Author: Gary More

Date: 1 August 2018

The Mineral and Petroleum Resources Development Act, 2002[1] states that it is a statute to make provision for equitable access to[2] the nation’s mineral[3] resources.[4]

Concentration of resources leading to “possible” limitation of access:  The Act stipulates that the Minister[5] must[6] refuse to grant a prospecting right if[7] granting it will result in the “concentration” of the mineral resources in question under the control of the applicant[8] with the “possible” limitation of equitable access to mineral resources.[9]

The provision is unduly vague. It does not make clear what degree of concentration or control, or what degree of possibility of limitation of equitable access, would require the Minister to refuse to grant a prospecting right.

The Rule of Law requires laws to be clear so far as possible[10] and indicate with reasonable certainty what is required,[11] and not be unpredictable[12] or impermissibly vague.[13]

Applicants “may” be asked to expand opportunities for disadvantaged:  The Minister “may”[14] request an applicant[15] to “give effect” to the Act’s object of[16] expanding opportunities for historically-disadvantaged persons[17] to enter[18] the mineral industry.[19]

This provision violates the Rule of Law, in being vague and discretionary. It is vague, in not defining how the applicant should give effect to this object.

And it is discretionary, in authorising the Minister to decide whether to request an applicant to give effect to that object. The Rule of Law requires legal liabilities to be determined by law, not by discretion.[20]

Applicant must provide for prescribed “social and labour plan”:  The Act states that The Minister must grant a mining right if the applicant has provided for the prescribed social-and-labour plan,[21] and the holder of the right must comply with the plan’s requirements.[22]

The Regulations[23] state that a social-and-labour plan’s objectives are to advance the social and economic welfare of “all South Africans”[24] and ensure that mining-right holders “contribute” to the socio-economic development of the areas that they operate in[25] (among other things[26]). An application for a mining right must be accompanied by a such a plan.[27]

The plan must include[28] a local-economic-development programme with the infrastructure and poverty-eradication projects that the mine would “support”.[29] The Regional Manager may refer the plan back to the applicant, with “proposals” for amendments.[30]

These provisions violate the Rule of Law in being vague and discretionary.

They are vague, in not stating how a plan can meet the object of advancing the social-economic welfare of all South Africans, and in not indicating more clearly how an applicant should support infrastructure and poverty-eradication projects.

And they are discretionary, in leaving it to the Regional Manager to decide whether to refer a plan back to the applicant, and, if so, what amendments to propose.

Grant of mining right must further socio-economic objects of Act, i.a.w. Charter: The Act states that the grant of a mining right must further the Act’s objects of[31] expanding opportunities for historically-disadvantaged persons[32] to enter[33] the industry[34] and promoting employment and advancing social-economic welfare,[35] in accordance with a socio-economic empowerment Charter[36] that must set out[37] how those objects could be achieved.[38]

The Minister had to develop the Charter,[39] that would[40] (besides setting a timetable for historically-disadvantaged persons to enter[41] the industry[42]) set out how the objects of[43] promoting the development of downstream industries[44] and ensuring that mining companies contribute to the socio-economic development of areas they operate in[45] could be achieved.[46]

In 2004 a Charter was gazetted.[47] It contains ultra vires and vague provisions which in effect permit the exercise of official discretion,  all in violation of the Rule of Law:

Despite the statute’s requirement that the Charter must set out how the object of ensuring that companies contribute to socio-economic development[48] can be achieved,[49] the Charter states only that “[s]takeholders, in partnership with all spheres of government, undertake to…[c]o-operate in the formulation of integrated development plans for communities where mining takes place.[50]

This is ultra vires, vague, an impermissible delegation, and in effect discretionary:

It is ultra vires. It does not carry out the Act’s requirement that the Charter must set out how the object of ensuring that companies contribute to socio-economic development can be achieved. (The Rule of Law requires a statutory power to be exercised in strict accordance with the statute that confers the power.[51])

It is vague, it stating that undefined stakeholders undertake to co-operate in formulating plans, and in not indicating what is required. (The Rule of Law requires laws to indicate with some certainty what is required.[52] A law (including, it is submitted, a statutory instrument such as the Charter, even if it is a mere policy or guideline[53] that applies only indirectly through application of the Act’s provisions that refer to it[54]) should be clear.[55])

It is an impermissible delegation of ministerial duty, in that it assigns to stakeholders the task of determining how companies can contribute to development. The Act states that the Minister had to develop a Charter setting out how that can be achieved, and does not authorise him to delegate the task to “stakeholders”, defined or not.[56] (The Rule of Law requires that statutory powers be exercised in strict accordance with statute.[57])

And it in effect introduces a discretionary component, by failing properly to set out how companies’ contribution to socio-economic development can be achieved, and thereby adding uncertainty to the Act’s requirement that grant of a mining right must further the object of advancing social-economic welfare.[58] (The Rule of Law requires legal liabilities to be determined by law, not discretion.)

