The Mining Law Review: South Africa


For more than a century, South Africa's mining industry has been one of the main driving forces and still forms a crucial cornerstone of its economy, which is generally considered to be one of Africa's wealthiest economies. This state of affairs is attributable to a number of factors, including the extraordinary mineral wealth of South Africa, relatively good access to infrastructure, a well-developed financial sector and relative political stability and predictability.

In recent years, South Africa's mining industry has come under some pressure, as a result of creeping regulatory uncertainty, a shortage of electricity, an increase in a recalcitrant workforce and tensions with local communities, and reduced spending on infrastructure maintenance and development. However, recent strides have been made in addressing regulatory uncertainty by way of improved engagements and interaction between government and industry stakeholders.

The South African government's formal position on mining and international investment is that South Africa is 'open for business' and that investment in the mining sector is to be welcomed, while it aims to find common ground between contending interests of the stakeholders involved. In practice, the situation is rather more complicated, as the promotion of investment in mining is often subordinate to South Africa's domestic agendas of black economic empowerment, affirmative action, land restitution and redistribution, and decolonisation.

One example of changing government policy (and legislation) on international investment is to be found in the promulgation of the Protection of Investment Act, 2015 (PIA), which came into effect on 13 July 2018. Despite its title, which suggests a positive impact on investment, the legislation has been criticised by investors, commentators and academics as reducing the level of protection afforded to international investors, especially as the legislation is intended to replace South Africa's bilateral investment treaties, which the government is allowing to lapse. This development should be seen against the backdrop of South Africa's embarrassing involvement in the late 2000s in an international investment dispute brought in the International Centre for Settlement of Investment Disputes under South Africa's bilateral investment treaties with Belgium and Luxembourg.2 The issue in question was the allegation that South Africa's Mineral and Petroleum Resources Development Act 2002 (MPRDA) constituted an indirect expropriation of the mineral rights held by Finstone Sàrl and its subsidiaries prior to the commencement of the MPRDA on 1 May 2004.

Despite South Africa's continued recognition as an investment destination over the years, with Anglo American, AngloGold Ashanti and BHP Group and various smaller mining companies, especially from Canada and Australia, contributing to South Africa's mining sector, it has not escaped the effects and impact of the covid-19 pandemic. On 15 March 2020, the South African government declared a state of disaster pursuant to the Disaster Management Act, 2002 (Disaster Management Act) as a result of the covid-19 pandemic and implemented stringent regulations, including a five-week lockdown between 26 March 2020 and 30 April 2020, government-imposed operational shutdowns and post closures, in an effort to curb the spread of the coronavirus and to provide the health sector sufficient time to prepare. The national lockdown measures, volatile commodity prices resultant from demand and supply disruptions, together with the global economic impact from mitigation measures to manage the spread of the covid-19 virus, has slowed South Africa's mining activity by 21.5 per cent in the first quarter of 2020,3 while being confronted with the 'new normal' of technological and digital transformation. Being one of the key contributing economic sectors, South Africa's mining industry was one of the first to ramp up operations pursuant the phased reopening of the economy following the easing of the national lockdown. Unfortunately, the long-term effects of the covid-19 pandemic and resultant impact on economic activity will still have to be determined.


In seeking to attain transformation and empowerment objectives, South Africa's mining legislation is based on a system of state 'custodianship' of mineral resources, in which the state, acting through the Minister of Mineral Resources and Energy, issues different types of licences and rights to applicants on a 'first come, first served' basis and upon satisfactory demonstration of the applicant's ability to comply with the financial, technical, environmental, health and safety and socio-economic development requirements set out in the legislation. The most important legislation concerned is the MPRDA, which came into force on 1 May 2004. Other important legislation includes the Mine Health and Safety Act 1996, the Mining Titles Registration Act 1967, the Mineral and Petroleum Resources Royalty Act 2008, the Precious Metals Act 2005, the Diamonds Act 1986, the National Environmental Management Act, 1998 and the National Water Act 1998.

The most noteworthy licences, rights and permits relating to mining and prospecting include:

  1. prospecting rights (which authorise invasive prospecting and exploration work, on an exclusive basis for the prospecting area and mineral concerned, but does not entitle the holder thereof to mine for that mineral);4
  2. mining rights (which authorise mining and exploration on a large scale and for an extended period, on an exclusive basis for the mining area and mineral concerned); and
  3. mining permits (which authorise small-scale mining on areas less than five hectares and for short periods, on an exclusive basis).

Other mining-related authorisations include reconnaissance permissions (which authorise non-invasive exploration activities on a non-exclusive basis) and retention permits (which protect the exclusivity enjoyed by prospecting right-holders during periods when it would be uneconomical to apply for a mining right or mining permit due to, for example, adverse economic conditions).

