New mining bill raises investment concerns over expanded BEE mandates and regulatory powers

Key topics:Bill grants minister sweeping powers over BEE rules for mining rights51% BEE ownership target feared, risking mass disinvestmentNo compensation likely under new expropriation law for forced deals.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Dr Anthea Jeffery*.The Mineral Resources Development Bill of 2025 has been roundly rejected by most commentators on the struggling mining industry. Mining analyst Peter Major says the bill lacks even “one redeeming feature to attract any investment, local or foreign”.Mining lawyer Lili Nupen of NSDV LAW Inc warns that the bill, if enacted in its current form, will effectively put an end to the industry because large mining companies will divest and junior miners will find it harder still to raise capital. The bill was gazetted on 20 May 2025 for public comment by 13 August 2025. Though bad drafting often makes it hard to understand, its wording is nevertheless clear enough to make the mining industry even more “uninvestable”. A host of valid and telling criticisms of the draft law have thus already been raised. However, these comments fail to acknowledge just how destructive the bill’s provisions on black economic empowerment (BEE) could be – especially when combined with a largely overlooked definition of “expropriation” in the new Expropriation Act of 2024..Stricter BEE obligations for mining rights.Though the bill seeks numerous amendments, this analysis focuses on four key changes to BEE requirements for mining rights. First, empowerment obligations are to be more closely aligned with those contained in the Broad-Based Black Economic Empowerment Act of 2003 (the BEE Act). Second, the mining minister will be required to “impose” relevant BEE requirements in granting applications for new mining rights. Third, the minister will be empowered to “repeal or amend” the empowerment obligations resting on companies with existing mining rights. Fourth, the minister will have the power to make new empowerment rules by regulation.A shift to “black persons” and the BEE ActThe existing law – the Mineral and Petroleum Resources Development Act (MPRDA) – aims its empowerment benefits at “historically disadvantaged South Africans” or HDSAs, whereas the Bill requires a shift to “black persons”, as defined in the BEE Act. It also defines broad-based economic empowerment as “having the meaning assigned to it” in the BEE Act.In keeping with this change, the draft law goes on to delete the Act’s current definition of HDSAs. Confusingly, however, it nevertheless retains a reference to HDSAs in an unchanged sub-section 100(2) of the MPRDA. This provision requires the minister, within “six months” of the Act’s taking effect, to “develop a broad-based socio-economic empowerment Charter” providing for the “active participation of historically disadvantaged South Africans” in the mining industry and allowing them to “benefit” from it.The bill does not say whether HDSAs are in future to be equated with “black persons”. Nor does it clarify what its changes might mean for existing HSDA ownership deals that might include white women. This creates uncertainty. However, this problem is far outweighed by the other BEE provisions in the draft legislation.“Imposing” BEE obligations on applicants for mining rightsThe bill seeks to insert a new sub-section 100(3), under which the mining minister “must”, in granting applications for mining rights, “impose” the “broad-based socio-economic empowerment prescribed elements of [BEE] ownership, inclusive procurement, supplier and enterprise development, human resources development, employment equity and mining community development”.These BEE elements generally echo those contained in the mining charter gazetted in September 2018. Will the law thereby empower the mining minister to demand compliance with all the key clauses of the 2018 charter from companies seeking new mining rights?This is doubtful, for three reasons. First, some clauses in the 2018 charter were struck down by the Pretoria high court in September 2021, after the Minerals Council South Africa had challenged their validity. One such clause required 30% HDSA ownership on the transfer or renewal of existing mining rights. Another demanded compliance with extraordinarily onerous preferential procurement rules. A third required 100% compliance with HDSA ownership obligations, failing which companies could have their mining rights suspended or cancelled under the MPRDA. These three clauses are invalid and cannot be restored by the bill’s becoming law.Second, the 2021 high court judgment made it clear that the mining minister has no law-making power under the MPRDA. The 2018 Charter is thus a mere “instrument of policy” and has no binding legal force. This will remain the case after the bill is enacted.Third, a different Pretoria high court judgment – one handed down in April 2018 – casts doubt on the validity of both the 2010 and 2018 mining charters. The wording of sub-section100(2) of the MPRDA is crucial here, for