23 June 2025
| Business Law
Since the 1990s, South Africa has moved from the world’s number 1 mining jurisdiction to being among the top 10 worst places for mining companies to operate.
Our mining production has declined compared to Australia, which also has abundant supplies of minerals, and whose mining production is now three times higher.
What is the reason for the lack of investment in mining? Why have we slipped from number one to one of the worst? Generally, five reasons have been advanced.
Problems with the electricity supply. Regulatory uncertainty. Mining industries require clear, direct legislation with stability commitments. The legal system, based upon mining companies being required to comply with the Mining Charter (the Charter) (and this being subject to change), has created uncertainty.
Mines are not cost-competitive. The relationship between mines, labour and mining communities is strained, which imposes risks.
Given these identified problems and the need to provide solutions to the challenges, one would have expected that the May announcement by Minister Gwede Mantashe of the Critical Minerals & Metals Strategy (the Strategy) and the Mineral Resources Development Bill (2025 Bill) would have addressed some of these issues and provided solutions.
Unfortunately, the 2025 Bill is a rinse and repeat of the legislation which came before and is unlikely to bring about reform. It is unlikely to achieve the restoration of South Africa’s mining competitive position and increase investor confidence.
In 2024, the Minerals Council commissioned a third-party study into the Mineral & Petroleum Resources Development Act (MPRDA or the Act) to understand objectively whether the Act had achieved its stated aim of growing the mining sector and encouraging development and transformation.
Although the mining sector remains important to the National Economy, its contribution has declined from 11% in 1993 to 4.8% in 2023. In real terms, the mining output, including gold, has declined. Gold output has declined by 85%. If gold is excluded from the figures, our output, since 1990, has increased by 65% but has remained largely static since 2000. Despite the abundant deposits of minerals, South Africa did not benefit from the commodity boom, which ran for most of the 2000s. The mining sector has been losing out to its competitors because of policy uncertainty, legislative misalignment, inconsistent application of regulations, infrastructural challenges, crime and corruption and fraught stakeholder relations. Generally, investor sentiment is negative.
The minerals policy review looked at jurisdictions which had achieved significant growth. These included Botswana, Chile, Canada and Western Australia.
From a legal perspective, the policy review identified that the MPRDA needed to deal with administrative discretion in decision making, principles of administrative justice, security of tenure, competing rights and obligations, administrative appeals, judicial reviews and judicial appeals, artisanal and small-scale mining, integration of environmental aspects and the lack of financial incentives.
So, has the 2025 Bill addressed these issues, and to what extent has it provided solutions? The Minister has focused on beneficiation, a prohibition on the transfer of mining rights and BEE.
Beneficiation
The issue of the beneficiation of minerals within South Africa has always been controversial. The State has long held the view that foreign mining companies have stripped South Africa of wealth by extracting minerals from South Africa and beneficiating the minerals in other jurisdictions. In December 2012, the State introduced a Bill (the 2012 Bill) which sought to radically control beneficiation in South Africa.
The 2012 Bill proposed that the Minister “must” initiate beneficiation. It provided that the Minister, by notice in the Government Gazette, could determine the percentage per mineral required for local beneficiation, after taking into account the national interest. The Minister could also stipulate that every producer had to offer to local beneficiators a certain percentage of their raw material or mineral products. Any person who intended to export a designated mineral (identified by the Minister) could only do so with the Minister’s written consent and subject to such conditions as the Minister determined.
The 2012 Bill afforded the Minister the broad discretion to set:
1. levels required for beneficiation;
2. the percentage per commodity required to be beneficiated;
3. pricing conditions required for beneficiation; and
4. the percentage of raw mineral or mineral products to be offered to local beneficiators.
At the time, these provisions were criticised by the mining industry, and submissions were made to the Parliamentary Committee. These submissions included the argument that the provisions in the 2012 Bill were unconstitutional and also contravened the General Agreement on Tariffs and Trade (GATT) and the European Union: South African Trade Development & Co-operation Agreement 1999 (TDCA), which were both binding on the State.
It was pointed out that there was an obligation on South African public authorities to act transparently, reasonably and without ambiguity and that South Africa would be in breach of bilateral investment treaties where it failed to protect investor’s legitimate expectations to rely on the host state’s earlier commitments in that it had not provided a predictable regulatory framework for investors.
