Anthea Jeffery: SA mining is "uninvestable" — the rational plan to save it

Key topics:GEM Bill proposes replacing MPRDA with investor-friendly reformsIRR seeks to scrap BEE rules and boost mining investmentNew bill strengthens property rights and legal certainty.By Anthea Jeffery*.South Africa’s mining industry is becoming “uninvestable.” The country has among the most valuable mineral endowments in the world, but is nevertheless battling to attract new investment – particularly for the exploration vital to the industry’s future.From bad to good mining lawCurrent problems stem mainly from bad mining law, primarily the Mineral and Petroleum Resources Development Act (MPRDA) of 2002. Since this statute came into effect in 2004, it has destroyed property rights, reduced business autonomy, encouraged corruption and bureaucratic dysfunction, and curtailed investor confidence.Much of the damage has come from onerous black economic empowerment (BEE) rules in the MPRDA’s mining charter. At the same time, similar BEE requirements in other sectors have raised electricity costs, thrown rail and port logistics into disarray, and encouraged an upsurge in illegal mining and mafia-type extortion..Read more:.New mining bill raises investment concerns over expanded BEE mandates and regulatory powers.All these barriers to mining investment need to be brought down. The first imperative, however, is to replace the MPRDA – as well as the 2025 Mineral Resources Development (MRD) Bill intended to replace it – with certain and sensible mining law.The IRR has thus drafted an alternative mining bill: the Growth and Employment in Mining (“GEM”) Bill. This repeals damaging rules and ushers in much better ones. It also replaces BEE with a non-racial empowerment system geared towards rapid growth and tangible upward mobility for the poor. The key changes proposedThe granting of mining rights: Under the MPRDA, onerous BEE and other vague requirements for the granting of mining rights have made for uncertainty, uneven application, long administrative delays, and considerable corruption. Under the IRR’s GEM Bill, by contrast, the granting of mining rights depends solely on applicants having the necessary technical and financial capacity to develop and operate mines safely and remediate environmental damage. These criteria are certain and objective. They are also similar to those that have long applied in Botswana and have helped make it one of the most attractive mining jurisdictions in Africa.The cancellation of mining rights: Under the MPRDA, mining rights that are supposed to last for 30 years are vulnerable to early cancellation. The MRD Bill greatly increases this risk by listing 15 additional offences that could trigger cancellation. Among the “crimes” listed are failures to comply with escalating BEE requirements. Under the GEM Bill, by contrast, mining rights can be cancelled solely for fraud or willful and material breaches of its clear rules. Moreover, any unmerited cancellation requires the payment of appropriate compensation.Protection for property rights: In 2004 the MPRDA brought about the uncompensated “nationalisation” of all mineral resources (as President Cyril Ramaphosa recently described it), which the Constitutional Court later upheld on spurious grounds. In addition, both the MPRDA and the MRD Bill allow the minister to expropriate “any land or any right therein” if this is necessary to increase black participation in mining. Such expropriations will be governed by the Expropriation Act of 2024, once this is made operative. Compensation is likely to be set at well below market value, and could be “nil” for mining land also needed for “land reform” purposes. Under the GEM Bill, by contrast, compensation must be based on fair market value, plus damages for direct consequential losses. Significantly, the onus lies on the state to prove the adequacy of the compensation offered – not on the expropriated owner to disprove this.Beneficiation requirements: The MRD Bill seeks to make beneficiation compulsory. Yet South Africa lacks sufficient cheap and reliable energy, while existing smelters with unavoidably high operating costs cannot compete with imports from China. Mining companies will nevertheless be obliged to make unspecified proportions of “minerals or mineral products…available…for local beneficiation.” The GEM Bill has no such obligation. Instead, it leaves it to mining companies to beneficiate where this makes economic sense.Environmental obligations: The MPRDA currently holds mining companies accountable for all environmental impacts until a mine closure certificate has been issued. The MRD Bill makes them responsible, even after closure, for any “latent” environmental damage that “might become known in the future.” This introduces permanent environmental liability for