GROUNDING GROWTH: FINDING THE RIGHT BALANCE BETWEEN MINING AND THE ENVIRONMENT
Though South Africa has enormous mineral wealth, its mining industry is at risk of becoming ‘uninvestable’ under the impact of unrealistic empowerment and other policies. It also confronts major challenges in the environmental sphere. Here, the right balance still has to be found between protecting the environment and preserving the competitiveness of the mining industry.
South Africa has been mining intensively for close on 150 years. For much of this time, it did little to protect the environment from the negative impacts of mining. Hence, Gauteng alone has some 375 tailings dams and other ‘mine residue areas’. It also has some 6 150 ‘ownerless and derelict mines’, which often continue to pollute the surrounding air, soil, and water. These legacy issues have given added impetus to the government’s determination to hold current mining companies fully responsible for any environmental damage they may cause.
The environmental rules affecting mining are many and complex, and cannot be adequately described in this brief overview. Instead, this analysis will focus briefly on some of the key issues: the absence of a single permitting system; the environmental authorisation needed for mining; the difficulty in ensuring adequate community consultation and a social licence to operate; the introduction of permanent environmental liability; the contested financial provisioning regulations; the growing role of activist environmental organisations; and how a better balance could be found between mining and the environment.
No single permitting system
Before mining can begin, a mining company must have, at minimum, a mining right, an authorised environmental management programme, an environmental authorisation and a water use licence. The company may also have to demonstrate compliance with legislation on air quality, the protection of biodiversity, the safeguarding of ‘protected’ areas, and the management of waste. The National Environmental Management Act (NEMA) of 1998 is the umbrella statute, and provides over-arching principles for decision-making in all matters relevant to the environment.1
South Africa does not have an integrated permitting system. However, mining companies try to cover all relevant issues in one environmental impact assessment, which they submit to the Department of Mineral Resources (DMR), the Department of Environmental Affairs (DEA), and relevant provincial authorities, along with the Department of Water and Sanitation (DWS). All these entities are supposed to co-ordinate their activities. In practice, however, the system is highly convoluted and mining companies must deal with multiple authorities, all of which have their own timelines, guidelines, and requirements. It may thus be difficult to obtain all the necessary permissions at the same time.2
In an attempt to resolve these difficulties, the mining and environmental ministers agreed in 2008 that there should be ‘one environment system’ for the country. This was finally achieved in December 2014, when the environmental requirements in the Mineral and Petroleum Resources Development Act (MPRDA) of 2002 were effectively replaced by an amended version of NEMA. Under these revised rules, the responsibility for issuing the environmental authorisations needed for mining has shifted away from the DEA and is now vested in the mining minister. However, the integration achieved is partial at best, as water-use licences and many other necessary permissions fall outside the ambit of this system.
Environmental authorisations for mining
According to the amended NEMA rules, no company may begin mining unless the mining minister has granted it an environmental authorisation. Every environmental authorisation must, ‘as a minimum, ensure that adequate provision is made for the ongoing management and monitoring of the impacts of the [relevant] activity on the environment through the life cycle of the activity’.3
Before considering an application for an environmental authorisation, the mining minister will generally require the submission of an ‘environmental management programme’ (EMP). An EMP must provide information on the ‘proposed management, mitigation, protection, or remedial measures’ that will be used to address environmental impacts at all stages of the mining operation, from planning and design to closure. It must also set out the measures that will be taken to ‘rehabilitate the environment...to its natural...state’ or ‘to a land use which conforms to generally accepted principles of sustainable development’.4
The mining company must ‘manage all environmental impacts in accordance with its approved environmental management programme’. Once mining begins, companies must also conduct annual audits of their EMPs, so as to monitor their performance against undertakings made. If any obligation has not been met, the annual audit must set out measures to improve compliance in the future.5
Under the ‘polluter pays’ principle, the mining company is ‘responsible for any environmental damage’ resulting from its operations. Its directors may also be held ‘jointly and severally liable for any negative impact on the environment, whether advertently or inadvertently caused by the company which they represent’.6
