MINERAL RESOURCES MINISTER PROPOSES INDEFINITE MORATORIUM ON THE GRANT, RENEWAL AND TRANSFER OF ALL MINERAL RIGHTS IN SOUTH AFRICA

On 19 July 2017, the South African Minister of Mineral Resources ("Minister") published a notice in the Government Gazette ("Notice") inviting interested parties

to make submissions on his intention to restrict:

 the grant of applications for prospecting or mining rights;

 the processing of applications for the renewal of such rights; and

 the grant of applications for the transfer of prospecting or mining rights, or the sale and transfer of a majority shareholding in holders of these rights.

("Applications")

Once the moratorium is implemented it will apply to all Applications lodged with the Department of Mineral Resources ("DMR") after 19 July 2017 and remain in force until the Minister lifts it.

In a subsequent media statement released by the Minister on 20 July 2017, he indicated that the moratorium was necessitated by the South African Chamber of Mines' ("Chamber") application for an urgent interdict (injunction), which it launched in response to the publication of the revised Mining Charter. (The Chamber's application is available here).

While the Notice may not expressly contravene the agreement reached between the Chamber and the Minister on 14 July 2017 not to apply the revised Mining Charter until the hearing of the Chamber's court application in September (please see our earlier client brief on the agreement here), it infers that the Minister intends to circumvent the agreement's underlying purpose.

In particular, it appears the Minister intends using the Notice to coerce the Chamber into a possible settlement of its injunctive proceedings..

In response to the Notice, the Chamber issued a media statement in which it described the Notice as "unlawful" and that its effect is to "to pave the way for the Minister to issue a further notice to prevent the issuing of new mining and exploration rights which will have an immediate negative impact on investment in the sector"

Although the Minister's decision to invite submissions on the Notice does not necessarily constitute administrative action under the Promotion of Administrative Justice Act, 2000[i], any subsequent decision to implement a moratorium would.

Such a decision would only be lawful if it was reasonable, procedurally fair and was within the Minister's powers under section 49(1) of the Mineral and Petroleum Resources Development Act, 2002 ("MPRDA"). 

Section 49(1) of the MPRDA provides that the Minister may restrict the grant of rights, but in doing so must specify the land, period and minerals (or class of minerals) to which the restriction would apply.

In addition, the Minister must exercise this right by having regard to the national interest, the strategic nature of the minerals in question and the need to promote the sustainable development of the nation's mineral resources.

None of these requirements appears to have been met. 

In addition, section 49(1) does not entitle the Minister to prohibit or restrict the grant of applications for the transfer of prospecting or mining rights, or the sale and transfer of a majority shareholding in holders of these rights.

Any decision by the Minister to do so would be unlawful.

Furthermore, by indicating that the moratorium will be implemented throughout South Africa "until further notice", the Minister is effectively proposing to freeze all licensing applications in the country and all corporate activity around them. Not only does the Minister have no power to do so under the MPRDA, but any such decision would be irrational and unreasonable.

It appears in any event that the Minister has already decided to implement the moratorium as the Notice indicates that it will apply retrospectively to Applications submitted after 19 July 2017. The Minister's invitation for written representations appears merely to ensure that the procedural requirements of section 49(1) of the MPRDA are met.

Interested parties have until 4 August 2017 to make submissions to the DMR.

Statement issued by Peter Leon, Partner and Co-Chair, Herbert Smith Freehills’ Africa practice, 21 July 2017