three financial vehicles that can be used to give the necessary financial provision. These vehicles can be used individually or as a combination. They are (regulation 8(1)):

  • financial guarantee issued by a registered bank, insurer or underwriter;
  • cash that must be deposited into an account administered by the Minister of Mineral Resources (“Minister“); or
  • a contribution to a trust fund established specifically for this purpose, provided that:
    • the trust fund can’t be used for annual rehabilitation, or for the final rehabilitation, decommissioning and closure at the end of life of the operations (regulation 8(1)(c)(i)); and
    • the trust is established in terms of a trust deed that complies with the prescribed format (regulation 8(7)).

Quantum of the Financial Provision

The financial provision must be equal to the actual costs for implementing the following plans and reports for a period of at least 10 years (regulation 7):

  • rehabilitation and remediation, as reflected in the “annual rehabilitation plan” (regulation 5(a) and 6(a));
  • decommissioning and closure at the end of life of the operations, as reflected in the “final rehabilitation, decommissioning and mine closure plan” (regulation 5(b) and 6(b)); and
  • remediation of latent and residual environmental impacts, including the pumping and treatment of polluted or extraneous water, as reflected in the “environmental risk assessment report” (regulation 5(c) and 6(c)).

These plans and reports are prescribed in the regulations (appendix 3, 4 and 5), so care must be taken to make sure that the plans and reports are compliant, and that they contain the prescribed minimum information (regulation 12(1), (2), and (3)).

The quantum must be determined by a specialist (regulation 9(1)), and in the determination the liability can’t be deferred against any assets at mine closure, or mine infrastructure salvage value (regulation 9(2)).

If the Minister is not satisfied with the determination, the Minister may request that the determination or assessment be:

  • adjusted to a satisfactory amount;
  • reviewed externally by another specialist; or
  • confirmed by an independent assessor (regulation 14(2)(c)).

The holder of the right or permit is responsible for all costs related to the determination or assessment of the financial provision (regulation 14(3)).

Compulsory Annual Review and Adjustment by the Holder

An annual review of the adequacy of the financial provision must be done (regulation 11(2)), and must be submitted within 3 months of the end of the company’s financial year (regulation 11(3)(c)(ii)). This period can be extended by a maximum of 3 months if an application for extension, with reasons, is submitted to the Minister (regulation 12(7) and (8)).

The results of the assessment must:

  • be audited and signed by an independent auditor;
  • be included in the “environmental audit report” prepared according to the Environmental Impact Assessment Regulations 2014;
  • be signed off by the chief executive officer, or person appointed in a similar position, and
  • be submitted to the Minister (regulation 11(3) and 13(3)).

The independent auditor’s declaration must reconcile the financial provision with the estimates of rehabilitation exposure and liabilities (regulation 12(5)), and must include any contingent liabilities and restricted cash that may be associated with the financial provision liability (regulation 12(6)).

If there is a shortfall in the quantum of the financial provision, the financial provision must be increased within 90 days from the signature of the auditor’s report (regulation 11(4)(a)).

Any excess in the quantum of the financial provision can only be deferred against future assessments (regulation 11(4)(b)).

The Public’s Right of Access to Information

The holder of a right or permit must make its environmental management programme available to the public (regulation 13(1)).

The environmental management programme must:

  • be published on the holders public website, if the holder has one;
  • be available at the site office of the operations; and
  • be accessible to the public on request.

Placing Operations under Care and Maintenance

A holder of a right or permit must lodge an application with the Minister if they want to place their operations under care and maintenance (regulation 16(1)). No operation may be placed under care and maintenance without the Ministers approval (regulation 16(6)).

The application to place operations under care and maintenance must include:

  • an explanation of the merits of placing the operation under care and maintenance; and
  • a “care and maintenance plan“, that contains the minimum prescribed information (regulation 16(2) and appendix 6).

Permission to place an operation under care and maintenance can be granted for a maximum of 5 years, with or without conditions, and at the end of this period the approval will be reviewed by the Minister (regulation 16(4)).

The care and maintenance plan must be audited and updated annually (regulation 16(5)(b)).

The Withdrawal of the Financial Guarantee by Financial Institutions

If a financial institution wants to withdraw the guarantee that it has provided for the financial provision:

  • the financial institution must give the Minister at least four months written notice of its intention by registered mail (regulation 8(3)(a)); and
  • the Minister must then give the holder of the right or permit 60 days to provide an alternate arrangement for the required financial provision (regulation 8(4)).

If the holder of the right or permit can’t provide an alternate arrangement within the 60 day period, the Minister must call on the financial guarantee. This money is then held by the Minister until an alternate arrangement can be provided for the financial provision (regulation 8(5)).

If the holder of the right or permit does provide an alternate arrangement then the Minister must release the first guarantee within 7 days of receiving the alternate financial provision.


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A Primer – National Water Act

The National Water Act, No 36 of 1998 (NWA) was enacted to ensure that water resources are protected and conserved in a sustainable and equitable manner (sections 2 and 3). The entitlement to use water is regulated by requiring a user to acquire a water use licence before commencing with various activities.

Definition of “Water Use”

“Water use” is defined broadly in the NWA, and includes:

  • taking water from a water resource;
  • storing water;
  • impeding or diverting the flow of water in a watercourse;
  • discharging of waste water into a water resource;
  • altering the bed, banks, course or characteristics of a watercourse; and
  • removing or disposing of water found underground (section 21).

Requirement for a Water Use Licence

A water use licence is required is for any water use unless the water use:

  • falls in the list of permissible uses that are set out in schedule 1;
  • is permitted in terms of a general authorisation that are published by notice in the government gazette; or
  • was a continuation of an existing lawful use prior to the commencement of the NWA (section 22).

A person is not automatically entitled to use water for prospecting, mining, exploration or production solely because a right has been granted for the activity in terms of the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA) (section 5(3)(d)). The use of water for these activities are still regulated by the Water Act and a separate water use licence is needed if the water use falls outside of the scope of the general authorisations under the NWA.

The general authorisations issued in terms of the NWA allows prospecting, mining, and quarrying companies, and other “small industrial users”, to use and store certain quantities of groundwater and surface water without needing a water licence (item 1.7 of GN 399 in GG 26187 of 26 March 2004).

The specific quantities are allowed, are however, dependant on the drainage regions where the activities will take place, and are subject to the water use not being excessive or detrimental to other water users.

Even if the water use falls within the authorisation and a water licence is not required, a water user may still be required to register as a water user.

Before commencing with any activities that may need water, it is necessary for a person to determine if the use of water is regulated by the NWA, and if so:

  • are the activities exempted from requiring a water licence because the quantities fall within the thresholds set out in the general authorisations;
  • is registration as a water user required even though a separate water use licence is not needed?

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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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