The importance of community consultation
NEMA and other environmental statutes require proper consultation with all ‘interested and affected people’ (IAPS) on the potential impacts of mining operations on land, water, air, people, plants, and animals, as well as buildings and houses. Mining companies generally appoint environmental authorisation practitioners (EAPs), who then advertise in newspapers and put up public notices calling IAPs to meetings or inviting them to post comments on websites. These processes allow people to ask questions of the EAP and request more information. Any comments made by community members must be given full consideration by both the company and, in time, the DMR.7
In practice, however, it can be very difficult to ensure adequate community consultation for two main reasons. First, it is challenging to secure adequate understanding and engagement with all IAPs on technically complex issues. Says environmental lawyer Matthew Burnell: ‘The EAP must try to break the information down so that it’s easier for people to understand. He will then engage with IAPs [and seek to obtain a] reasonable degree of consent... But it’s very easy to challenge the public participation process and argue that it has not been enough – that the reports were not clear enough, or that they were not made sufficiently available, or that the community did not really understand the explanation provided.’ When people give their comments, it can also be argued that ‘these views were not taken seriously enough, that there was not a proper sense of engagement’, but rather a ‘tick-box’ approach in which legitimate concerns were brushed aside.8
The second problem is that those who purport to enter into agreements with mining companies may not in fact have the legal authority to do so. Says Mr Burnell: ‘This often arises with tribal authorities... Often, it is difficult to know who exactly has the ultimate authority. Sometimes factions are in dispute over leadership positions. At other times, arguments can develop later about how the flow of money is to be directed – and a traditional leader who was accepted before will be disputed now. Often companies don’t know what to do. Customary law provisions are difficult to follow, and objections can always arise.’9
Appeals and prosecutions
Dissatisfaction among communities and other IAPs may also manifest in the lodging of appeals against the granting of mining rights, environmental authorisations, and water use licences. Appeals against the granting of mining rights lie to the mining minister, appeals against the issuing of environmental authorisations to the environmental minister, and appeals against water-use licences to the minister of water and sanitation. The lodging of an internal appeal (to the relevant minister) against an environmental authorisation suspends its operation and means that mining cannot start until the matter has been resolved. An internal appeal against the issuing of a water use licence has a similar effect. Where internal appeals are dismissed, dissatisfied communities and IAPs may take these decisions on review to the high court.10
In addition, as the Centre for Environmental Rights (CER) points out, there are many criminal offences created by NEMA and the National Water Act, as well as by the laws governing air quality, biodiversity, protected areas, and so on. In a booklet drawn up to help IAPs bring criminal prosecutions against mining companies, the CER stresses that ‘it is a crime to mine without a licence, or without obeying the rules in the licence or the environmental management programme’. It is also a crime to use water without the requisite licence, or to breach the terms of such a licence. ‘If the mining company did not consult landowners, occupiers, and affected people before the mining began, it may also have committed a crime.’ Moreover, says the CER, ‘if the mining company is polluting the air or water or generally causing harm to the environment, it may also have committed a crime’ under various provisions of NEMA and other laws.11
The penalties visited on mines and their directors may be significant. As Mr Burnell adds, ‘mines can be fined and people can be sent to prison for various offences under NEMA’. If a contravention has caused harm to any person, a mine can be ordered to pay damages, as well as the legal costs that have been incurred in securing remediation. Other penal sanctions can also be imposed, while directors have concurrent liability. ‘A successful prosecution can thus trigger a whole series of penalties. If you are an IAP, you can get a compensation order and execute it like a civil claim.’12
According to the CER, the only disadvantages to the laying of criminal charges are that police investigations may be very slow and the National Prosecuting Authority (NPA) may ultimately decide not to prosecute. In this situation, a private prosecution may instead be brought – but then the state no longer bears the costs. Private prosecutions have thus been uncommon in the past. However, this may be changing as activist organisations gear up to take advantage of NEMA provisions making it easy – and now also potentially lucrative – to bring private prosecutions against mining companies for breaches of environmental rules (see Private prosecutions, below).
