1 May 2024 marks the 20th anniversary of the Mineral and Petroleum Resources Development Act, 2002 ("MPRDA"), coming into force. The MPRDA has been transformational in many aspects, most notably as it has abolished private ownership of minerals. It has further provided that 'mineral resources are the common heritage of all the people of South Africa and the state is the custodian thereof." Most significantly, the MPRDA has, to some degree, facilitated the entry of Historically Disadvantaged South Africans ("HDSAs") into the mining industry.
Over the past two decades, the MPRDA has been subject to several legal challenges, resulting in legal uncertainty. Some of these challenges stem from the gaps created by the MPRDA itself while other challenges stem from poor interpretation and enforcement of the MPRDA. Currently, the South African mining industry faces several challenges that hamper its attractiveness as a desirable mining investment destination, especially when compared to some of its counterparts on the continent. These include energy insecurity, the port crisis, declining ore grades and commodity prices which have inevitably resulted in curtailed production and retrenchments. Despite these challenges, South Africa is endowed with abundant mineral reserves and is predicted to remain a key player on the globe.
Having had the benefit of two decades of the MPRDA, it is important to reflect on the past 20 years and what the future holds for the South African mining industry. We consider below, some key issues which are critical for a thriving mining industry.
Application for Mining Titles
The MPRDA makes provision for applicants to apply for various mining titles, including prospecting and mining rights and mining permits. The regional managers of the Department of Mineral Resources and Energy ("DMRE"), receive and process applications. These applications are processed on a first-come first-served basis. An inherent weakness of the MPRDA is that it does not impose deadlines by which the DMRE must have granted mining titles but only provides deadlines by which an applicant must have taken certain administrative steps before its application can be assessed. Consequently, it takes the DMRE anything from a couple of months to several years to grant or refuse applications. This issue has been exacerbated by the South African Mineral Resources Administration Database ("SAMRAD") which was introduced to streamline the application process. However, SAMRAD's effectiveness has been inconsistent, leading to challenges such as double grants, among others.
At the 2024 Mining Indaba, the Minister confirmed that the DMRE is working towards clearing the licensing backlogs as they are currently sitting with thousands of backlogs in applications The insurmountable delays experienced with the processing and granting of applications have severely impacted investment in the mining industry and require urgent resolution.
Effective Date of Mining Titles
There have been inconsistencies in the determination of the effective date of mining titles following the decision of the Supreme Court of Appeal in Minister of Mineral Resources v Mawetse (SA) Mining Corporation (Pty) Ltd (20069/14) [2015] ZASCA 82 (28 May 2015) (the "Mawetse Judgment"). The SCA decided that the period of a prospecting right starts running when the decision to grant the prospecting right has been communicated to the applicant
It is important to note, however, that the Mawetse Judgment was based on the provisions of the MPRDA as they were before their amendment. In other words, although the decision of the court in the Mawetse Judgment was handed down on 28 May 2015, it was based on the provisions of the MPRDA as they were before 7 June 2013, when certain provisions of the Mineral and Petroleum Resources Development Amendment Act, 2008 came into force. Section 1 of the MPRDA defines "effective date" as the date on which the relevant permit is issued or the relevant right is executed. Whatever import the decision in the Mawetse Judgment has, it is only applicable to the law as it was before the introduction of the definition of 'effective date' with effect from 7 June 2013.
Following the Mawetse Judgment, where mining titles were granted after 7 June 2013, the DMRE insists on the effective date being the date of grant as outlined in the grant letter. In the South African mining industry, it is common practice for mining companies to accept the DMRE directives and proceed with the execution of mining titles despite the contradictory dates between the effective date and commencement date. This is both poor notarial practice and is inconsistent with the MPRDA, which specifies that the commencement date of mining titles should align with the date of execution. It is also inconsistent with section 1 of the MPRDA which clearly states that mining titles come into force on the date of execution.
Mining Transactions
Section 11 of the MPRDA is an anti-avoidance provision that seeks to ensure that parties do not circumvent the objects of the MPRDA. It caters for two types of transactions; asset transactions – which involve the transfer, letting, assignment or disposal of mining and prospecting rights or any interest in such rights – and share transactions – which involve the disposal of a controlling interest in a company which holds mining or prospecting rights. From inception, section 11 of the MPRDA has created uncertainty and stalled commercial transactions. In recent years, there have been several judgments on its interpretation. A recent judgment of the Supreme Court of Appeal on section 11 has provided further guidance. In the matter between Vantage Goldfields SA (Pty) Ltd and Another V Arqomanzi (Pty) Ltd and Others Case No: 733/2022, the court had to consider whether section 11(1) of the MPRDA applies to an indirect change of control. The SCA concluded that in light of the objects of the MPRDA, section 11 must be interpreted as including both direct and indirect changes of control by the issue of new shares in a company that controls the mining right.
Empowerment
One of the key objectives of the MPRDA is to transform and facilitate the entry of HDSA into the mining industry. Section 100(2)(a) of the MPRDA enjoined the Minister to publish a broad-based socio-economic empowerment charter for the mining industry within 6 (six) months of the entry into force of the MPRDA. The Minister discharged this obligation by gazetting the Broad-Based Socio-Economic Empowerment Charter for the Mining Industry, 2004 on 13 August 2004. Since then, subsequent charters have been published. The Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (the "2018 Mining Charter") is the most recent charter published on 27 September 2018. As with its predecessors, the 2018 Mining Charter has not been without its challenges. The scheme of the 2018 Mining Charter requires holders of new mining rights to have at least 30% Black Economic Empowerment ownership.
The MPRDA has undoubtedly led to the rise of some prominent black mining enterprises and black industrialists. However, the pace of transformation has been painstakingly slow. This is largely attributable to the uncertainty around the juristic niche of the mining charter (which has been settled by a judgment of the High Court in the matter between Minerals Council of South Africa v Minister of Mineral Resources and Others Case No: 20341/19), the application of the charter by the DMRE, the constant 'shifting of the goal posts' through the publication of various iterations of the mining charter and the inadequacies in the MPRDA itself. This unfortunate state of uncertainty has led to many mining companies flouting the empowerment objects of the MPRDA and has diluted the importance of transformation. Going forward, given the state of the mining industry, to quell the concerns of investors, the DMRE must ensure that the regulatory uncertainty concerning empowerment is settled. In addition, the DMRE and the mining industry must give transformation the serious attention it deserves.
Conclusion
The MPRDA has not been without its controversies. In fixing some of the challenges occasioned by the MPRDA, both the Government and the industry need to acknowledge the shared objective for the mining industry. The government wants a thriving mining industry for the benefit of all South Africans, including black people given the entrenched barriers. Industry wants a thriving mining sector to maximise on revenues and extract meaningful benefits for all stakeholders. These objectives are complementary and therefore all stakeholders need to work together towards a thriving mining industry.
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