The commencement of the MPRDA signified a radical and important departure from the preceding regulatory environment, which existed for more than 100 years prior to the MPRDA, where the right to mine was based on a system of private ownership of 'mineral rights' (being essentially limited real rights and servitudes in respect of land), which could be freely traded. To accommodate the transition, the MPRDA contains detailed provisions allowing for the conversion of 'old order rights' into prospecting rights and mining rights regulated by the MPRDA. This process seems to be largely completed, with old order rights and conversion playing a less important role in the mining industry and, indeed, legal practice. However, a small number of old order mining rights are yet to be converted into new mining rights.

In the international sphere, the most important treaties from the perspective of foreign investors would be the bilateral investment treaties concluded between South Africa and various foreign states. However, as mentioned before, the South African government has adopted the PIA and has announced that it is not renewing its bilateral investment treaties. The net effect of this development is the watering-down of protection for foreign investors in the South African mining industry.

Other noteworthy international treaties include a variety of trade agreements with various countries, the Treaty on the Non-Proliferation of Nuclear Weapons, various treaties relating to climate change and South Africa's involvement in the World Trade Organisation.

Mineral reporting requirements in South Africa are largely regulated by the rules of the JSE Limited, South Africa's premier stock exchange. In terms of the JSE rules, mineral resources and reserves are to be reported in accordance with South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves.

Mining legislation in South Africa is administered and enforced by the Department of Mineral Resources and Energy (previously the Department of Mineral Resources) (DMRE). The DMRE is further divided into five main branches, namely, mineral policy and promotion; mineral regulation; mine health and safety; corporate services; and the chief financial officer. The mineral regulation branch is primarily responsible for the processing of applications, awarding of licences and rights and enforcement of the MPRDA. The mine health and safety branch is primarily responsible for the administration and enforcement of the Mine Health and Safety Act 1996 (MHSA), including investigations into safety incidents, injuries and fatalities occurring at mines in South Africa. In both cases, there are regional offices of the DMRE in each of the nine provinces of South Africa, which are primarily responsible for the administration of the MPRDA and MHSA. However, especially in the case of mineral regulation, the ultimate decision-making, including the granting of licences and rights, consideration of internal appeals and decisions to suspend or revoke licences and rights owing to non-compliance, are taken at national level by officials in the DMRE Head Office in Pretoria.


i Title

For all practical purposes, the state could be regarded as the 'owner' of underground minerals. However, to avoid large numbers of claims for expropriation of mineral rights as a result of the transition from the old system of private ownership, the MPRDA does not refer to the state as having 'ownership' of underground minerals. Instead, the MPRDA provides that the mineral resources are the 'common heritage' of all South Africans, and that the state is the 'custodian' thereof for the benefit of all South Africans.

The right to mine underground minerals is conferred on (private) third parties by the state, acting through the Minister of Mineral Resources and Energy (or his or her delegate), based on a 'first come, first served' application system and upon satisfactory demonstration of the applicant's ability to comply with the financial, technical, environmental, health and safety, empowerment and socio-economic development requirements set out in the legislation.

For the duration of the mining right in question, the holder of the mining right may, for all practical purposes, be regarded as the owner of the minerals. In any event, the holder of the right to mine becomes owner of the minerals upon extraction of the mineral from the land where it naturally occurred.

Once a private party holds a prospecting right or mining right, it is possible for the private party to transfer such right (or a portion thereof) to another private party, subject to the consent of the Minister of Mineral Resources and Energy in terms of Section 11 of the MPRDA.5 The requirement of consent for transfers also applies to the transfer of a controlling stake in the business entity that holds the right, unless such business entity is a listed company.

ii Surface and mining rights

As mentioned in Section II, the most noteworthy licences relating to mining are prospecting rights, mining rights and mining permits.

An emphasised recognition of the tension between the rights of mineral right-holders in terms of the MPRDA and informal land right-holders (customary title holders) in terms of the Interim Protection to Informal Land Rights Act 1996 (IPILRA) has brought about an increase in recent litigation.

Mineral rights are conferred on applicants upon the satisfactory compliance of certain requirements. The MPRDA is peremptory insofar as, should all these requirements have been met, the Minister 'must' issue a mineral right. Following the High Court's recent ruling, this authority can now only be exercised upon the additional compliance with the provisions set out in the IPILRA, where applicable, that protect Historically Disadvantaged South Africans' (HDSAs) or traditional communities who hold informal land rights as a result of the previous dispensation's failure to recognise customary title of land. Due the invasive nature of mineral rights on surface rights, the High Court held that the granting of a mining right in terms of MPRDA amounts to 'deprivation' for purposes of the IPILRA as it goes beyond the normal restrictions on property use and enjoyment, and as such, triggers the requirement of 'consent' in terms of IPILRA. In other words, where land is held on a communal basis by a community that is subject to IPILRA, a mining right can only be granted if that community provides its full and informed consent thereto, through a majority decision at a meeting convened for the purpose of considering such disposal and of which they have been given sufficient notice, and in which they have had a reasonable opportunity to participate.6

Despite the benevolent intentions to reconcile these contending rights, given the socio-political climate at play, this additional requirement could ultimately prove repellent for holders and investors lacking in an appetite to tolerate delays and expensive and prolonged court proceedings, if faced with ineffective or time consuming community engagements, where uncertainty reigns in relation to recognised community representatives and their decision making powers on behalf of its community.