Permanent environmental liability and financial provision
In a major departure from the previous rules, NEMA now states that every holder of a mining right ‘remains responsible for any environmental liability, pollution or ecological degradation... notwithstanding the issuing of a closure certificate’ by the mining minister. Mining companies are thus expected to take on permanent environmental liability for impacts that cannot be predicted and which may come to light only decades after mining operations have ended. In addition, the latent impacts for which mining companies are now to be held liable in perpetuity include the pumping and treatment of extraneous and polluted water. Yet it may often be difficult to tell whether the pollution of a river, for example, stems solely from a particular closed mine – or whether it is at least partly the result of previous or subsequent mining operations in the vicinity.13
Under NEMA, a mining company seeking an environmental authorisation for mining activities must first (before the mining minister may grant the authorisation) ‘comply with the prescribed financial provision for the rehabilitation, closure, and ongoing post decommissioning management of negative environmental impacts’. If the company subsequently fails to rehabilitate the environment, or to ‘manage any impact’ on it, the mining minister may use ‘all or part of this financial provision’ for rehabilitation purposes.14
Regulations regarding financial provision
These NEMA rules have been supplemented by the Financial Provisioning Regulations (the 2015 Regulations), which were gazetted by the minister of environmental affairs, Edna Molewa, on 20th November 2015. These regulations were initially due to take effect in February 2017, but this date was postponed to February 2019 as objections mounted. By then, mining companies are expected to increase their financial provision in line with the new requirements, failing which they will face criminal prosecution and fines of up to R10m, prison terms of up to ten years, or both.15 However, as criticism mounted, an amended version of these regulations was gazetted on 10th November 2017 for comment within 30 days (the 2017 Proposals).16
According to the 2015 Regulations, the financial provision to be made available must match the ‘actual cost of implementation’, for current, closure, and post-closure rehabilitation, ‘for a period of at least ten years’ going forward. However, as Mr Burnell explains, ‘mines objected that they had to set aside money for ten years, and yet still meet annual rehabilitation costs out of operating income. Often, it would be very difficult for them to do both’.17 The challenge would be particularly difficult for new mines not yet in production.
The 2017 Proposals reduce the financial provision required, saying it must at any time be ‘equal to the sum of the costs of implementing the activities’ that will be needed, both on closure and following closure, ‘for a period of three years’ looking forward. Annual rehabilitation costs need no longer be included, and must be covered under normal operating costs.
The CER and other activist environmental organisations have objected strongly to this reduction, saying the proposed three-year period is too short and that a much longer period (of ‘at least 20 years’) would be preferable. The Chamber of Mines counters that having to put aside money for ten or 20 years will sterilise resources that could better be used for current rehabilitation initiatives and increased research into how best to overcome complex environmental challenges. Requiring a high level of financial provision for contingent liabilities that may never come to fruition is also not the best use of scarce resources. In addition, it may be difficult for companies to afford, especially at times when commodity prices are depressed and mines are struggling to sustain their operations.18
In addition, the 2017 Proposals make it clear ‘no financial guarantee...may be used for the financial provision required for remediation of residual environmental impacts’. In other words, a mere financial guarantee is not considered sufficient for post-closure impacts, and the relevant moneys must instead be paid into a bank account controlled by the minister or into a trust fund. Less money will have to be tied up in this way if the three-year period in the 2017 Proposals is adopted, but objections from activist organisations may yet prevent this.19
The 2017 Proposals largely concur with the 2015 Regulations in specifying the information that must be included in annual rehabilitation plans, final rehabilitation and closure plans, and the ‘environmental risk report’ that identifies latent environmental impacts that could come to light following closure.20 The level of detail required of mining companies – in addition to their already extensive monitoring and reporting obligations under NEMA itself – is extraordinary.
In addition, mining companies, as earlier outlined, are already obliged to submit detailed annual reports on their progress in implementing their environmental management programmes (EMPs). These EMP reports could easily be modified to include the financial aspect, as the Chamber points out. The Chamber is concerned about the overall compliance burden and would prefer to have a co-ordinated approach to reporting requirements.21
Increasing environmental activism
Activist environmental organisations have an important role to play in ensuring appropriate respect for the environment. South Africa has a number of such organisations, which are taking a number of different steps against mining (and other) companies as part of a comprehensive overall strategy. This includes judicial review of administrative decisions in the granting of mining rights and environmental permissions – though not all communities welcome activist interventions that put mining on hold. A communications campaign is also in place, but often seems one-sided and even hostile to mining.
Often, activist allegations are vague and generalised, making it difficult for mining companies to respond. Though details are seldom provided, mines are commonly accused of pushing people into yet more abject poverty by depriving them of their arable lands, contaminating air, polluting water, poisoning livestock, and robbing them of livelihoods. By contrast, activist organisations pay little attention to the innovative steps being taken by many major mining companies to rectify environmental damage.
