The Legal Requirement to think about Global Warming

During March 2017 the High Court of South Africa in Pretoria, handed down a decision that has been hailed in some quarters as a victory in the fight against dirty energy and global warming. The court’s decision in isolation isn’t a decisive victory for the proponents of clean energy, but it does add an important tool that can be used in future fights, not only against coal fired power stations, but also in broader environmental challenges against the dirty energy and extractive sectors.

Earthlife Africa Johannesburg asked the court to set aside the Department of Environmental Affairs’ decision to grant an environmental authorisation to the preferred bidder, Thabametsi Power, that was selected to build a 1,200 MW coal fired power station near Lephalale in the Limpopo Province. If set aside, construction would be delayed until a new environmental authorisation could be applied for and granted.

Earthlife argued that the environmental authorisation should be set aside because a climate change impact assessment had not been conducted, meaning firstly that all the relevant environmental factors had not been considered before the environmental authorisation was granted, and secondly that the decision to grant an environmental authorisation without considering a climate change impact assessment rendered the decision irrational and unreasonable.

The court decided in Earthlife’s favour, setting aside the environmental authorisation. The matter was referred back to the minister’s internal appeal process, giving the minister the opportunity to consider the climate change impact assessment report that had been prepared by Thabametsi Power after its initial environmental authorisation was granted.

The court didn’t, however, prohibit the construction of coal-fired power stations, and didn’t make any decision on whether the construction of additional coal-fired power stations should be permitted or restricted in the future. This allows the minister to decide to grant an environmental authorisation after weighing up all the relevant factors, which now includes the potential global warming impacts and South Africa’s international commitments on climate change.

The narrow questions that the court considered was if the minister had a legal obligation to consider global warming impacts of the project, and if so, did the minister have sufficient information when taking the decision to properly consider global warming as a relevant factor.

Earthlife argued that before the minister grants an environmental authorisation, all criteria set out in the National Environmental Management Act, No 107 of 1998 (NEMA) must be considered. The act requires the minister to “take into account all relevant factors, which may include …” going on to list various factors including pollution, environmental impacts and environmental degradation (section 24O). Earthlife argued that even though the section doesn’t specifically list climate or global warming impacts as a factor, these impacts fall into the non-exhaustive list of “relevant factors” and must be considered.

The department argued that there was no South African law requiring the preparation of a climate change impact assessment. It also argued that South Africa’s international obligations to reduce greenhouse gas emissions were broadly framed and in the discretion of the government, which must take into account the government’s over-riding priority to address poverty and inequality. Thabametsi Power added the arguement that to introduce a mandatory assessment the entire legal regime governing environmental impact assessments must be challenged.

The court agreed with Earthlife; NEMA’s list of “relevant factors” is non-exhaustive, meaning that the minister must consider any relevant factor even if it is not specifically listed.

The court examined the legislative and legal framework that governs South Africa’s climate change and energy policies to determine if climate change impacts are “relevant”. It considered domestic policies such as the National Climate Change Response White Paper of 2012, the Integrated Resource Plan for Electricity 2010-2030 (“IRP”) adopted by the South African cabinet, the Department of Energy’s binding determination on the mix of energy generation technologies that was adopted in terms of the Electricity Regulation Act No 4 of 2006, and South Africa’s international obligations. The legal framework overwhelmingly supports the argument that the assessment of climate change impacts and mitigation measures are relevant factors that must be considered as part of the environmental authorisation process.

After finding that the minister must consider climate change impacts, the court turned to the question of if the minister had enough information at the time to properly consider this factor.

When the minister granted the environmental authorisation, only an environmental impact assessment reports (EIR) was considered. The EIR didn’t quantify the greenhouse gas emissions, stating only that “while quantification of the relevant contribution … is difficult, the contribution is to be considered to be relatively small in the national and global context”. It also didn’t consider the impact that the coal fired power station could have on global warming, and the effects that global warming would have on water scarcity in the region. The EIR was also directly in conflict with a later climate impact report that found that the emissions from the power station could constitute up 3.9% South Africa’s total emissions after 2025.

