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Will SA’s new environmental bill lure mining investors?

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The Draft National Mine Closure Strategy 2021 moves away from the previous approach, which envisaged unrealistically that mining land could be returned to its pre-closure state, and instead requires the development of a sustainable transitional economy after a mine closes. Image credit: Leon Louw for WhyAfrica

Will SA’s new environmental bill lure mining investors?

Once the South African president signs NEMLAA4, it will introduce greater certainty on environmental requirements, helping to improve the country’s attractiveness for mining investment writes Garyn Rapson and Tendai Bonga.

President Cyril Ramaphosa’s impending signature on the National Environmental Management Amendment Bill (NEMLAA4) would be an easy step for the South African government to take to immediately help to make South Africa more attractive to mining investors.

This long-awaited piece of law (six years in the parliamentary process) will help to address the grey areas created by the One Environmental System. However, NEMLAA4 will also introduce higher environmental compliance standards and stricter penalties for environmental transgressions, including giving the Minister of Water and Sanitation greater enforcement powers.

Some of the key amendments proposed in terms of NEMLAA4 include the introduction of a consolidated application regime for environmental authorisation and environmental related permits, which allows for the simultaneous submission of applications as well as the issuance of an integrated decision-making process.

Section 24G of NEMA will also be amended to allow “successors in title” or “persons in control” of land on which a listed activity has unlawfully commenced without an EA or a Waste Management Licence (WML) to submit a rectification application.

Currently, only the guilty person who carried out the unlawful activity without the required EA/WML may apply for rectification.  A further significant proposal is that municipal managers will be empowered to issue enforcement action for contravention of the statutory environmental duty of care.

Financial provisioning

NEMLAA4 proposes to extensively amend the financial provisioning (FP) regime applicable in terms of NEMA, the scope of which will be potentially extended to other holders of environmental authorisations (EAs) issued in terms of NEMA, as opposed to holders of mining related EAs only.

The current section 24P of NEMA will apply generally to the remediation of environmental damage in relation to specific instances which can be prescribed by the Environment Minister (or MEC in concurrence with the Minister).

When such instances have been prescribed, the FP must be ‘determined’ before an EA is issued.  Prescribed mitigation, remediation and rehabilitation measures will have to be undertaken on an annual basis.  The FP vehicles that may be used include cash, insurance, a financial guarantee, a trust fund and any other vehicle, including a closure rehabilitation company, a parent company guarantee or an affiliate company guarantee.

A new section, 24PA, will be introduced to specifically regulate FP requirements for mining. Among other aspects, it empowers the Minerals Minister, in consultation with the Environment Minister and the Water Minister, to approve an annual drawdown of the FP to support final decommissioning and closure for a period not exceeding 10 years, before final decommissioning and closure.

Significantly, both the new section 24P and 24PA will introduce the ability of the Water Minister to be able to use all or part of the FP to undertake mitigation and rehabilitation in the event that the holder of an EA, holder of a permit/right under the MPRDA or holder of an old order right fails to undertake the required measures.

Once signed by the President, NEMLAA4 will also likely set the scene for the finalisation of the Third Draft Financial Provisioning (FP) Regulations, which are intended to completely replace the existing set of FP Regulations. The timing of NEMLAA4’s finalisation shines the spotlight on the looming 19 June 2022 deadline for the bulk of mining right holders to transition to the NEMA FP regime, which will in some cases, severely impact rehabilitation liability assessments.

The Third Draft FP Regulations change the way that financial provisioning will be assessed, the way funds will be put aside to address rehabilitation and, critically, introduce a focus on ensuring there is a sustainable end state for a mine. These regulations will help to ensure the funds are in place to close mines in a sustainable way, taking an economic and socioeconomic approach.

Failure to comply with this new proposed FP regime will be a criminal offence under NEMA – and also constitute Schedule 3 offences for which directors’ liability may be imposed.

Draft Mine Closure Strategy

The Department of Mineral Resources and Energy has taken a progressive step towards clarifying mine closure with the publication on 21 May 2021 of the Draft National Mine Closure Strategy 2021 for public comment.

This strategy document moves away from the previous approach, which envisaged unrealistically that mining land could be returned to its pre-closure state, and instead requires the development of a sustainable transitional economy after a mine closes.

This is in line with global trends, where mine closure entails handing over predetermined and defined post-mining land use projects which facilitate sustainable economic development following the cessation of mining activities.

Government considers it a priority to put these strategies in place where there are clusters of mines that are still operating, because the closure of one mine inevitably impacts neighbouring mining operations.

A large-scale public participation process is under way to obtain input on the draft strategy. We anticipate the public participation process will be completed in the next quarter, which would make it possible to finalise this strategy by the end of 2022.

Garyn Rapson is a partner at law firm Webber Wentzel and Tendai Bonga is Senior Associate at Webber Wentzel

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AgricultureEnvironmental Management & Climate ChangeEnergyESGInfrastructureMiningPolitical EconomyTourism and ConservationWater Management