Activists also seem to overlook the administrative inefficiency which can contribute to environmental problems, as shown in the Blyvoor case. In 2014 an activist organisation laid criminal charges against three directors of the defunct Blyvooruitzicht gold mine on the west Rand, saying they should be held personally liable for acid mine drainage, tailings spillages, major dust emissions, and failing to rectify a R107m shortfall in the mine’s financial provision. However, the shortfall in remediation funds stemmed largely from the DMR’s own inefficiency in failing to grant the mine a new-order mining right. Without that right – and the security of tenure it would have brought – Blyvoor was unable to obtain an insurance guarantee for all remediation costs. If the mining right had been granted, Blyvoor’s rehabilitation costs would have been fully funded on the day of its liquidation.22 The environmental problems at Blyvoor are thus not solely the directors’ fault, but they have nevertheless been singled out for prosecution while no attempt has been made to hold the relevant officials accountable.
Some activist criticisms seem to be rooted in hostility to the free market system, as illustrated by this statement by the Bench Marks Foundation in October 2016: ‘As long as the industry is built on the profit motive, extracting for profits and short-term gain at the expense of communities and society as a whole, we are slowly but surely walking to our death. Sustainable development and profit-taking do not go together. Profit kills and capital is too powerful, while society is too weak... New models of socialisation of mining by removing profit from the equation would allow us to begin a new debate... Perhaps we need models that give communities ownership, where surpluses made are reinvested, and the excess distributed for community development.’23
Activists are also gearing up, it seems, to take advantage of NEMA rules which now make it easy and potentially lucrative for them to bring both civil proceedings and criminal prosecutions against mining companies over alleged infractions that might better be addressed in other ways.
Private prosecutions may become particularly common, for NEMA gives activist organisations the right to ‘institute and conduct a prosecution’ for any breach of an environmental obligation which amounts to an offence, provided they are acting in the public interest or in order to protect the environment.
Activists wanting to prosecute a mining company for any such offence must begin by notifying the appropriate public prosecutor of their intention to prosecute. However, if the public prosecutor does not confirm in writing within 28 days that a state prosecution is indeed to be brought, then the private prosecution may proceed. These rules are very different from the usual ones, under which a private prosecution may be brought only if the National Prosecuting Authority (NPA) has expressly issued a notice of its intention not to prosecute, in what is termed a ‘nolle prosequi’ declaration.24
In this situation, the activists are excused from having to provide security for the costs of the court proceedings, and also from having to produce the usual certificate confirming that the NPA has declined to prosecute. Why the normal rules regarding private prosecutions have been relaxed in the environmental sphere – but not in a host of other areas of equal importance to society – has not been explained.25
If the private prosecution succeeds, the convicted mining company may be ordered to pay ‘the costs and expenses of the prosecution’, including ‘the costs of any appeal against such conviction or any sentence’. Only if the private prosecution is found to be ‘trivial, vexatious or unfounded’ may costs be awarded against the activists that brought it.26
In addition, if a company is convicted of an offence and ordered to pay a fine, the trial court may instruct that ‘not more than one-fourth of the fine be paid’ to a person ‘who assisted in bringing the offender to justice’.27 This is likely to provide a further financial incentive for activist organisations to bring private prosecutions.