In terms of Section 5 of the MPRDA, prospecting rights and mining rights are limited real rights in respect of the land to which they relate. In simple terms, this means that prospecting and mining rights constitute limitations on the rights of ownership of the landowner. Moreover, Section 5 of the MPRDA expressly authorises the holder of a prospecting right or mining right to enter the land in question, together with his or her employees, and to bring onto that land any plant, machinery or equipment and build, construct or lay down any surface, underground or undersea infrastructure that may be required for the purpose of prospecting, mining, exploration or production, as the case may be.

In other words, a prospecting right or mining right encompasses not only the right to exploit the minerals in question, but also the surface rights necessary for the exercise of such right.

To ensure that the landowner or lawful occupier of the land in question does not suffer undue hardship as a result of prospecting or mining activities on the land, the MPRDA provides that the holder of a prospecting right or mining right can, and which has become common practice, compensate the landowner or lawful occupier for any loss or damage suffered by the landowner or lawful occupier as a result of the prospecting or mining activities. The amount of compensation payable may be agreed contractually between the parties, or it may be determined by the court or by way of private arbitration. It has become a common practice for mining companies to enter into surface leases or 'surface use agreements' with landowners or lawful occupiers, which sets out the parties' respective rights and obligations, and fixes a compensation amount for purposes of the MPRDA. However, neither payment of compensation nor agreement between the mining right-holder and the landowner as to the quantum of compensation are prerequisites for access to land for the purposes of mining or prospecting activities.7

The Constitutional Court's recent decision resulted in a power shift in favour of the landowner or lawful occupier, insofar that it held that, should the landowner or lawful occupier prevent the mineral right-holder from commencing with its prospecting or mining activities, the latter must first exhaust its internal remedies in terms of Section 54 of the MPRDA before it can commence with its mining activities on the land,8 which in effect means that the regional DMRE office is to be relied on to resolve such disputes. Once again, in practice, this presents the right-holder with significant obstacles to overcome in the form of delays and possible prohibitions imposed by the Regional Manager, and ultimately expensive and time-consuming court proceedings in respect of the enforcement of their rights. From a compliance perspective, the Court's attempted reconciliation of communities' and mineral right-holders' rights, has provided for a disconnect between legal precedents and mining legislation, as evidenced by the Minister taking guidance from the legal precedents in publishing for comment the Draft Mine Community Resettlement Guidelines in December 2019, which, inter alia, prohibits the commencement of mining activities until a resettlement agreement is reached on the appropriate amount of compensation as a result of resettlement. If published in their current form, the guidelines will render unenforceable should they be effected prior to making the necessary amendments to the MPRDA to give force and effect to such guidelines.

Prospecting rights and mining rights are obtained by means of an application submitted in a prescribed form to the Regional Manager of the DMRE in the province or region where the proposed mining operation is to take place. The application must be submitted online, must be accompanied by the prescribed application fee and must be motivated by means of detailed documents describing the manner in which the applicant proposes to conduct the prospecting or mining operations in question and comply with the other requirements set out in the legislation. These documents include, for example:

  1. a prospecting or mining works programme containing a detailed description of the geology of the resource being mined, the method and time schedule according to which the resource will be mined and a financing plan setting out the economics of the operation and the proposed method in which it will be financed;
  2. documents demonstrating how the applicant will comply with black economic empowerment requirements;
  3. a social and labour plan, indicating how the mine will contribute to the sustainable socio-economic development and empowerment of its workers, surrounding communities and labour-sending areas; and
  4. an application for an environmental authorisation.

On submission of the application to the DMRE, an applicant must submit the relevant environmental reports as required in terms of the National Environmental Management Act 1998 (NEMA) whereafter and on acceptance of the application, it will be required to consult in the prescribed manner with the landowner, lawful occupier and any interested and affected party and include the result thereof in the relevant environmental reports. Where an environmental impact assessment has been identified as the environmental instrument to be utilised in informing an application for an environmental authorisation, the environmental impact assessment is not submitted together with the other documents when the application is first submitted to the DMRE, but is conducted and developed over the course of the time when the mining right application is being processed.

In terms of time limits, a prospecting right may be granted for a maximum period of eight years (up to five years' initial period and one renewal for up to three years), a mining permit may be granted for up to five years (an initial period of two years and up to three renewals for one year each) and a mining right may be renewed an unlimited number of times for up to 30 years at a time. The duration of rights granted under the MPRDA depends primarily on the motivation submitted in support of a specific time period, subject to certain statutory limits. For example, if an applicant can only demonstrate a life of mine of 20 years, that applicant cannot, generally, obtain a mining right for a period of 30 years.