In other words, the amendments proposed in the 2012 Bill regarding the export of mineral products did not adequately protect foreign investors' legitimate expectations by creating a regulatory environment which is significantly different from that which existed at the time the investments were first made.
It was also argued that the provisions breached international law obligations and Section 231(2) of the Constitution.
Finally, the argument was made that the 2012 Bill violated Section 25 of the Bill of Rights to the Constitution in that it constituted an arbitrary deprivation of property. In other words, without clear rules, the deprivation could not be procedurally fair and without adequate criteria, the deprivation was arbitrary.
President Zuma elected to withdraw the 2012 Bill.
The amendments contained in the 2025 Bill, dealing with beneficiation, are almost identical to those which were originally contained in the 2012 Bill. All of the same arguments previously raised would apply. So would the arguments raised in the Mineral Policy Review.
Although the 2025 Bill does not define “designated minerals”, as was contained in the 2012 Bill, the same concept is carried forward in that the Strategy, approved by Cabinet, defines which minerals are critical to South Africa.
High criticality minerals are platinum, manganese, iron ore, coal and chrome ore.
Minerals with moderate to high criticality are gold, vanadium, palladium, rhodium and rare earth elements.
The Minister is given the power to regulate the mining industry to meet, inter alia, national development imperatives, ensure transformation, ensure sustainability and develop local beneficiation. The Minister would be vested with broad discretionary power to restrict the export of minerals and to provide that every producer of minerals must make available mineral or mineral products for local beneficiation.
Unfortunately, the mistakes of 2012 have been repeated in 2025.
The Transfer of Mining Rights
One of the most controversial elements of the MPRDA is the prohibition on the transfer of control in the holder of a mining right.
Section 11 of the MPRDA currently contains a prohibition against a transfer of the control of the shares in a company which holds a mining right, save for a listed company.
The 2012 Bill sought to contain a prohibition in a change in the controlling interest of a listed company, including a foreign listed company. The 2025 Bill initially contained a similar prohibition (both a South African and a foreign listed company), but this was withdrawn in an amendment to the Bill, which was published on 9 June 2025.
The 2025 Bill, however, now stipulates that any transfer of shares in an unlisted company, even if it is not a change in control, is prohibited. This is unduly restrictive and is likely to put off further foreign investment.
Broad-Based Economic Empowerment
In 2004, the MPRDA came into force and required all mining companies to convert their old order rights to new order rights. Conversion could only occur if there was compliance with the rules set out in the Charter. In a High Court judgement of September 2021, the Court found that the original Charter was a document recording a pact between the Government and the mining industry in which they both committed themselves to a framework for progressing empowerment of previously disadvantaged South Africans in the mining and minerals industry with a timetable and aspirational targets.
It set out the factors which would be taken into account in making licencing conditions. The mining industry agreed to this because the Charter set out objective rules which could be complied with and removed administrative discretion.
After 2010, the Minister contended that the Charter was instead binding subordinate legislation and that all mining companies were obliged to comply with the Charter, as amended from time to time. In particular, the Minister contended that, in order to achieve the objectives of transformation in the minerals industry, the Minister could, from time to time, amend the Charter and accordingly, the rules which would have application to all mining companies. In other words, the principle of “once empowered, always empowered” would not apply. The Department would also have discretion in the approval of mining rights.
In response to the judgement, the 2025 Bill seeks to legislate that the Charter forms part of the Act and that the Minister may amend and repeal the Charter, from time to time, which would become binding on all mining companies.
This proposed amendment will obviously negatively impact upon decisions by mining companies to invest in the sector as the rules applicable to the sector will be subject to change, which may be determined by the Minister.
Conclusion
Submissions on the 2025 Bill must be made before 13 August 2025.
It is evident that Minister Mantashe has not taken into account the findings of the Mineral Policy Review and the reasons for the decline in our mining sector. The 2025 Bill rehashes policy documents which were introduced in 2012 and then withdrawn. It seeks to amend the legal position covered by the judgement of the High Court handed down in 2021.
It is likely to cause further insecurity and entrench South Africa’s position as now being one of the worst destinations for mining investment.