The penalties that apply on conviction of offences under NEMA are severe. For most of the offences listed in the statute, a fine of up to R10 million, imprisonment for up to ten years, or both of these punishments may be imposed. If a mining company is convicted of an offence under NEMA, the court may also withdraw its environmental authorisation, so exposing it to the cancellation of its mining right.28
The first private prosecution under these NEMA provisions has been brought against BP Southern Africa (BP), for having built a number of new petrol stations in Gauteng, in the period from 1998 to 2002, without all the necessary environmental permissions. As the Mail & Guardian reports, ‘Everyone agrees that it did so without all the environmental paperwork in place, which is not unusual, and that it subsequently paid “administrative penalties” to set things to rights, also not unusual.’ Now, however, a close corporation called Uzani Environmental Advocacy, a paper entity whose sole purpose is to prosecute BP, has used NEMA to bring criminal proceedings against the company.29
The stakes are high. If the prosecution succeeds, says the newspaper report, ‘Uzani could make a great deal of money out of prosecuting BP, before taking the fight to every other petrol company in South Africa in what could amount to thousands of separate criminal counts, collectively costing the oil industry billions of rands’.30
BP is trying to have the prosecution quashed on the basis of its ‘naked opportunism’. The corporation queries whether there is really any public interest in having the matter proceed, especially as ‘there is no environmental wrong they are trying to cure’. The issues of which Uzani complains are ‘matters of historical significance...where no one is affected any more, if they ever were’. BP has thus expressed its confidence that the criminal proceedings against it are ‘not competent in law’ and will be dismissed.31
However, the provisions of NEMA are so broad that the prosecution of BP might in fact succeed. Activists are also planning to co-ordinate their efforts and make sure they use the new NEMA provisions to the full. Hence, mining companies could also soon find themselves confronting a host of civil suits and criminal prosecutions. Activists will increasingly be seeking to have directors imprisoned or otherwise held personally liable. As the Mail & Guardian recently reported, ‘holding directors personally criminally liable is the holy grail of environment law, with cases ongoing around the world to get this sort of judgment.’32
Ramifications of South Africa’s environmental rules
Speaking at the Johannesburg Mining Indaba in October 2017, Cobus Loots, chief executive of Pan African Resources, said increasing environmental obligations ‘threatened the stability of the industry’. He warned that onerous compliance costs could result in ‘massive retrenchments’ and the closing down of mining companies. Environmental legislation also ‘remained mired in confusion’, he went on, while its vague and contradictory terms were a further major deterrent to foreign investment. Said Mr Loots: ‘We need regulations that work. It is difficult to sit in front of an international investor and to convince them to put money in South Africa...To sit and explain to an investor that the mining charter has not been finalised and now there are issues on the environmental side is a tall order.’33
The uncertainty around the 2017 Proposals for a reduced amount of financial provision (three years instead of ten) is also debilitating. The 2017 Proposals may not in the end be adopted in their current form, especially as environmental activist organisations are strongly opposed to them. The proposals are beneficial in various important ways, but no one yet knows if they will in fact be implemented. At present, thus, mines must still plan to make ten years’ financial provision available as from February 2019, which is less than a year away. Yet the financial provision needed could also be brought down to three years, as the 2017 Proposals envisage, or perhaps to some intermediate level (say, five years instead). How then are mining companies to plan for the future or quantify their contingent liabilities? Particularly for the many platinum mines which are loss-making or only marginally profitable at current platinum prices, these questions are vital to future sustainability.34
South Africa’s attractiveness to mining investors, as measured each year on the Mining Index compiled by the Fraser Institute in Canada, has significantly deteriorated over the past decade. On the policy perceptions index – which measures the extent to which government policies detract from positive geological factors and reduce willingness to invest – South Africa’s score has dropped from 56.9 in 2013 to 42.7 in 2017.35 This is a sharp decline.
One of the factors measured by the Fraser index is ‘uncertainty concerning environmental regulation’. Here, the Fraser index provides only comparative rankings, rather than scores, which are more difficult to assess because the number of mining countries surveyed varies from year to year. Deterioration is nevertheless evident here too. In 2009 South Africa ranked 23rd out of 72 countries surveyed, but in 2011 it ranked 42nd out of 93. In 2015 it ranked 44th out of 112, but in 2016 its ranking dropped steeply to 81st out of 104. This, presumably, had much to do with the introduction of permanent environmental liability under NEMA, coupled with the onerous requirements in the 2015 Regulations. The country’s ranking recovered thereafter in 2017 (to 60th out of 91 countries), probably in response to the government’s pledge to revise these regulations (as it has now done in the 2017 Proposals). But South Africa’s current ranking nevertheless remains far below where it was in 2012, when the country ranked 38th out of 96 countries.36