A second charter was gazetted in 2010.[59]

A Pretoria high court full bench in April 2018 adjudged this second charter of 2010 to be ultra vires and invalid. The court held that the 2004 Charter is the Charter that the Minister had to develop within six months of commencement of the Act, and there is no intention in the Act that that Charter could be varied or amended after that six-month period.[60]

(The Rule of Law, and its incident the doctrine of legality, constrain the executive to exercise no powers beyond those conferred.[61])

A third charter was gazetted in 2017,[62] before the court decision.

Yet, after the April 2018 court decision and seemingly in spite thereof, in June 2018 a draft fourth charter was gazetted for comment.[63]

Prospecting and mining rights are subject to conditions stipulated in the right: The Act states that a prospecting or mining right is subject to[64] terms and conditions stipulated in the right.[65] This implies that different conditions can be imposed on different rights.

But the Act contains no objective criteria for determining the circumstances in which different terms and conditions might be imposed on different prospecting or mining rights. This is inconsistent with predictable and circumscribed administrative action.[66]

It in effect permits the Minister to impose terms and conditions in his discretion, and different terms and conditions in different prospecting or mining rights in his discretion.

The Rule of Law requires requires legal liabilities to be determined by law, not by the exercise of discretion.

 

[1] Mineral and Petroleum Resources Development Act 28 of 2002.

[2] And sustainable development of.

[3] And petroleum.

[4] Mineral and Petroleum Resources Development Act, Long title.

[5] Minister of Minerals and Energy. Mineral and Petroleum Resources Development Act s 1 sv “Minister”.

[6] The Regional Manager of the region concerned must forward applications for prospecting rights that meet the formal requirements to the Minister for consideration. Mineral and Petroleum Resources Development Act s 16(5) read with ss (1)–(4) and s 1 svv “Regional Manager”, “region”.

[7] Inter alia.

[8] And “their” [sic] associated companies.

[9] Mineral and Petroleum Resources Development Act s 17(2)(c).

[10] Lord Bingham, 2006, “The Rule of Law”, Sixth Sir David Williams Lecture, Centre for Public Law, Univ of Cambridge (first sub-rule).

[11] Affordable Medicines Trust and others v Minister of Health of the Republic and ano 2005 (6) BCLR 529 (CC) par [108] per Ngcobo J (for a unanimous Court).

[12] Van der Walt v Metcash Trading Ltd 2002 (5) BCLR 454 (CC) par [66] per Madala J (in dissent).

[13] South African Liquor Traders Association and others v Chairperson, Gauteng Liquor Board and others 2006 (8) BCLR 901 (CC) par [27] per O’Regan J (for a unanimous Court).

[14] Having regard to the type of mineral concerned and the extent of the proposed prospecting project.

[15] For a prospecting right.

[16] Substantially and meaningfully.

[17] Including women and communities.

[18] And actively participate in.

[19] Mineral and Petroleum Resources Development Act s 17(4) read with s 2(d).

[20] Bingham, supra (second sub-rule).

[21] Mineral and Petroleum Resources Development Act s 23(1)(e) read with s 1 sv “prescribed” and s 107(1)(k).

[22] Mineral and Petroleum Resources Development Act s 25(2)(f).

[23] Mineral and Petroleum Resources Development Regs (Govt Notice R527 of 23 Apr 2004 as amended).

[24] Mineral and Petroleum Resources Development Regs, reg 41(a).

[25] Mineral and Petroleum Resources Development Regs, reg 41(b).

[26] And promote employment and contribute to the transformation of the mining industry. Mineral and Petroleum Resources Development Regs, reg 41(a) and (b).

[27] Mineral and Petroleum Resources Development Regs, reg 42(1)(a).

[28] Inter alia.

[29] In line with “the Integrated Development Plan” of the area the mine operates in and “major sending areas”. Mineral and Petroleum Resources Development Regs, reg 46(c)(iii).

[30] Mineral and Petroleum Resources Development Regs, reg 42(1)(b).

[31] Substantially and meaningfully.

[32] Including women and communities.

[33] And actively participate in.

[34] Mineral and Petroleum Resources Development Act s 2(d).

[35] Mineral and Petroleum Resources Development Act s 2(f).

[36] Mineral and Petroleum Resources Development Act s 23(1)(h) read with s 100.

[37] Inter alia.

[38] Mineral and Petroleum Resources Development Act s 100(2)(b).

[39] Within six months from the date on which the Act took effect.