The court found that the minister didn’t have all the legally required information when making the decision to grant the environmental authorisation, and was unable to weigh up the competing factors before making the decision.

The court didn’t prohibit the building of the coal powered power station, but only ordered that the decision to grant the environmental authorisation was to be remitted back to the minister so that the minister could consider the climate change impact assessment report and comments on the report submitted by any interested and affected parties.

The decision in this case should serve as a call for all parties to fully consider potential impact that projects may have on South Africa’s commitments to curtail global warming.


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

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 Environmental Management Waste Act

The National Environmental Management: Waste Act, No 59 of 2008 (the “Waste Act“) is a complimentary act to the National Environmental Management Act, No 107 of 1998 (NEMA). It aims to regulate waste management in order to protect health and the environment through the minimisation of the consumption of natural resources and generation of waste, ensuring the treating and safe disposal of waste, and the prevention of pollution and ecological degradation (section 2(a)).

The act sets certain standards and requirements that are applicable to all waste. The act also lists certain waste management activities cannot be conducted by any person unless the activity is conducted in accordance with the prescribed standards and a waste management licence is issued if required for the activity (section 20). To determine whether a waste management licence is needed the following questions must be answered.

Definition of “Waste”

Is the substance a “waste” regulated in terms of the act?

Waste is defined very broadly in the act, and includes:

  • any substance or material that is unwanted, discarded or abandoned or is intended to be discarded or disposed of;
  • all substances listed in schedule 3 of the act; and
  • any other substance the minister identifies as waste by notice published in the government gazette (section 1).

Listed Activities in terms of the Waste Act

If the substance is waste, is the intended activity listed as an activity that requires a waste management licence? The listed activities are, again, listed broadly and include a wide range of activities such as storage, recycling, treatment and disposal of waste, and the construction of facilities to accomplish these activities (GN 921 in GG 37083 of 29 November 2013).

The requirement to get a licence before conducting these activities may depend on the place where the activity is conducted and the volumes that are involved (GN 921).

For the mineral and petroleum industry the regulation of residue stockpiles and residue deposits as waste is particularly significant. These activities were previously excluded from regulation under the Waste Act (repealed section 4(b)). The act was, however, amended in 2014 as part of the effort to create a single environmental management system to regulate environmental management in South Africa. Residue stockpiles and residue deposits, defined to include all waste resulting from exploration, mining, quarrying, and physical and chemical treatment of minerals, are now a listed waste for the purposes of the Waste Act (sections 1 and schedule 3).

Depending on the activities that are conducted by mineral and petroleum companies, a waste management licence may have to be obtained in respect of stockpiles and deposits. This is in addition to the general requirement that all stockpiles and deposits must be managed in the manner prescribed by the act and deposited on a site designated for that purpose in the applicable environmental management plan or programme (the EMP) (sections 24S of NEMA, and sections 1 and 43A of the Waste Act).


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A Primer – National Environmental Management Biodiversity Act

The National Environmental Management: Biodiversity Act, No 10 of 2004 (NEMBA) is a complimentary act to the National Environmental Management Act, No 107 of 1998 (NEMA). NEMBA aims to provide for the management and conservation of South Africa’s biodiversity within the framework of NEMA. These objectives are promoted by giving protections to ecosystems and species that are threatened or in need of protection (section 51).

Numerous species of flora and fauna have also been identified as a threatened or protected species, and two hundred and twenty five threatened ecosystems have already been identified in terms of NEMBA (sections 52, 56 and GN 1002 in GG 34809 of 9 December 2011).

NEMBA Restrictions

A permit must be acquired before conducting any “restricted activities” involving any protected species of flora or fauna (section 57(1)). These restricted activities include:

  • cutting, chopping off, uprooting, damaging or destroying any specimen; and
  • conveying, moving or trans-locating any specimen (section 1).

NEMBA doesn’t have any exemptions for the mineral and petroleum industry, and may have an impact on planned prospecting, mining, exploration or production activities.


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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).

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