The government seems to assume that South Africa’s exceptionally valuable mineral resources will always be a powerful draw card for investors, irrespective of how greatly the regulatory burden is increased. It does not seem to realise, says James Lorimer, DA shadow mining minister, that investor interest has already largely shifted away. Many mining companies have pinned their hopes on President Cyril Ramaphosa’s assumed capacity to usher in real reforms, beginning with the mining charter. Thus far, however, the charter negotiations between the Chamber of Mines and new mining minister Gwede Mantashe have been disappointing, for the minister has shown little willingness to compromise on the ownership requirements that do so much to make the industry ‘uninvestable’.37
Finding the right balance
In finding the right balance between protecting the environment and ensuring the sustainability of its mining industry, South Africa has much to learn from international experience. Environmental regulations are crucial in constraining negative impacts from mining, but they also raise the costs of opening and operating mines. Direct costs include the additional expenses involved, for example, in acquiring new equipment or taking on more technical and administrative staff. Indirect costs may also arise if spending on environmental compliance crowds out other investments, or if the research and development (R&D) needed in the environmental sphere makes it more difficult to push ahead with conventional R&D. Such factors may undermine competitiveness in the long run, with negative spillover effects for employment, procurement, and the wider economy.38
Mining is also capital-intensive, while global mineral prices often fluctuate widely. Long delays in the granting of environmental approvals may thus prevent companies from benefitting from narrow investment windows. They can also make it more difficult for companies to raise loan finance. Heavy financial provisioning requirements in the initial stages of a mining project – when costs are high and no income is yet being generated – may be particularly difficult to meet. Unduly onerous environmental obligations can also provide incentives for mining companies to strip out the most valuable mineral resources as rapidly as possible, rather than seeking to maintain mining activities over many years.39
Both the design and the implementation of environmental regulations are important in reducing these potential negative effects. Environmental rules should thus be clear, certain, and reasonable, rather than vague, fluctuating, and unduly onerous. Decisions should be predictable and timely, which calls for standardised procedures, objective criteria, and uniform guidelines for the interpretation of the relevant rules. Integrated permitting systems should be developed, while sufficient numbers of experienced and technically competent decision-makers should be provided. Another way of helping to secure more timely decisions and reduce time-consuming appeals is to put more emphasis on expert-based assessments than on public participation processes, which are often not as well informed.40
South Africa’s environmental rules relevant to mining are often flawed in their design and implementation. They seek to regulate every aspect of mining operation, but often do so in vague and imprecise terms that open the door to selective interpretation and enforcement. In addition, the relevant rules keep changing in significant ways, which erodes the certainty and predictability required.
Despite the ‘one environmental system’, the country’s permitting process remains split among various entities, making for unnecessary complexity and adding to delays. Major skills shortages within the state further erode the quality and timeliness of decision-making, especially on complicated technical issues. Public participation requirements are difficult in practice to fulfil, which means they can easily be challenged and used to mount a plethora of lengthy appeals.41
At the same time, having to review and, if necessary, revise their environmental management programmes every year puts a heavy compliance burden on mining companies. So too does the obligation to report in great detail each year on current rehabilitation, planned closure activities, and likely post-closure latent impacts. NEMA’s emphasis on permanent environmental liability following closure is also unduly onerous, while current and proposed financial provisioning regulations make it difficult or impossible to use financial guarantees to cover post-closure impacts.
South Africa’s increasingly detailed environmental rules are at odds with global trends. According to the Extractive Industries Source Book, the modern trend is to move away from overly prescriptive requirements with heavy compliance costs. Instead, the aim is to develop ‘goal-setting’ regulations, which are normally backed up by non-mandatory guidance notes. Such regulations set out the objectives to be achieved, but allow flexibility in the methods to be used by companies in doing so. This relieves the regulator of the burden of having to decide in detail on the relevant rules and puts the onus on companies to come up with environmental management plans that are reasonable, responsible, and tailored to their particular circumstances.42 This ‘internal control principle’ avoids the problem of ever more prescriptive regulations which cannot easily cater for complex situations and soon become outdated as circumstances change.
In finding a more appropriate balance between environmental needs and the sustainability of the mining industry, South Africa should more fully embrace this ‘goal-setting’ approach. This would be easier for the country to manage, given the skills shortage within the state. Ideally, moreover, the job of drawing up a co-ordinated set of appropriate goal-setting environmental rules for mining should be given to a specialist agency. This should be funded from tax revenues but staffed by independent experts.
This specialist agency should also be responsible for granting all the permissions needed for mining, from air emission permits to waste management licences. These permissions should be granted in a timely and predictable manner – and on the basis of a single environmental impact assessment that covers all likely impacts and sets out a comprehensive environmental management programme that caters for them all.