(The Act took effect on 1 May 2004. Mineral and Petroleum Resources Development Act s 111(1) read with Proc 25 of 23 Apr 2004.)

[40] Inter alia.

[41] And participate in.

[42] Mineral and Petroleum Resources Development Act s 100(2)(a).

[43] Inter alia.

[44] Mineral and Petroleum Resources Development Act s 2(e).

[45] Mineral and Petroleum Resources Development Act s 2(i).

[46] Mineral and Petroleum Resources Development Act s 100(2)(b).

[47] With a “scorecard” indicating that companies should achieve specified levels of ownership by historically-disadvantaged persons, of 15 percent in five years, and 26 percent in ten years. Govt Notice 1639 of 13 Aug 2004. Broad-based socio-economic Charter for the mining industry, and annexed Scorecard.

[48] Of areas in which they operate.

[49] Mineral and Petroleum Resources Development Act s 100(2)(b) read with s 2(i).

[50] And for major labour-sending areas, with “special emphasis on” development of infrastructure. Broad-based socio-economic Charter for the South African mining industry, 2004, par 4.4.

[51] And for the purpose for which they were conferred. Bingham, supra “The Rule of Law” ibid (sixth sub-rule).

[52] See above.

[53] Albeit “given the force of something akin to delegated legislation”. See South African Mineral and Petroleum Law, M O Dale et al, sched II (transitional arrangements) appendix 1 pt A (commentary on the Charter) pars 3.2 and 3.3, read with Commentary on Act s 23 (grant and duration of mining right) par 183.8.2 and fn 1078.

[54] Chamber of Mines v Minister of Mineral Resources and ano [2018] 2 All SA 391 (GP) par [81].

[55] A court may review delegated legislation on the grounds that it is vague, unclear or incomprehensible. Member of the Executive Council for Education, Gauteng and ano v Federation of Governing Bodies for South African Schools [2015] 4 All SA 591 (SCA) par [26].

The decision was largely undisturbed on appeal. Federation of Governing Bodies for South African Schools v MEC for Education, Gauteng and ano 2016 (8) BCLR 1050 (CC).

[56] The Minister may assign a duty imposed on him by the Act to the Director-General, a Regional Manager or an officer of the Department. Mineral and Petroleum Resources Development Act s 103(1) r.w. s 1 sv “officer”.

[57] As mentioned. Bingham, supra “The Rule of Law” ibid (sixth sub-rule).

[58] South African Mineral and Petroleum Law, op cit, Commentary on Act, introductory provisions, preamble, par 14.1.4 par (d).

[59] Amendment of Broad-based socio-economic Charter for mining industry. Govt Notice 838 of 20 Sep 2010.

[60] Chamber of Mines v Minister of Mineral Resources and ano [2018] 2 All SA 391 (GP) pars [95]–[101] per Barrie AJ with Mabuse J concurring.

However, the successful party (the Chamber) sought no declaration of invalidity: ibid par [107].

(The case dealt with whether a mining-right holder was obliged, under either the 2004 or 2010 Charter, to top up its empowerment shareholding continually so that it always maintained a level of 26 percent. The court held that, where a mining-right holder’s ownership percentage controlled by historically-disadvantaged persons falls below 26 percent, the holder is not thereafter obliged to restore that percentage to the 26 percent target, unless such obligation is a specified obligation in the conditions stated in the mining right.)

[61] Pharmaceutical Manufacturers Association and others; in re ex parte application of President of the Republic and others 2000 (3) BCLR 241 (CC) par [17].

[62] Reviewed Broad-based Black economic empowerment Charter for the mining and minerals industry. Govt Notice 581 of 15 June 2017.

(This 2017 charter was criticised as imposing an unduly short period for compliance with its empowerment requirements, and the Chamber of Mines applied for an interdict against implementation of this 2017 charter. Chamber of Mines v Minister of Mineral Resources, Notice of motion, Pretoria high court, case 43621/17.

(The Chamber reportedly did not continue to pursue that court application: Mining Technology, 18 Apr 2018, M Lempriere, “Will a new president herald a golden era for South African mining?”)

[63] Draft broad-based socio-economic empowerment Charter for the mining and minerals industry, 2018. Govt Notice 611 of 15 Jun 2018 (Gazette 41714).

[64] Inter alia.

[65] Mineral and Petroleum Resources Development Act ss 17(6) and 23(6).

[66] South African Mineral and Petroleum Law, op cit, Commentary on Act, introductory provisions, preamble, par 14.1.4 par (f).

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Gary Moore

Gary Moore BA LL.B. (Witwatersrand) LL.M. (UC London) is a South African lawyer and Senior Researcher at the Free Market Foundation.

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