Prospecting rights and mining rights are generally subject to conditions that are little more than restatements of the legal principles applicable to these rights in terms of the legislation. The most important of these terms and conditions include (in the case of a mining right) the duration of the right, the payment of royalties to the state, the black economic empowerment requirements under the MPRDA, limitations on the transferability of the right and the undertakings made in terms of the mining work programme, the social and labour plan and the environmental authorisation. In some cases, statutory conditions are further circumscribed by the terms and conditions of a specific right. For example, some mining rights are subject to a limitation on the transfer of any shares (not only a controlling interest) in the holder (whereas the MPRDA only limits the transferability of a controlling interest in the holder). Many commentators believe these conditions are ultra vires and therefore invalid. However, they are seldom if ever tested in South African courts.

Mining rights are protected through various means. For example, interfering with the lawful mining activities of the holder of a valid mining right constitutes an offence under the MPRDA and may be punishable by imprisonment or the imposition of a fine or both. The DMRE further maintains a public registry of all prospecting and mining rights, so that the public is deemed to have knowledge of the existence and extent of all prospecting and mining rights. In civil law, the holder of a mining right may obtain an interdict (injunction) prohibiting all third parties, including a landowner, from hindering or interfering with its mining activities, and may enforce its rights against any third parties.

At the moment, there is no special restriction on the surface rights or mining rights that may be acquired by foreign parties, save to note that all new mining rights are subject to the requirement that HDSAs must have at least 30 per cent in the economic benefit and voting rights of the holder of a mining right.9

iii Additional permits and licences

In addition to a mining right, a party wishing to conduct mining activities requires at least the following additional permits or licences:

  1. a further environmental authorisation authorising in detail the listed activities that will form part of the mining and mineral processing activities, should these listed activities incidental to the operations not be covered by the environmental authorisation forming part of a mining right;
  2. a waste management licence in respect of inter alia management of tailings;
  3. a water use licence in respect of use of any natural water sources, as well as to make provision for the treatment, storage and disposal of water in the mine itself and in tailings dams, etc; and
  4. air quality licences, if required.

Other licences depend on the nature of the mining activities to be undertaken, or the natural, social or cultural environment where the mining activities are to take place. The most notable licences would be:

  1. licences for the possession, processing and beneficiation of precious metals;
  2. licences for the possession, processing and beneficiation of uncut diamonds;
  3. licences for the possession, beneficiation, transportation and exporting of nuclear materials and radioactive materials;
  4. licences for the destruction or relocation of archaeological sites or graves; and
  5. zoning of land for mining purposes in areas subject to town planning schemes.

Depending on the circumstances, many other licences, permits or authorisations may be applicable. The above list is not exhaustive and only serves to illustrate the most important and most common licences.

iv Closure and remediation of mining projects

In terms of Section 24 of NEMA, the holder of a prospecting right, mining right or mining permit must provide acceptable financial provision for the rehabilitation, closure and ongoing post decommissioning management of negative environmental impacts. The financial provision may take the form of a cash deposit into the DMRE's bank account, a cash deposit in a rehabilitation trust account, a bank guarantee or an approved insurance product provided by a recognised financial institution.

The manner in which rehabilitation is to be done is prescribed in terms of a closure plan, which must be developed by the mining right-holder and approved by the DMRE after the cessation of mining activities. The contents of the closure plan will be dictated by the attributes of the environment, the nature and extent of the disturbances to be rehabilitated, the likely consequences of not rehabilitating (or partially rehabilitating) the disturbances concerned, the commitments and mitigation measures set out in the environmental authorisation and a value judgment as to the acceptable level of environmental degradation, which may remain after conclusion of rehabilitation.

In theory, the MPRDA makes provision for the issuing of a closure certificate upon successful finalisation of the remedial action set out in the closure plan. The issuing of a closure certificate terminates the holder's statutory liability for rehabilitation and potential claims arising from environmental degradation remaining as a result of mining activities. Very seldomly is a closure certificate issued in practice, given that it is not in the government's interest to release mine owners from liability for environmental degradation, even if rehabilitation seems to be completed.


i Environmental, health and safety regulations

In South Africa, environmental activities associated with mining activities are regulated under NEMA. NEMA sets out a number of core principles, aimed at sustainable development, sustainable exploitation of natural resources, management of environmental impacts from economic activities and emphasising the right of people to live in an environment that is not detrimental to their health and well-being. In terms of Section 2(2) of NEMA:

. . . environmental management must place people and their needs at the forefront of its concern, and serve their physical, psychological, developmental, cultural and social interests equitably.

To obtain a prospecting or mining right, an applicant must demonstrate that the prospecting or mining activities will not result in 'unacceptable' pollution or environmental degradation. To this end, the applicant must perform either a basic assessment or an environmental impact assessment and obtain an environmental authorisation (authorising the prospecting or mining activities concerned) that incorporates an environmental management plan or programme.