The important task of assessing whether mining companies are managing their environmental impacts in reasonable and responsible ways should be given to the same specialist agency. These compliance assessments, coupled with appropriate amendments to environmental management programmes, should generally be required only once in five years, so as to reduce the compliance burden on both the specialist agency and the mining industry.
However, South Africa cannot easily embrace this ‘internal control principle’ while NEMA rules encourage activist environmental organisations to litigate against mining companies – or even to prosecute them – for what may be technical infringements with no major environmental consequences (as in the current private prosecution of BP Southern Africa). Instead of expecting companies to answer to a range of environmental activists, whose vague allegations sometimes seem rooted in hostility to mining and the free market, the vital issue of whether miners are doing enough to mitigate, remediate, and rehabilitate should be for this single expert agency to assess. Activist environmental organisations wishing to take the decisions of this specialist agency on judicial review should have to provide security for costs in the usual way – and should not be given financial incentives to litigate. Private prosecutions on environmental issues should be governed by the usual rules (requiring a nolle prosequi declaration by the National Prosecuting Authority and the provision of security for costs), so as to uphold the right to equality before the law.
As regards financial assurance, this should suffice to cover three years of rehabilitation for current and closure activities, but not for the post-closure period. Mining companies should make this assurance available via irrevocable financial guarantees or letters of credit. Mining companies should also be obliged to take out insurance cover against any potential unmet environmental liability arising, for example, from bankruptcy or other premature closure. If all mining companies have this obligation, the overall risk will be widely spread and premiums can be kept lower. Where overall closure costs are reduced as remediation proceeds, the financial guarantee or insurance cover required should come down by an appropriate amount. This would give companies financial incentives to rehabilitate as much as possible as mining proceeds.
Permanent environmental liability for latent impacts that become apparent only after closure should not be imposed. Instead, South Africa should introduce a mine rehabilitation fund (loosely modelled on a similar institution in Western Australia) to which all mining companies should contribute an annual levy amounting, say, to 1% of their estimated total rehabilitation costs (up to and including closure). South Africa’s fund could then be used to deal with all post-closure latent impacts that become apparent in the future.
This fund could also be used to deal with the rehabilitation of abandoned mines, which is the most pressing priority. However, rehabilitating abandoned mines is primarily the responsibility of the state, not the companies which happen to be engaged in mining today. Hence, the costs of this clean-up should come mainly from tax revenues – and the government should help build up the fund by paying into it a proportion of the overall revenue it receives each year. This may currently be difficult for the fiscus to afford, but the more the ruling party succeeds in encouraging mine investment and putting an end to wasteful and corrupt spending, the easier it will be for it to manage these payments.
The government, with its limited technical capacity and current complicity in corruption, should not be given the task of implementing necessary rehabilitation measures. This job should instead go to the same specialist agency, which should appoint the necessary experts (via competitive and open tendering processes) and oversee their work. Mining companies which are already helping to deal with legacy issues – for example, by countering acid mine drainage and other pollution from abandoned mines and dangerous tailing dams – could contract with this agency to continue their important work. Such contributions to legacy clean-ups by mining companies could also be recognised and encouraged through appropriate tax credits.
The government’s ‘new vision’
As part of his ‘new vision’ for South Africa, President Cyril Ramaphosa is seeking to re-ignite the economy by encouraging direct investment, boosting the growth rate, and expanding employment. The mining industry can potentially do much to help achieve these goals.
If the mining industry is to realise more of its great potential, the Ramaphosa administration must act decisively to address the 2017 mining charter and the 2013 MPRDA Amendment Bill, which are the most potent obstacles to investment. But the industry now also has to comply (in the words of former Harmony Gold CEO Bernard Swanepoel) ‘with 2 000 bits of legislation and policies’.43 Within this already burdensome regulatory milieu, rapidly shifting and unduly onerous environmental rules are further eroding investor confidence, as Mr Loots has warned. Finding the best balance on environmental law would thus address a major source of unnecessarily uncertain, dirigiste, and costly regulation. This in itself would help the government achieve its new vision for an expanding economy and a prosperous and stable South Africa.
This article first appeared in @LIBERTY, an occasional publication of the Institute for Race Relations.
