- with readers working within the Metals & Mining and Oil & Gas industries
A recent statement by a significant mining investor to the effect that "South African gold operations at USD1,200 per ounce was not worth investing in, but at USD4,000 plus, a completely different story," recalls the last great gold boom of the late 1970s and early 1980s, a period when South Africa was similarly viewed with investment suspicion. Not only did investors into South Africa face a moral quandary, but the viability of the apartheid state as a stable going concern was also in question. South African mining has always faced "investability" issues, but returns in boom times have often trumped investor queasiness.
This leads to a different question: are the regulatory hurdles in South Africa real, or exaggerated?
Every mining operation in every jurisdiction in the world faces near identical challenges: permitting and mining rights; governmental or citizen participation in equity; environmental and water use regulation; relationships with host communities, illegal and artisanal miners; participation by local citizens in white-collar employment roles and in the supply chain of goods and services to mining operations; labour laws and worker rights; beneficiation obligations; access to, and cost of access to, road, rail and electrical infrastructure; and the remittance of earnings, together with stable royalty and tax treatment, being key amongst them.
South Africans tend to view these as uniquely South African issues. They are not. When compared with many second- (and third-) world mining jurisdictions, South Africa's mining environment is better regulated and infrastructure more accessible than most.
So what, then, are the big regulatory issues?
Mining rights — and the conditions under which they are issued and may be lost. Those familiar with South African mining will probably flinch when the term once-empowered-always-empowered is raised.
For those who are not, a brief explanation is useful. In the early 2000s, a new mining law, the Mineral and Petroleum Resource Development Act (MPRDA), was enacted. Broadly, to preserve existing mining rights and to continue mining operations, miners were required to convert existing mining rights into new mining rights issued and valid under the MPRDA. To do so, mining companies were required to introduce Black investors, who acquired equity (usually 26%) in the company, often under company- or vendor-financed terms. The understanding at the time was that this "once-off" empowerment transaction ensured validity and compliance of the converted mining rights for the life of the mining right, usually 30 years from date of issue.
This understanding was never made clear in the legislation, and the regulator now holds the view that as Black investors exited their investments (usually after a lock-in period), fresh Black investors are required for the mining right to remain valid.
The MPRDA Draft Bill, issued for comment in 2025, represents a missed opportunity to end this debate. The draft Bill does not contain express transitional provisions recognising previous empowerment transactions for purposes of compliance with new Black ownership requirements. This absence is notable. Whereas previously quasi-legislative tools (such as Mining Charter III) recognised certain once-empowered-always-empowered principles for existing rights holders who had previously achieved 26% Black equity ownership, the draft Bill's silence on this issue creates uncertainty as to whether such credits will be preserved.
Further, the Minister may now issue new mining rights subject to a range of broader empowerment criteria, and a threshold of Black equity participation may seemingly be determined on an ad hoc basis.
Finally, a key source of South African gold production — re-treated gold mining dumps, or tailings — which were previously not regulated under the MPRDA mining licence regime, are now subject to the same, with all the complexities this may entail in terms of the equity ownership quagmire.
The once-empowered-always-empowered debate has been brewing since the MPRDA was enacted in 2002. Both government and the mining industry must finally grasp the nettle, meet each other and agree a long-term and fair regime, encompassing recognition for previous empowerment transactions and a stable and determinable basis for the issue of new mining rights.
Mining everywhere is a long-term investment. The investment capital demanded is enormous, and the fluctuations in mineral prices are significant. A failure to reach a solid agreement and to provide an understandable basis for what the regulatory future holds for miners and their investors, in respect of the most essential element of any mine — the right to operate and take ownership of the mined product — is a gaping and needless own-goal and, sadly, in this instance, uniquely South African.
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