Health and safety in South African mines are also closely regulated under the MHSA, as well as detailed regulations (some dating from before the commencement of the MHSA).

The aim of the MHSA is to hold the employer (the mine) primarily responsible for the health and safety of all persons at a mine (including employees, contractors and occasional visitors).

The MHSA places detailed obligations on the employer to provide sufficient training regarding the health and safety hazards and risks encountered at the mine, and how to deal with such situations. The employer is also responsible for providing sufficient personal protective equipment to all persons at the mine. The employer is further obliged to keep thorough records on the health of its employees, including establishing each employee's baseline health upon commencement of employment, undertaking annual health assessments for all employees and performing final 'exit' assessments upon termination of an employee's employment.

Failure by any person to comply with health and safety regulations at a mine, or to obey lawful instructions relating to health and safety issued by a person responsible for enforcement of the mine's health and safety rules and policies, constitutes an offence under the MHSA. Failure by an employer to take reasonable steps to ensure safe and healthy working conditions for its employees at a mine also constitutes an offence under the MHSA.

The MHSA further empowers the Chief Inspector of Mines and his or her delegates to issue far-reaching directives in relation to health and safety at a mine, including to cease all activity at a mine until an identified risk is sufficiently addressed. In April 2020, the Minister announced that coal mines would be permitted to operate at full capacity and all other mines would be permitted at 50 per cent capacity. At the time, the Minister and Chief Inspector of Mines had not yet announced any covid-19 measures to be put in place at mines; a failure that was taken on review by a mineworkers' association. In May 2020, the Labour Court upheld the relief sought by the mineworkers' association to compel the Minister and the Chief Inspector of Mine to impose binding obligations under the MHSA on mining companies to take certain prescribed minimum measures to protect mineworkers from covid-19.10 These binding obligations were given effect to in the form of guidelines for a mandatory Code of Practice, requiring all mines to prepare and implement the precautionary measures prior to the re-commencement of its operations.

ii Environmental compliance

As mentioned above, environmental activities associated with mining activities are regulated under NEMA. NEMA sets out a number of core principles, aimed at sustainable development, sustainable exploitation of natural resources, management of environmental impacts from economic activities and emphasising the right of people to live in an environment that is not detrimental to their health and well-being.

To obtain a prospecting or mining right, an applicant must perform either a basic assessment (for prospecting activities and mining permits) or an environmental impact assessment (for mining rights), and obtain an environmental authorisation (authorising the mining activities) that incorporates an environmental management plan or programme.

The procedure for obtaining an environmental authorisation consists, very broadly, of the following:

  1. an application submitted to the DMRE (which administers the provisions of NEMA insofar as it relates to mining activities);
  2. a scoping phase, when environmental risks are identified at a basic level and remedial measures are suggested. The scoping report compiled at the conclusion of this phase is then published for public comment within a period of 30 days;
  3. following public comments and consultations on the scoping report, detailed field studies are then performed by experts in various scientific disciplines (depending on what is appropriate in the circumstances), including ecology, biology, hydrology, archaeology, geophysics, etc. At the conclusion of this phase, an environmental impact assessment report and a draft environmental management programme is compiled, which is then published for public comment within a period of 30 days;
  4. following receipt of public comments on the environmental impact assessment report and draft environmental management programme, a final environmental impact assessment report and environmental management programme is compiled, taking into account (and addressing as far as possible) all comments raised during the process; and
  5. the final environmental impact assessment report and environmental management programme is then submitted to the DMRE for approval.

Timelines for public comments on the documents may (and should) be extended in cases where the reports are complicated and voluminous and any members of the public (including lobby groups) request an extension.

The environmental impact assessment process may take between eight and 18 months to complete, depending on how sensitive the environment is and how many reports need to be compiled and peer reviewed.

iii Third-party rights

In terms of Section 104 of the MPRDA, communities have a 'preferent right' to apply for prospecting or mining rights in respect of communal land. This provision remains largely untested in our courts, and it is uncertain how this provision will practically manifest itself. The interpretation of this section poses a myriad of potential difficulties in the context of competing applications between communities and other applicants.

iv Additional considerations

An important development concerns the promulgation of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2018 (Mining Charter 2018) on 27 September 2018, followed by the Implementation Guidelines to the Mining Charter 2018 in December 2018, outlining the processes and execution procedures to facilitate compliance with the requirements of the Mining Charter 2018. Following the most recent draft of the Mining Charter 2018, public comment, and extensive engagement and collaboration between stakeholders across the mining industry, the Mining Charter 2018 came into effect on 1 March 2019. Compliance is required from 27 September 2018 and 1 March 2019, for new and existing right-holders, respectively. While some unrealistic requirements still remain, especially within the context of the employment equity and local procurement requirements, given South Africa's current capacity to produce goods, services and skills locally, the Mining Charter, 2018 have responded to the stakeholder engagements to some extent, with lower compliance targets for right-holders (i.e., the notable removal of the mandatory 1 per cent 'trickle' dividend to black shareholders under certain circumstances).

