Draft Bill 2025 will need further amendments to encourage investment

The draft Mineral Resources Development Bill, 2025 (Draft Bill) has been released for public comment. Interested parties have until 13 August 2025 to submit written comments.

The Draft Bill was approved by the Cabinet last week together with a Critical Minerals and Metals Strategy. The statement by the Minister of Mineral and Petroleum Resources (Minister) on Cabinet’s approval of the Draft Bill indicated, among other things, that that the strategic objective of the Draft Bill includes (i) ensuring policy and regulatory certainty and enhancing investor confidence; and (ii) reducing bureaucratic inefficiencies and improving turnaround times for mining rights, permits and regulatory approvals.

Many commentators have, however, pointed to elements of the Draft Bill that should be addressed to avoid having the opposite effect. For example, most of the clear recommendations in the Mining Dialogues 360° and Good Governance Africa report titled ‘Mineral Policy Review: Findings and Recommendations’, and dated August 2024, are not carried through in this Draft Bill. The report contains recommendations on how the MPRDA and its regulations should be changed to support the restoration of South Africa’s competitive mining position and increase investor confidence.

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The proposed changes to empowerment requirements and the ministerial consent requirements in terms of section 11 of MPRDA (Ministerial Consent) provisions, arguably of most importance from a transactional perspective, are discussed below.

Transfer of mining or prospecting rights or shares in holders of such rights

A surprising aspect of the Draft Bill is that it reverts to a transfer regime focused on State control which many hoped the Department of Mineral and Petroleum Resources (DMPR) had agreed to move away from.

The Draft Bill has reintroduced controversial provisions from the Mineral and Petroleum Resources Development Amendment Act 49 of 2008, which never commenced. The section 11 provisions of the Draft Bill require Ministerial Consent for each and every change in an interest in an unlisted holder of a right. The change, if implemented, would prevent pledges of shares, the introduction of preference shares and any change in shareholding at all for a non-listed mining company without Ministerial Consent. The Draft Bill also reintroduces a requirement for consent for a change in control of a listed company.

This is a much more restrictive approach than is currently provided for under section 11. It is difficult to understand how this could be considered to give rise to ‘enhanced investor confidence’.

Currently section 11 of the MPRDA provides that a prospecting right or mining right or an interest in any such right, or a controlling interest in a company or close corporation, may not be ceded, transferred, let, sublet, assigned, alienated or disposed of without the written consent of the Minister, except in the case of a change of a controlling interest in listed companies.

If the proposed amendment to section 11 is passed in its current format, a prospecting right, mining right, or an interest in any such right, or any interest in an unlisted company or any controlling interest in a listed company, which holds a prospecting right, mining right, small-scale mining permit or artisanal mining permit or an interest in any such right, may not be ceded, transferred, encumbered, let, sublet, assigned or alienated without the prior written consent of the Minister, as prescribed.

These changes appear to be an intent directed at the micro-management of mining companies. The need for these far-reaching changes which upend 20 years of mineral regulation, is not explained.

Direct or indirect control

The Draft Bill fails to clarify an ongoing controversy that arises for corporate transactions in the mining space: whether the ‘interest’ acquired must result in a ‘direct’ change in the holder of the mining right or an ‘indirect’ change up the chain of ownership in the holder of a mining right, including changes that occur in foreign companies, involving all foreign shareholders.

The broad market consensus has been that indirect changes of control are implicated by section 11. This market view is further supported by the Supreme Court of Appeal decision in Vantage Goldfields SA (Pty) Ltd. & Another v Arqomanzi (Pty) Ltd. and Others [2023] 3 All SA 667 (SCA). DMPR officials are, however, on record as viewing only ‘direct’ changes to require consent and only changes involving South Africa parties.

The Draft Bill introduces the words ‘which holds … an interest in such rights’, as the trigger for ministerial consent for transfer of any interest in unlisted companies and change of control in listed companies. This new and unclear qualification does nothing to clarify whether this extends to direct and indirect ‘interests’.

This is a missed opportunity by the DMPR to clarify an unnecessarily debated issue and we would like to see this clarified in further drafts of the Bill.

Foreign listed shares

The Draft Bill specifically indicates that it is not only companies listed on the Johannesburg Stock Exchange that will be impacted by the change to require Ministerial Consent for a change in control but also those that are listed in foreign jurisdictions. This is because the Draft Bill introduces a definition of ‘listed company’ as ‘defined by the Income Tax Act No 58 of 1996’, which defines listed companies as including a stock exchange in a country other than South Africa that has been recognised by the Minister as contemplated in paragraph (c) of the definition of ‘recognised exchange’ in paragraph 1 of the Eighth Schedule.

Some have said this introduces ‘extra territorial’ regulation in the Draft Bill and also unduly disadvantages rights holders who have no ability to influence or control shareholding, particularly shareholding that is listed on a foreign exchange, or that is held by foreign shareholders in off share companies.

The DMPR has offered no explanation for these far-reaching amendments.

Other changes to section 11 of the MPRDA

Currently, section 11(1) of the MPRDA does not specifically list ‘encumbrance’, or ‘pledge’ as one of the prohibited actions in respect of a prospecting or mining right or a controlling shareholding interest in a prospecting or mining right. However, the Draft Bill proposes to specifically list encumbrance as one of the triggers for ministerial consent.

