Like other economic sectors, the South African mining industry continues to face many headwinds, but it remains resilient.

Some of the key challenges facing the industry, which are not unique to South Africa, include: geopolitical uncertainty; costs; productivity and environmental social governance considerations.

Over and above these global risks and opportunities, the South African minerals industry faces additional risks including, among others, energy security of supply, rail and port systems constraints and community relations, which continue to impact the industry.

Opportunities presented by these risks include for the sector to: (i) continue pursuing clean energy; (ii) continue playing a transformative role in critical public infrastructure improvements; (iii) increase its role in the electricity supply sector; and (iv) further embed inclusivity and community relations.

We briefly discuss these opportunities and their key regulatory enablers.

Improvement of critical public infrastructure

For years, the sector has been grappling with water supply issues and rail and port system constraints.

In respect of the rail and port constraints, the recent industrial actions and floods in KwaZulu- Natal have not helped the situation. Given the multiplicity of factors that constrain access to rail and port systems, it is essential that the industry and the public sector cooperate to find sustainable solutions.

The South African public private partnership legal regime is well established to enable the public and private sector to deliver a long-lasting solution.  To this end, it is encouraging to see policy pronouncements in this regard. For example, in the State of the Nation Address last year, the President announced that Government was seriously considering the introduction of private sector participants into the Durban and Ngqura container terminals and private parties into operating the container railway line between Durban and Johannesburg. This has since been followed by initiation of public procurement process which is ongoing.

It is also encouraging to see practical steps being initiated to foster public-private sector cooperation to alleviate rail and port access constraints. Among others, this is evident from the announcement in December 2022 by the Minerals Council South Africa that it has agreed with Transnet to establish a high level ‘5 a side’ steering committee to tackle this constraint.

Platinum palladium Mining and Processing of ore, Piles of ore rock being moved and stored

Energy supply

Security of supply has been a problem for the South African economy for a long time now. The mining sector, as an intensive energy user, is disproportionately affected.

To overcome the problem, Government has introduced energy recovery plans with varying success. One of the most successful interventions has been to allow independent power producers (IPPs) to play an important role in electricity supply.

The success of this intervention shows that the private sector can significantly contribute to electricity supply. Recognising this success, Government’s energy recovery plans were recently further amended to allow IPPs to establish utility scale energy projects without the need for generation licences.

While this is an important and welcomed development, to realise the true value of these amendments (especially energy security considerations), there are additional institutional mechanisms, policies and laws that are required. These could include measures to strengthen the grid, bolster wheeling and grid access, introduce other necessary institutions (eg an independent system market operator), and clarification of the policy position regarding non-private sector offtaker arrangements.

Transformation and community relations

From a mining community relations perspective, much has improved, but more can always be done. The lived reality of host communities often does not reflect the positive outcomes that the industry is striving to achieve.

One area which we believe requires attention is to settle the required standard of consultation requirements. From the early cases such as the Maledu and Xolobeni judgments up to the recent Seismic Survey judgment, the court’s approach to consultation requirements has not been consistent. Hopefully the Supreme Court of Appeal will put the matter to rest on appeal.

Besides the clarification of the consultation requirements, there is urgent need to restore law and order in many communities, especially where illegal mining and gender-based violence (GBV) crimes are high.

The lack of law-and-order impacts communities’ health and security, undermines South Africa’s attractiveness as a mining investment jurisdiction and threatens mining companies’ social licence to operate.

South Africa continues to have one of the highest prevalence rates of GBV in the world, and initiatives such as the Minerals Council’s partnership with the NPA and the GBVF Response Fund are critical.

About Bowmans

With over 500 lawyers operating out of Kenya, Mauritius, South Africa, Tanzania, Uganda and Zambia, and close working relationships with leading independent law firms across the continent, Bowmans delivers integrated legal services to clients throughout Africa. The firm offers a service that uniquely blends expertise in the law, knowledge of the local markets and an in depth understanding of its clients’ businesses.

Bowmans has established itself as a leading adviser within the mining industry and delivers a full complement of legal services to global mining and resources companies, investors, banks and financial institutions, state-owned enterprises and various government departments within the mining and resources sector.

The firm has a strong record of executing complex and time-sensitive mandates across the continent. Its lawyers support clients through every aspect of mining and resource-related M&A, financing and other commercial transactions, including the initial due diligence through to regulatory compliance and negotiating and closing deals. Its expertise extends to advising on some of the largest and most innovative M&A, stream, royalty and debt and equity capital market transactions on the continent.

The firm provides strategic advice to its clients on all legal and regulatory matters relating to the mining and resource sector, including regarding environmental, social and governance (ESG) issues, mining and health and safety compliance, mining title opinions, prospecting and mining right applications, mine incident enquiries, review applications, appeals and due diligences.

On the commercial side, whether clients are negotiating offtakes, supply side contracts or require day-to-day support with agreements, Bowmans has the necessary depth of expertise and skills to assist.

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