impacts that might come to light decades after closure, when the causal link to earlier mining is unclear. It also empowers the minister, in issuing a closure certificate, to “retain any portion” of a company’s financial provision to cover future latent impacts. These rules will raise the costs and risks of investing in South Africa. The GEM Bill avoids such rules. Rather, it creates a pooled remediation fund to which all mining companies must contribute proportionately. These pooled funds will cover post-closure impacts and could also help remediate historical damage from abandoned mines.Penalties: Though the MPRDA has relatively limited penalties, the MRD Bill seeks to introduce massive fines (up to 10% of a company’s annual turnover in South Africa, plus its exports in the past year) as well as prison terms of up to ten years for its directors. These penalties are to apply to 16 listed offences, including failures to comply with BEE, beneficiation and financial provisioning rules. The GEM Bill has no such penalties. Instead, it leaves it to the National Prosecuting Authority and the ordinary criminal courts to prosecute and punish fraud and other crimes..Read more:.EWC, BEE setting up Godongwana and GNU for failure – IRR.Adjudication: Both the MPRDA and the MRD Bill require internal appeals to the minister, which must generally be exhausted before judicial review can be pursued. Access to independent international arbitration has been barred by other laws, leaving mining companies dependent on overburdened domestic courts. Under the GEM Bill, internal appeals are excluded under rules that require all mining disputes to be adjudicated by an Independent Mining Tribunal and an Independent Mining Appeals Tribunal.Ever more onerous BEE requirementsUnder the MRD Bill, the mining minister will have the power to “impose” ever higher BEE targets by regulation or in other ways. Yet onerous and shifting BEE requirements have already reduced exploration investment to a trickle. Ramping up unrealistic BEE demands will increase costs, as well as potential penalties and cancellation risks. It will encourage mining companies to disinvest, rather than bring new monies in. By contrast, the GEM Bill scraps all BEE rules, replacing them with a non-racial policy of Economic Empowerment for the Disadvantaged (“EED”).A new EED scorecard gives mining companies voluntary EED points for their contributions to investment, growth, employment, export earnings, tax revenues, mine health and safety, and environmental stewardship. EED also redirects much of the tax revenue being badly spent on dysfunctional public schooling, housing and health services into tax-funded vouchers for the poor. These vouchers will end virtual state monopolies and incentivise all suppliers, including public ones, to compete for the custom of voucher-bearing families. Little could be more liberating for the poor – or more effective in keeping costs down and quality up. An urgent need for real reformThe MPRDA has “eviscerated” the mining industry, as journalist Michael Avery commented in 2025, and the MDR Bill will make the damage even worse. Both are in keeping with the ANC’s false promise that it can deliver faster growth and significant upward mobility even as its increasingly destructive legislation drives more investment away.Fortunately, however, most South Africans no longer believe what the ANC says. The organisation has lost its dominance and fractured into competing factions. Its best solution, to help preserve what support it still has, is to abandon its socialist ideology and embrace the substantial reforms needed to set the economy free..Read more:.Miningweb: Three questions for Gwede Mantashe about his new Mining Bill - Anthea Jeffery.In the mining sector, the GEM Bill gives practical content to the key reforms required. Like the various other alternative bills the IRR has crafted over the past year, it helps to show #WhatSouthAfricaCanBe once it escapes the heavy hand of a corrupt and dysfunctional state committed to a coercive ideology that has failed wherever it has been tried..*Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR. She has authored 12 books, including Countdown to Socialism - The National Democratic Revolution in South Africa since 1994, People’s War: New Light on the Struggle for South Africa and BEE: Helping or Hurting? She has also written extensively on property rights, land reform, the mining sector, the proposed National Health Insurance (NHI) system, and a growth-focused alternative to BEE..This article was first published by Daily Friend and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. 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Anthea Jeffery: SA mining is "uninvestable" — the rational plan to save it

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