it empowers the minister to develop a socio-economic empowerment charter within six months of the Act’s coming into operation. Since the MPRDA took effect on 1 May 2004, the single charter it envisaged had to be developed before 31 October 2004. Any charter developed thereafter is clearly ultra vires (beyond the powers) given to the minister.This second judgment also prevents the minister from overriding a key clause in the 2004 charter. This clause requires that the “continuing consequences of all previous deals” be taken into account, even after HDSA investors have exited. This bars the minister from demanding “top-up” ownership deals by mining companies which have previously met the 26% ownership requirement.One of the main purposes of the bill is to circumvent these two judgments and give the minister the law-making powers he currently lacks. This is also what mining officials have long wanted to achieve. In November 2021, two months after the September 2021 ruling, some of these officials told the relevant parliamentary portfolio committee that no appeal would be lodged against the judgment so as to avoid any risk of becoming “bogged down in the courts”. Instead, the MPRDA would be amended to “incorporate the transformation objectives the judgment had overturned” and make “compliance obligatory”.Empowering the minister to “repeal or amend” an empowerment charterIn keeping with this aim, the draft law introduces a new sub-section 100(4) which gives the minister the power, “as and when the need arises”, to “amend or repeal…the broad-based socio-economic empowerment prescribed elements of [BEE] ownership, inclusive procurement, supplier and enterprise development” and the like, as earlier listed.Once the bill is enacted, the minister could use these powers to “amend” the 2004 charter (the only one that is undoubtedly valid) by repealing its present clauses and inserting instead, say, all the clauses in the 2018 mining charter. This would restore the clauses struck down in 2021. It would also end the “continuing consequences” principle and require all mining companies to do top-up deals when black investors sell out. The minister could also go beyond the 2018 rules and include higher targets for BEE ownership (and other elements) in his amendments, as outlined below.Adding new empowerment targets by regulationThe bill also gives the minister additional regulatory powers on empowerment. Under a new subsection 107(1)(jD), the minister will be able, by notice in the Gazette, to make regulations “regarding…the promotion of transformative elements of BEE ownership, inclusive procurement, supplier and enterprise development” and the like (again, as earlier listed). Such regulations could again either mirror the rules in the 2018 charter or introduce higher BEE ownership (and other) targets..What higher BEE ownership targets might the minister introduce?.The 2018 charter sets a 30% ownership requirement for new mining rights, but generally retains a 26% target for companies with existing mining rights. However, the ANC has long wanted a 51% ownership target for the mining industry – and may well see this legislation as the vehicle to achieve this.The 51% ownership goal for all mines was evident back in 2002, when an early version of the mining charter was leaked to the media. The news caused a stock market panic, in which the value of mining shares fell by some R55bn and the ANC was compelled to draw back. By contrast, little attention has been paid to a May 2025 draft BEE sector code for the transport sector, which proposes a 51% BEE ownership target for companies needing permits from the government or wanting to enter into procurement contracts with the state.Under this draft code, a 51% BEE ownership requirement could be imposed for procurement contracts with Transnet aimed at restoring parts of the crumbling rail network. This could significantly erode private-sector willingness to partner with the parastatal in this way – even though private sector expertise and financial resources are urgently needed to return rail tonnages to earlier norms, boost exports, and increase economic growth. The proposed 51% BEE ownership target in the draft sector code has nevertheless passed largely unremarked. The relative silence here could encourage the ANC to use the Bill to enforce a 51% BEE ownership target in the mining sector too..The potential impact of the Expropriation Act.Until now, many mining companies have largely shouldered the costs of the 26% BEE ownership requirement. However, if the Bill in time ushers in a 51% BEE ownership requirement for all mining rights, the costs would be enormous. They would be yet more unaffordable if the “continuing consequences” principle was repealed and top-up deals were demanded whenever black investors exited (as the draft transport sector code in fact envisages there).In this situation, mining companies might want to claim compensation for compulsory ownership deals that amount to regulatory or indirect expropriations – and would merit compensation under virtually all bilateral investment treaties (BITs) and other investment agreements.A regulatory expropriation takes place when the state’s rules deprive owners of many of the usual powers and benefits of ownership without fully stripping them of title. Most BITs see such interventions as having effects “equivalent” to direct expropriations, in which ownership passes to the state itself. Most BITs thus require the payment of compensation for both direct and indirect expropriations.In South Africa, however, the new Expropriation Act of 2024 – already signed into law but not yet operative – is intended to preclude compensation for indirect expropriations. This is to be done under a new definition of expropriation which confines the meaning of the term to expropriations of the direct kind.According to the Act, expropriation means the “compulsory acquisition” of property by the state. A compulsory 51% BEE ownership deal will not satisfy this definition because the relevant shareholding will be transferred – probably at a steeply discounted price and with the help of vendor financing that may not be repaid – to politically connected ANC cadres, rather than the state or its mining company.There will therefore be no acquisition of ownership by the state and hence no expropriation within the meaning of the Expropriation Act. Also important here are constitutional provisions requiring compensation for “expropriation” but not for other “deprivations”. The combined effect is that mining companies are likely to be denied any compensation for compulsory 51% ownership deals, regardless of the magnitude of their resulting financial losses.An adverse precedent has also already been set. In 2004, when the MPRDA came into effect, it vested all mineral resources in the “custodianship” of the state. Though two thirds of these resources had previously been privately owned, no compensation was paid for the loss of these valuable assets. This was primarily because of a flawed judgment of the Constitutional Court, in the Agri SA case in 2013, in which Chief Justice Mogoeng Mogoeng ruled that expropriation requires the acquisition of ownership by the state. Since the “assumption of custodianship” was different from this, no expropriation had taken place and no compensation was due.The ANC has long wanted to turn this flawed judgment – based on the particular facts of a particular case – into a general principle of law. The Expropriation Act is intended to achieve this. Once the Act with its narrow definition of expropriation has been brought into force, the ANC may be inclined to push ahead with new rules requiring 51% BEE ownership deals in mining, transport, and elsewhere. In the mining sector, the bill will provide the mechanism to achieve this aim..What, then, is to be done?.Faced with the prospect of what amounts to expropriation without compensation, many mining companies may look for legal weaknesses in the ANC’s likely arguments. Such weaknesses can be found in the doctrine of the separation of powers, for example, which gives law-making powers to Parliament and not to the executive. They can also be found in the many errors in the Agri SA judgment, as well as the doubtful constitutional validity of both the expropriation definition and the entire Expropriation Act.To help win any legal battle, the mining industry needs also to speak out strongly against the harm that the MPRDA has already done and the bill will greatly worsen. True transformation requires vastly increased investment, very much faster economic growth and an upsurge in jobs for the 12 million South Africans now unemployed. That in turn demands cast iron protection for property rights as the minimum foundation for economic expansion and rising prosperity.BEE in mining has greatly enriched a small elite, but badly hurt the great majority of South Africans. The BEE elements in the Bill should at minimum be scrapped. So too should the entire BEE policy, which needs to be replaced by a non-racial alternative along the lines of the IRR’s Economic Empowerment for the Disadvantaged (EED) idea.In the mining sector, companies would then earn voluntary EED points for all investments made, all jobs provided, all taxes paid, and all additions made to export earnings, skills and innovation. These are the most important contributions that business can make to growing the economy and creating jobs, so that millions more South Africans can climb the ladder to cherished middle-class status.An EED system would also reach right down to the grassroots by providing the poor (identified by income, not race) with tax-funded vouchers for the competitive schooling, housing and healthcare of their choice. Little could be more effective in truly empowering the great majority – or in breaking the ANC’s stranglehold on a struggling mining industry and beleaguered economy..*Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR..*This article was first published by the DailyFriend and is republished with permission.

New mining bill raises investment concerns over expanded BEE mandates and regulatory powers

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