The Draft Bill does not define encumbrance and instead it proposes to amend section 11(3) to inter alia say ‘the consent contemplated in subsection (1) is not required in respect of the encumbrance by mortgage contemplated in subsection (1) of a right or interest as security to obtain a loan or guarantee for the purpose of funding or financing a prospecting or mining project b … (c) any public entity, if the bank, public entity or financial institution in question undertakes, in writing, that any sale in execution or any other disposal pursuant to foreclosure of the mortgage is subject to the consent in terms of subsection (1)’.

The addition of public entities as other institutions that may encumber the right by mortgage without the ministerial consent is welcomed. However, limiting the exemption to encumbrance by mortgage is problematic. A common encumbrance in the security package for a mining transaction would be a pledge of shares, this has not previously needed ministerial consent. The change will inhibit the financing of mining transactions.

In addition to the encumbrance restriction, other changes to section 11 include the proposed introduction of section 11(5), which proposes that if ministerial consent is not obtained, the cession, transfer, disposal or encumbrance will be void. This is obviously a further reason for there to be absolute clarity regarding the reach of section 11. Without this, this provision will inhibit transactions in the sector.

Further, the Draft Bill proposes to amend section 98 to make it an offence to contravene section 11 of the MPRDA. There is also a proposal to amend section 99 to provide that penalty for this offence should be a fine not exceeding 10% of the person’s or the right holder’s annual turnover in South Africa and its export from South Africa during the person’s or the right holder’s preceding financial year as reflected in the last available annual financial statements, or to imprisonment for a period not exceeding 10 years, or to both such fine and such imprisonment.

Given the uncertainties in section 11 as described above, these proposed punitive measures create further risk for investor.

Changes to the empowerment requirements for granting mining rights/ permits

Since the publication of the Amendment of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2010, which was replaced by the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (2018 Charter), the empowerment obligations that apply to mining and prospecting rights holders have been subject to much legal uncertainty.

Over the years, these uncertainties have led to a great deal of litigation including successful litigation by Minerals Council South Africa (Minerals Council) in Chamber of Mines of South Africa v Minister of Mineral Resources and Others [2018] 2 All SA 391 (GP) and Minerals Council South Africa v Minister of Mineral Resources and Another, 2020] 4 All SA 150 (GP) (Minerals Council case).

While the Draft Bill contains several changes concerning empowerment requirements in the mining sector, possibly in response to the foregoing court decisions, the provisions do not in fact offer real certainty regarding how these important matters will be dealt with in future.

In the first instance, the Draft Bill requires that applicants for prospecting and mining rights must comply with the broad-based socio-economic empowerment prescribed elements as contemplated in section 100(3)(b). Large portions of the 2018 Charter were, however, set aside in the Minerals Council case. One would have hoped, considering the time that has passed, that the Minister would have introduced an amended Charter with the Draft Bill. No indication of timing on this has been given. The empowerment requirements (if any) that apply in a renewal or transfer context and which were specifically dealt with in that matter remain unclear.

Draft section 100 (3)(b) obliges the Minister to impose provisions of the Housing and Living Conditions Standard, Codes of Good Practice and broad-based socio-economic empowerment prescribed elements of black economic empowerment ownership, inclusive procurement, supplier and enterprise development, human resources development, employment equity and mining community development upon grant of a right in terms of section 23.

The Draft Bill contemplates that relevant elements of black economic empowerment ownership, inclusive procurement, supplier and enterprise development, human resources development, employment equity and mining community development will be prescribed in the regulations. The relevant regulations have not been prescribed, for industry to effectively comment. Draft regulations should have been released.

Besides the empowerment requirements that apply to the applications for, and holders of, mining rights, other empowerment requirements that the Draft Bill seeks to introduce relate to applications for prospecting rights, and empowerment requirements that apply to small-scale mining permits and artisanal mining permits which we discuss below.

Empowerment requirements in applications for prospecting rights

The draft section 17(1)(f) provides that the Minister must grant a prospecting right if the granting of such right will further the objects referred to in section 2(d) and comply with the broad-based socio-economic empowerment prescribed elements as contemplated in section 100(3)(b).

The proposed change is a material change to the current position in the MPRDA which only makes it mandatory for an applicant for a prospecting right in respect of strategic minerals to comply with empowerment requirements. This has always made sense commercially as at prospecting stage there is no expectation of return or profit, only cost.

This is particularly difficult for unsophisticated participants to understand and can lead to community and labour unrest if these parties know that they are shareholders, but have seen no return for the prospecting period. Furthermore, such arrangement are costly to negotiate and imposing these at prospecting stage would inhibit prospecting applicants.

The proposed section 17(1)(f) makes it compulsory for all applicants of prospecting rights objects referred to in section 2(d), to comply with the broad-based socio-economic empowerment prescribed elements as contemplated in section 100(3)(b). Several issues arise from this including the fact that all prior presentations by the Department of Mineral Resources and Petroleum (DMPR) always indicated that applicants for prospecting rights will not have to comply with empowerment requirements.

Further, section 100(3) only speaks of mining rights and provides that the Minister must, when granting applications in terms of section 23 impose the prescribed broad-based socio-economic empowerment requirements. Nothing is said about applications in terms of section 17. The misalignment between section 100(3) and section 17 creates legal uncertainty.

Designation of areas for small-scale and artisanal mining

To give effect to the objects referred to in section 2(c) and (d) of the MPRDA, the Draft Bill proposes to insert a new section 7A which empowers the Minister, by notice in the Gazette after consultation with the Council for Geoscience, to designate certain areas for black persons to undertake small-scale and artisanal mining.

This type of reservation would need to be carefully approached so as to ensure it can be upheld Constitutionally; to avoid fronting; to ensure these operations can be funded as needed; and to avoid unfair and irregular practices both from the DMPR side and the community side.