The Mining Charter 2018 introduces a number of new, but expected, empowerment requirements and measures for mines aimed at driving transformation and socioeconomic development, while providing economic growth and regulatory security.

A newly introduced concept relates to the 'ring-fenced' elements of Ownership and Mine Community Development, which require full (100 per cent) compliance at all times for mining right-holders. The Mining Charter 2018 specifies different percentages of HDSA ownership in mining rights. For existing mining right-holders, a minimum empowerment shareholding of 26 per cent is required to be recognised as compliant for the duration of the right; however, this must be increased to 30 per cent upon renewal or transfer of such right. For pending applications, a minimum empowerment shareholding of 26 per cent is also required to be seen as fully compliant, subject to a five-year 'top-up plan' to increase its empowerment shareholding up to 30 per cent. In respect of new mining rights, holders must achieve a minimum empowerment shareholding requirement of 30 per cent, from the date of publication of the Mining Charter 2018 on 27 September 2018. This requirement of 30 per cent shareholding must be allocated in a specific ratio among qualifying employees (5 per cent non-transferable carried interest), mine communities (5 per cent non-transferable carried interest or minimum 5 per cent equity equivalent benefit) and black entrepreneurs (20 per cent effective ownership) with preference to black women (5 per cent). These compliance targets for existing mining rights are subject to a 'once empowered, always empowered' principle, meaning that right-holders are able to retain empowerment status even if their empowerment partners have exited their equity investment, on the condition that the empowered shareholder exited prior to 27 September 2018 and were lawfully authorised to do so in terms of the underlying agreements. The extent to which the Mining Charter 2018 applies to rights granted to junior miners, is dependent on turnover and employee threshold.

Another key change and ring-fenced element to the Mining Charter 2018 refers to Mine Community Development, which requires full compliance with Social and Labour Plan commitments. Further overarching changes includes, more stringent requirements for procurement of mining goods and services from local and HDSA suppliers, permission to invest in enterprise and supplier development by offsetting some procurement obligations, and increased requirements for employment of HDSAs in junior, middle and senior management of mining companies.

  1. A further important regulatory development relates to the implementation of the proposed amendments to the MPRDA Regulations11 (Amended MPRDA Regulations) in March 2020, of which the most notable include: an expansion of 'interested and affected parties' with whom mineral right-holders are required to consult, and the inclusion of the requirement for 'meaningful consultation' when consulting with 'interested and affected parties', both effectively resulting in a more complicated and lengthy consultation process whenever consultation with interested and affected parties is required, with a possible duplication of process with the inclusion of governmental authorities;
  2. the requirement for the approval, periodic review and publication of a mining right-holder's Social and Labour Plan;
  3. the requirement for Ministerial approval for persons who intend to use the surface of any land in a manner which may be contrary to the objects of the MPRDA; and
  4. a new prescribed process in respect of appeals lodged against the various levels of decision-makers relating to mineral rights and authorisations.

Although the Amended MPRDA Regulations reflects the Regulator's attempt in providing legal certainty and practical clarification, certain amendments result in burdensome obligations and potential delays in dealing with government departments.


i Processing and operations

There is no general limitation on the import and export of equipment. However, as indicated, the Mining Charter 2018 puts a specific focus on local procurement, insofar that mining right-holders will be expected to source a certain percentage of their capital goods and consumables (mining goods) from local producers, including HDSAs. The Mining Charter 2018 expressly states that a mining right-holder is required to promote economic growth through the development of small, medium and micro enterprises and suppliers of mining goods and services. This plays a part in the level of black economic empowerment credit given to mining right-holders.

Other than the environmental licensing requirements, and special permits required for processing, possessing, transporting or exporting precious metals, diamonds and nuclear materials, there are no general restrictions on processing extracted minerals.

As far as use of foreign labour and services is concerned, we note that under the Mining Charter, 2018 mining right-holders are expected to source certain minimum percentages of their services from local producers, including from HDSA service providers.

Mining right-holders are required to invest in enterprise and supplier development (ESD) to strengthen local procurement; however, mining right-holders are permitted to offset a percentage of their mining goods and services procurement obligations against investments into ESD.

Use of foreign labour is regulated in terms of immigration laws, and, given South Africa's high unemployment rate, the general principle is that foreign labour should only be used for scarce skills.

ii Sale, import and export of extracted or processed minerals

Other than the special permits required for processing, possessing, transporting or exporting precious metals, diamonds and nuclear materials, there are no general restrictions on the sale, import and export of extracted or processed minerals. Imports may be subject to customs duty imposed under the Customs and Excise Act 1964.