1 Centre for Environmental Rights (CER), ‘Mining and Your Community’, 2013, p9; Warren Beech and Nicholas Veltman, Hogan Lovells (South Africa) Inc, ‘Environmental law and practice in South Africa: overview’, in Practical Law Country Q&A, 2018, pp1-2
2 Beech and Veltman, ‘Environmental law’, pp4-5; interview with Matthew Burnell, Environmental Law Director, Herbert Smith Freehills, Johannesburg, 29 November 2017, pp1-2, 4; Centre for Environmental Rights, ‘When Mines Break Environmental Laws: How to use criminal prosecution to enforce environmental rights’, February 2014, pp3-4, 8
3 Sections 24F(1), 24E(a), National Environmental Management Act (NEMA) of 1998
4 Section 24N(1) (2), NEMA
5 Sections 24N, 24Q, NEMA; Burnell interview, p2
6 Section 24N, (7)(8), NEMA
7 Ibid, p18
8 Burnell interview, p4
9 Ibid, p5
10 Sections 43(1A), 43(7), NEMA; CER, ‘Mining and Your Community’, pp23-24
11 CER, ‘Mining and Your Community’, p24; CER, “When Mines Break Environmental Laws’, pp5-8
12 Burnell interview, p6; Section 34, NEMA
13 Section 24R, NEMA, emphasis supplied; Clause 5, Financial Provisioning Regulations, 2015, Government Gazette, No 39425, 20 November 2015 (the 2015 Regulations); ‘Mining’s big hangover’, Mining Mirror, July 2016; Clydeco.com, ‘New financial provision regulations under NEMA’, 9 February 2016, p1; Saturday Star 22 July 2017
14 Sections 24P(1), (2), NEMA
15 2015 Regulations, pp1, 16-17; Business Day 5 October 2017; Sandra Gore and Alecia Pienaar, ‘Overhaul of financial provision regime takes a step in the direction of legal certainty’, Cliffe Dekker Hofmeyr, 5 February 2018, p1; Clydeco.com, ‘New financial provision regulations’, p3
16 Business Day 5 October 2017; Gore and Pienaar, ‘Overhaul of financial provision regime’, p1; Ms Edna Molewa, ‘Proposed Regulations pertaining to the Financial Provision for Prospecting, Exploration, Mining or Production Operations, Government Gazette, No 41236, 10 November 2017 (the 2017 Proposals)
17 Clause 7, 2015 Regulations; Chamber of Mines of South Africa, ‘Financial Provisions in NEMA – the view of the Chamber of Mines’, Frequently Asked Questions, 2016, p1; Burnell interview, p7
18 Interview with Stephinah Mudau, Head: Environment, Chamber of Mines, 16 April 2018 (Mudau interview)
19 Clause 8, 2017 Proposals; cf Clause 8, 2015 Regulations; Clause 8(2), 2017 Proposals
20 Clause 12, 2017 Proposals; Clause 12, 2015 Regulations
21 Mudau interview, p3
22 Jana Marais, ‘Blyvoor villagers to get day in court’, The Mining Yearbook 2017, pp40-41; Business Day 16 February, 12 April 2017, Saturday Star 11 March 2017
23 Business Report 25 October 2016
24 Section 33(2), NEMA, read with Sections 8 to 17, Criminal Procedure Act of 1977
26 Section 33(2), NEMA, read with Sections 8 to 17, Criminal Procedure Act of 1977
27 Section 34B(1), NEMA
28 Sections 49A, 49B, 34C, NEMA
29 Mail & Guardian 8 September 2017, 16 November 2017
32 Mail & Guardian 12 May 2017
33 Business Report 28 September 2017
34 Business Report 12 March, Business Day 11 April 2018
35 Fraser Institute, Annual Survey of Mining Companies, 2017
36 Fraser Institute, Annual Surveys of Mining Companies, South Africa’s ranking on ‘uncertainty concerning environmental regulations’, 2009 to 2017
37 Business Day 19 March, 4 April, 11 April 2018
38 Kristina Söderholm et al, ‘Environmental Regulation and Mining Sector Competitiveness’, Luleå University of Technology, 2014, pp14-17
39 Söderholm, ibid., pp14-15, 21; Santiago J Dondo, ‘Financial Assurance for Mine Closure: A regulatory perspective from the Argentine context’, University of Queensland, May 2014, p15
40 Söderholm, pp6-7, 22
41 Mudau interview, pp3-4
42 Section 5.7.1, Extractive Industries Source Book
43 Business Day 19 April 2018