Allaying infrastructure obstacles can aid sector

24th February 2023 By: Cameron Mackay - Creamer Media Senior Online Writer

Despite operational and legislative challenges, local law firm Beech Veltman CEO Warren Beech stresses that South Africa is in an ideal position to capitalise on and benefit from the increasing demand for “battery minerals”.

These minerals support the global transition to a green economy and the consequent investment this attracts.

However, to capitalise on this demand, South Africa must address a range of challenges – most notably its energy supply crisis and failing infrastructure, says Beech.

“It is also vital for South Africa to address serious concerns surrounding corruption, safety and security, and the interpretation and application of South Africa’s mining and environmental laws. The immediate future for the South African mining and natural resources sector will remain challenging until these aspects are addressed.”

Embedded Generation, Supply

Beech stresses the adverse impact that the energy supply crisis in South Africa has had on the country and its mining sector, owing to electricity’s being vital for safe and sustainable mining operations such as powering underground ventilation, hoisting people and equipment below ground, smelting and other beneficiation activities.

“Most midsized to large mining companies have anticipated the requirement for independent energy sources. The lifting of the threshold for embedded power generation projects to 100 MW last year has improved the opportunities for miners to generate their own power. Many miners have formed joint ventures with energy sector stakeholders, which is good for both the mining and energy sectors.”

He adds that many players in the mining sector were disappointed that the licensing threshold was not removed entirely.

Important legislative changes likely to be lobbied for this year are the further relaxation of thresholds and improved approvals processes, to open the market to enhanced economies of scale and, therefore, cost-efficient energy generation.

“If the legislative framework can be amended to allow renewable-energy projects to be accelerated, this can contribute to energy requirements at South African mines and commitments to decarbonisation. As with most legislation in South Africa, the primary challenges are inconsistent interpretation and application, and the ever-increasing timelines to obtain environmental authorisations.”

Legislative Challenges

Beech contends that the local mining and natural resources sector is hampered by red tape, capacity constraints within the Department of Mineral Resources and Energy, and inconsistent interpretation of existing mining and environmental laws – despite the comprehensive legislative framework governing the sector.

“Prospecting and mining companies face hurdles when applying for prospecting and mining rights and all the environmental authorisations that are required before mining can be carried out lawfully. Despite timelines being prescribed in many instances, the actual timelines are lengthy and take several years, especially for environmental authorisations such as water licences.”

He stresses that stakeholders and investors cannot accommodate these timeline uncertainties.

Beech also points out that recent judgments in favour of Minerals Council South Africa, regarding the ‘once empowered always empowered’ principle in relation to the Mining Charter have been viewed as positive by the local mining and resources sectors, adding that it is hoped that these judgments do not prompt further amendments to the Mineral and Petroleum Resources Development Act as has been proposed.

“Policy and regulatory uncertainty are always mentioned as a concern, but the inconsistent interpretation and application of the mining and environmental laws and capacity constraints, are, in reality, of greater concern.”

Environmental Laws

Beech says amendments were made to the environmental laws last year that apply to the mining and natural resources sector.

The National Environmental Management Laws Amendment Bill came into effect as an Act on June 22, 2022, outlining far-reaching changes, upon Presidential discretion.

The Act changes the manner in which environmental aspects are addressed by encouraging improved enforcement, including through the introduction of new offences, increased fines and the extension of enforcement powers.

“One of the key changes is the rectification process stipulated in Section 24G of the National Environmental Management Act (Nema). “If any listed activities start without an environmental authorisation, this is in breach of the environmental laws. “Section 24G of Nema, however, makes provision for this to be rectified, subject to the payment of an administrative fine.”

Payment of an administrative fine does not prevent the applicant who has started activities unlawfully from being prosecuted, he adds.

Another change is the financial provisioning requirements.

“Currently, holders of mining rights must make financial provision for rehabilitation and remediation. Changes will broaden the scope of persons who will be required to make financial provisions, as well as how the amounts should to be calculated. “We also anticipate changes to the Mine Health and Safety Act, particularly statutory responsibility and liability.”

Environmental laws remain extremely stringent, and it is also likely that changes to environmental laws will be lobbied for again in 2023 and 2024, Beech concludes.