Pursuant to the lapsed MPRDA Amendment Bill,12 the government proposed imposing certain restrictions on the export of unprocessed minerals, being those minerals declared as 'strategic minerals', in an effort to promote local beneficiation of minerals. However, towards the end 2018, the government announced the withdrawal of the MPRDA Amendment Bill.13

iii Foreign investment

South Africa implements a system of exchange control, in terms of which approval is required from the South African Reserve Bank to transfer sums of money to and from South Africa. Reserve Bank approval may be obtained in advance in respect of a large number of proposed or potential transactions; for example, in respect of all dividends payable in respect of a foreign investor's shareholding in a South African company. Generally speaking, the Reserve Bank finalises applications for exchange control approvals relatively quickly (i.e., in a matter of weeks rather than months).

Foreign investors in South Africa enjoy various levels of protection of their investments, depending on whether South Africa has a bilateral investment treaty with the investor's country; where no bilateral investment treaty exists, the PIA, which commenced on 13 July 2018, will apply. According to commentators, this legislation significantly waters down the level of protection previously afforded under bilateral investment treaties. For example, investors are given legal protection of their investments to the same extent as any South African citizens, with reference to the property rights under Section 25 of the Constitution of the Republic of South Africa. This Section of the Constitution, which is in the process of being reviewed, is constantly being interpreted by the courts, and there is case law to the effect that South African law does not recognise any forms of constructive or indirect expropriation. Moreover, the Protection of Investment Act stipulates that investment disputes will be decided by the domestic courts, unless the government consents to international arbitration.


i Royalties

Under the terms of the Mineral and Petroleum Resources Royalty Act, 2008 (the Royalty Act), a person who wins or recovers a mineral resource in South Africa (an extractor) must pay a royalty for the benefit of the National Revenue Fund in respect of the transfer of that mineral resource to another party. Under the terms of Section 4 of the Royalty Act, a formula is prescribed for calculating the extent of the royalty, based on the earnings before interest and taxes from the gross sales of refined or unrefined mineral resources. Following amendments to the Royalty Act, with effect from 1 January 2019, gross sales, in respect of refined mineral resources, excludes any insurance and handling expenditure actually incurred after being refined to a specified condition, or any amount received to effect the disposal thereof, while in respect of unrefined mineral resources, it excludes all transport, insurance and handling (TIH) expenditure actually incurred after being brought to a specified condition or any TIH expenditure to effect the disposal thereof – irrespective of whether such expenditure is specifically considered in the determination of gross sales and irrespective of whether it is of a capital nature.14 The maximum royalty in respect of refined mineral resources is 5 per cent, and the maximum royalty in respect of unrefined mineral resources is 7 per cent.

If gross sales, in respect of mineral resources won or recovered by the extractor for purposes of testing, identification, analysis and sampling pursuant to a prospecting or exploration right, do not exceed 100,000 rand during a year of assessment, an extractor is exempt from the imposed royalty.

ii Taxes

In addition to the royalties mentioned above, South African mining companies are subject to normal taxes, such as standard income tax on companies, withholding taxes on dividends to shareholders, value added tax (in certain circumstances),transfer duties in respect of transfers of land or prospecting and mining rights and as from 1 June 2019, carbon tax (if the taxpayer conducts a prescribed listed activity and such activity exceeds the prescribed greenhouse gas emissions threshold). However, mining companies may deduct large portions of capital expenditure against their taxes and may ring-fence capital expenditure and taxable income in respect of distinct mining operations. Moreover, gold mining companies enjoy a special tax dispensation whereby income tax rates increase as the company's profits increase, while allowing shareholders to receive dividends even when no income tax is payable because of low profits. A detailed discussion of the tax regime applicable to mining companies in South Africa is beyond the scope of this chapter.

iii Duties

Duties payable by mining companies include transfer duties and custom duties for the importing of goods.

iv Other fees

In addition to the above-mentioned taxes, duties and royalties, mining companies pay prospecting fees based on the area of the land where exploration takes place, and small fees for various applications and administrative processes under the MPRDA.


Following the High Court's recent ruling, in terms of which informal land right-holders, falling within the scope of IPILRA, are required to provide full and informed consent before a mining right is granted, the Minister has announced his intention in February 2019 to appeal this judgment as it jeopardises the licensing authority held by the state as required by mining legislation. With the implementation of the Amended MPRDA Regulations, there is a clear effort in minimising the abovementioned disconnect between legal precedents and mining legislation, as evidenced by the inclusion of greater engagement with communities throughout the life of mine period and of 'meaningful consultation' with landowners, lawful occupiers and interested and affected persons, requiring a good faith facilitated participation process to enable these parties to make an informed decision regarding the impact of proposed activities on the land. What exactly is meant with 'meaningful consultation' in practice is to be developed through court challenges and further amendments. The announcement of the withdrawal of the MPRDA Amendment Bill, which introduced controversial concepts such as restrictions on the export of strategic minerals (as mentioned above) and substitution of the 'first come first served' right application process with a process of periodic invitation by the Minister, is viewed as a welcome development towards creating regulatory certainty on the part of the government within the mining sector. The withdrawal presents a step towards the anticipated split of the MPRDA into separate legislative frameworks for minerals and petroleum resources, respectively, following a stagnation in legislation development in the oil and gas sector and particularly in the wake of the recent gas condensate discovery in the Outeniqua Basin off the southern coast of South Africa by petroleum giant Total.

