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The murky depths of regulatory uncertainty

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The murky depths of regulatory uncertainty

14th October 2021

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Canada claims that the environment it has created for its minerals sector is the world’s most competitive minerals sector and very attractive for investment into its mining industry.  In its 2019 Canadian Miners and Minerals Plan, it attributes its success story to the following factors:

  • World-leading financing and taxation systems that support exploration and other activities.
  • More agile and efficient regulatory systems that increase certainty and protect Canadians’ interests.
  • World class, innovative public geoscience.
  • Increased certainty on land access and land use.
  • Infrastructure to unlock the mineral potential of northern, remote and isolated areas; and
  • Downstream activities that provide opportunities for entrepreneurs and support communities and regional development.

It also states that it has “more agile and efficient regulatory systems that increase certainty and protect Canadians’ interests” and that by 2020 it envisages “gains in the stability, predictability and effectiveness of regulatory regimes for the minerals industry and Canadians”.

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Recently there have been numerous articles published which explore potential reasons why investment into South Africa’s mining industry has declined so significantly over the past decades, even though South Africa remains a mineral rich country.

If one compares what has been claimed about Canada with South Africa’s current mining environment, it is clear that there are lessons to be learnt, especially if we are seeking to attract desperately needed capital investment due to, inter alia, the ravages caused by the COVID-19 pandemic and the consequences of the recent unrest in KwaZulu-Natal and Gauteng on the South African economy.

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South Africa has numerous well recognised challenges, but the fact that there are also areas of considerable uncertainty from a regulatory perspective, would not appear to have helped South Africa in its quest to compete with other countries to attract investment.

For example, the courts have made it clear that where mining activity is to take place on land in respect of which people have informal land rights protected by the Informal Protection of Informal Land Rights Act (IPILRA), consent has to be obtained before a mining right can be granted by the Minister.  This is a laudable development, given the history of the country.  However, the relevant Acts do not provide for a uniform process through which the requisite consent should be obtained.  Section 2(1) of the IPILRA simply stipulates that where land is held on a communal basis, the community may only be deprived of the land in accordance with “the custom and usage” of that community.  However, it should be noted that each community has its own “custom and usage”.  As such, the requirement in section 2(4) that “the custom and usage of a community shall be deemed to include the principle that a decision to dispose of any such right may only be taken by a majority of the holders of such rights present or represented at a meeting” does not provide significant assistance in setting out the way in which consent must be obtained as it simply sets out the minimum requirements. 

In the Baleni case, the relevant community explained that a decision to approve mining operations without the consensus of the community will trigger massive conflict between those community members who may benefit from the mining activities and those who would be severely prejudiced by such activities.  It was argued that even if most community members were to be in favour of the granting of the mining right, it would not suffice as this particular community requires consensus between its members.  The community argued that in terms of the “decision making processes that exist in this community, even in circumstances where the majority of community members would support mining activities, it would not be sufficient ground to consent to mining on their land under customary law.”

The lack of uniformity, coupled with the dynamic and flexible nature of customary law is a challenge for potential mining right applicants.  The import of the Maledu and Baleni judgments is that community members are effectively able to sterilise the exploitation of the minerals embedded in the land in which they have informal rights because if they do not provide their consent, the Minister has no power to grant the relevant right, except if he decides to utilise his powers in terms of section 55 of the MPRDA, which permits him to expropriate the informal rights in certain circumstances. 

Secondly, the provisions of the contested 2018 Mining Charter continue to cast a shadow over the mining sector. 

Yes, the mining industry welcomed the High Court’s recent judgment which confirms that the Mining Charter is merely a policy and not binding.  However, it should be borne in mind that even though the court made it clear that the Mining Charter is merely a policy, the court also confirmed that in the event that Charter related obligations already form part of the terms and conditions of existing mining rights, the holder of such a right is obliged to comply with these obligations as they form part of the terms and conditions of the right.  This would effectively mean that Charter related obligations would be binding for the relevant mining right holder, even though the court concluded that the 2018 Mining Charter is merely a policy and not binding.  The court also suggested in its judgment that the Minister could have imposed Charter related obligations by way of three alternative mechanisms: (a) incorporation of the obligations into the mining right, (b) by making regulations and (c) by amending the MPRDA. 

Thirdly, earlier this year the Department of Mineral Resources and Energy told Parliament that it had a backlog of 5 326 rights applications.  However, in a recent Daily Maverick article it was stated that the backlog had been cut from the 5 326 to 4 719 due to the number of applications that have been finalised.  Nevertheless, while this may be progress, it does not detract from the fact that there are thousands of unfinalised applications still to be processed by the Department.   

Taking these factors into consideration, it is clear that there are serious regulatory issues which have to be addressed in order to turn the tables and attract greater investment.  However, these regulatory issues are by no means unique.  For example, prior consent is not a South African specific requirement in relation to indigenous communities and has been acknowledged in other parts of the world where mining occurs.  Can the current economic maelstrom not be a catalyst for South Africa to step up and renew its regulatory regime?

Nina Christina Greyling, attorney at Nortons Inc

Switchboard: +27 (0) 11 666 7560
Email: nina@nortonsinc.com
www.nortonsinc.com

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