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South Africa: Compliance date for the National Environmental Management Act: Financial Provisions Regulations Extended Again

29 April 2021
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The compliance date for the Financial Provisioning Regulations, 2015 [1] (FP Regs) is inching close. But for the proposed extension briefly discussed below, all mining right holders were required to comply with the FP Regs with effect from 19 June 2021.

However, on 22 April 2021, the Minister of Forestry, Fisheries and the Environment Department published a further notice of her intention to amend regulation 17B of the FP Regs. This will be the third extension of the compliance period. The proposed amendment to regulation 17B of the FP Regs:

  • Extends this date of compliance by an extra year, requiring compliance with the FP Regs by 19 June 2022; and
  • Also extends the period that holders are deemed to be compliant with the FP Regs to 19 June 2022, provided that they have complied with the provisions and arrangements regarding financial provisioning, approved as part of the right or permit issued in terms of the Mineral and Petroleum Resources Development Act, 2002 (MPRDA). 

If the proposed extension is promulgated into law, the compliance date for the FP Regs will be extended to 19 June 2022. The interested and affected persons have until 22 May 2021 to comment on this proposed extension.

Although the proposed extension is a welcomed intervention, an affected mineral right or permit holder should continue to prepare for a new financial provisioning regime which will come into effect sooner or later. This is especially the case if regard is had to the fact that the current FP Regs are bound to be replaced, at least in part, shortly. The latest draft of the substantive amendment is set out in the ‘Proposed Regulations Pertaining to Financial Provision for the Rehabilitation and Remediation of Environmental Damage caused by Reconnaissance, Prospecting, Exploration, Mining or Production Operations’, published on 17 May 2019 (Draft FP Regs).

If the Draft FP Regs are promulgated in their current format, they will significantly affect the rehabilitation financial provisioning regime, hence it is important to continue to plan for future changes. Among others, the Draft FP Regs propose:

  • To widen the application of the Draft FP Regs and include the requirement that in a transaction involving transfer of a right, in order to obtain approval as contemplated in section 11 of the MPRDA for the proposed transaction, the transferee should be required to conduct its own financial provision assessment as described in the Draft FP Regs. This proposal goes further than the previous 2017 draft regulations and also includes a person who requires a renewal of a permit or right as contemplated in the MPRDA. Practically, if this proposed change is effected, whenever one applies for section 11 and section 102 consents under the MPRDA, they will be required to update all the applicable plans and confirm whether the existing financial provision is adequate.
  • That the Draft FP Regs will apply notwithstanding the applicability of section 52(1) of MPRDA. Therefore, even if downscaling operations have commenced, these regulations will continue to operate and the obligations set out therein such as annual review, the update of plans, and the re-assessment of the environmental impacts, will remain. [2]
  • In terms of regulation 6(4) of the Draft FP Regs, the determination of the financial provision must be undertaken by specialists. The term ‘specialist’ is in turn defined as ‘an independent person who is qualified by virtue of his or her demonstrable knowledge, qualifications, skills or expertise in the mining, environmental, water, resource economy and financial fields’. This departs from the current FP Regs which provides that the holder must determine the financial provision. [3]
  • A new financial vehicle called ‘a closure rehabilitation company established for the sole purpose of regulation 5(b) and (c)’ is introduced. Besides this restriction, there is, however, no further guidance provided on this closure rehabilitation company.

As already mentioned, these proposed changes are fundamental, and holders need to prepare for them in advance. If you would like more information related to the extension of the compliance period and other proposed rehabilitation financial provisioning regime, please contact us and we will gladly assist further

[1] Published in terms of the National Environmental Management Act, 1998, under Government Notice R1147 in Government Gazette 39425 of 20 November 2015, as amended.

[2] See regulation 12 of the Draft FP Regs with respect to the review, re-assessment, confirmation or adjustment of the financial provision.

[3] See Regulation 4 of the FP Regs and the 2017 Draft Regulations.