Despite the Mining Charter 2018 receiving some praise for providing regulatory certainty and accounting for stakeholders' concerns, the Minerals Council South Africa (previously known as the Chamber of Mines)(MCSA) filed an application for the judicial review of the Mining Charter 2018 during March 2019, aimed at setting aside certain provisions of the Mining Charter 2018. The MCSA alleges that, in its current form, the Mining Charter 2018 fails to extend protection or fully recognise previous empowerment transactions upon the renewal and transfer of mining rights, having the effect that right-holders will have to top up their empowerment shareholding should it have fallen below the required target. This is despite the High Court previously ruling in favour of the MCSA in 2017, that mining right-holders cannot be compelled to restore their empowerment shareholding when black shareholders have disposed of their shareholding.15 The Minister's interlocutory defence of non-joinder raised in the judicial review, heard in earlier in May 2020, was upheld by the High Court. In equating a potential legal interest to a direct legal interest, the judgment created the unfortunate and onerous obligation for any litigant challenging the law, to first identify and join any party with even a potential interest. Regrettably, with the MCSA having to give effect to the directions in respect of the non-joiner, final determination of the challenged provisions, including the status of the Mining Charter 2018 as law or policy, will be delayed even further.

Despite the pending judicial review of the Mining Charter 2018, and following public comment, the Reviewed Housing and Living Conditions Standard for the Minerals Industry 2019 (Reviewed Housing Standard) (a further element of the Mining Charter 2018), purposed to ensure that a mining right-holder provides adequate and decent living circumstances and support services to its mine employees, was published on 15 November 2019. Notably, the proposed prescribed periods for mining right-holder to submit a housing and living conditions plan, survived, requiring new and existing mining right-holders to comply with the Reviewed Housing Standard within 12 months of its publication.

A further development aimed at regulatory certainty concerns the publication of further proposed amendments to the 2015 Financial Provisioning Regulations published in terms of NEMA for the rehabilitation and remediation of environmental damage caused by mining activities, in May 2019 for public comment.

In January 2020, the Minister published a notice extending the transitional time period for compliance to 19 June 2021, having the effect that mineral right-holders will be deemed compliant with the 2015 Financial Provisioning Regulations if it is compliant with its financial provisioning requirements as per its approved mineral right. A further set of proposed amendments to the proposed amendments to the Financial Provisioning Regulations for public comment is expected to be published during 2020.

In circumstances where South Africa is experiencing a surge in covid-19 infections, and its peak of infections predicted to be reached in late September 2020, the state of disaster, together with the associated regulations and directives for the mitigation of the spread of the covid-19 has been extended to 15 August 2020.


1 Estelle Hayes is a director and Jeandri Cloete is an associate at Falcon & Hume Inc. The authors would like to thank L Nupen and P Smit for their contributions in preparing this article.

2 Piero Foresti, Laura de Carli & Others v. The Republic of South Africa, ICSID Case No. ARB(AF)/07/01.

4 Subject to the Minister's permission, the holder of a prospecting right may remove and dispose of diamonds and bulk samples of any other minerals found by such holder in the course of prospecting operations for its own account.

5 Subject to the Minister's consent, mining permits may only be encumbered or mortgaged for the purpose of financing the mining project in question and may not be transferred in any way whatsoever.

6 Baleni and Others v. Minister of Mineral Resources and Others 2019 (2) SA 453 (GP).

7 Joubert and Others v. Maranda Mining Co (Pty) Ltd 2010 (1) SA 198 (SCA).

8 Maledu and Others v. Itereleng Bakgatla Mineral Resources (Pty) Ltd and Another 2019 (2) SA 1 (CC).

9 The Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry 2018.

10 Association of Mineworkers and Construction Union v. Minister of Mineral Resources and Energy and Others (J427/2020) [2020] ZALCJHB 68.

11 Regulations for Petroleum Exploration and Production, 2015, issued by the Minister under section 107(1) of the MRPDA.

12 Bill has lapsed in terms of National Assembly Rule 333(2).

13 Bill not withdrawn, but lapsed, which has the same effect.

14 United Manganese of Kalahari (Pty) Ltd v. Commissioner, South African Revenue Services 2018 (2) SA 275 (GP).

15 The Minister previously sought to appeal this judgment, but has recently withdrawn the appeal in August 2020. The result of the withdrawal is that the declaratory order issued by the High Court remains in force and effect. Accordingly, black economic empowerment ownership transactions will continue to be recognised for regulatory purposes for the duration of the mining right, even where the black economic empowerment partner has sold or transferred part or all of its equity.

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