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01 Apr 2022
BY Ntsiki Adonisi-Kgame , Mihlali Sitefane AND Rewaldo Quest

Policy to formalise artisanal and small-scale mining in South Africa published

A policy published on 30 March 2022 by the South African Minister of Mineral Resources and Energy aims to create a formalised, sustainable artisanal and small-scale mining (“ASM”) industry in South Africa, to eliminate illegal ASM operations and promote job creation.

The 2022 ASM Policy follows the which was published for public comment on 5 May 2021 (“2021 Draft ASM Policy”). The 2022 ASM Policy largely mirrors the 2021 ASM Draft Policy.

The 2022 ASM Policy acknowledges that the Mineral and Petroleum Resources Development Act, 2002 (“MPRDA”) does not expressly regulate ASM.

  • The 2022 ASM Policy retains the definitions introduced in the 2021 ASM Draft Policy as:
    • Artisanal mining” means traditional and customary mining operations using traditional or customary ways and means. This includes the activities of individuals using mostly rudimentary mining methods, manual and rudimentary tools to access mineral ore, usually available on the surface, or at shallow depths; and
    • Small-scale mining” means a prospecting or mining operation that does not employ specialised prospecting, mechanised mining technologies, chemicals including mercury and cyanide or explosives; or the proposed prospecting or mining operations, do not involve investment or expenditure which exceed such amount as may be prescribed.
  • The 2022 ASM Policy proposes investment thresholds to distinguish between artisanal mining and small-scale mining:
    • for artisanal mining: a maximum of ZAR1-million; and
    • for small-scale mining: a maximum of ZAR10-million.
  • The 2022 ASM policy distinguishes between illegal miners who are to be criminalised in terms of the Criminal Procedure Act, 1977 amongst other laws, and lawful ASM Permit holders.
  • The 2022 ASM Policy introduces “a graduation provision” which allows artisanal miners to graduate to small-scale mining, and for a small-scale miner to graduate to medium, junior or emerging miner based on production and investment thresholds. The 2022 ASM Policy does not provide details around the graduation provision, and how it is intended to operate.
  • The dual licencing system in the 2021 Draft ASM Policy is retained in the 2022 ASM Policy. ASM is to be licenced through the issuance of either an Artisanal Mining Permit or a Small-Scale Mining Permit (“ASM permits”), through a “first come, first served” system, together with the “invitation system” in terms of which government would be empowered to invite applications for ASM Permits in designated areas.
  • Criteria for the invitation system is still unknown, as it needs to be developed after consultation with the Council for Geoscience (“CGS”).
  • Like mining and prospecting rights, the legal nature of ASM Permits is envisaged to be a limited real right. This means that, once the permit is registered, it will be enforceable against third parties. ASM permits would be capable of being transferred, mortgaged and/or capitalised, unlike the mining permits provided for in section 27 of the MPRDA.
  • As was the case with the Draft ASM Policy, the 2022 ASM Policy does not specify the duration of an ASM Permit once it is issued, however security of tenure must be at the forefront when the duration is determined.
  • Unlike mining permits, the extent of the ASM Permits has not been capped, and the area covered by ASM Permits may be determined by taking into account the type of mineral being mined, technical and financial resources required and environmental impacts associated with the extraction of that mineral.
  • The minister is to be empowered to designate or demarcate certain areas as artisanal or small-scale mining areas, which is informed by geological data of the CGS and the prevalence of ASM mining activities in the given area. The minister may also collaborate with the departments responsible for the environment to assess environmental impacts and risks.
  • As was the case in the 2021 Draft ASM Policy, ASM Permits are to be reserved for South Africans, which are defined as:
    • in respect of a natural person, a person who is at least 18 years of age who was born in South Africa or is a permanent resident; and
    • in respect of a juristic person, a company incorporated and registered in terms of the Companies Act, 2008, with operations in the country.
  • The government will prioritise the issuing of ASM Permits to co-operatives however, issuance of the ASM permits to private individuals will not be restricted.
  • ASM mining operations may be limited to surface and open case mining only, subject to the design of a risk-based system that considers the depth and mining methods to be used by ASM miners.
  • The policy and regulatory framework is intended to empower ASM Permit holders to trade in the open market and get involved in the value chain of mineral development. Consideration should be made for the establishment of a regulated market, or central buying agency to afford ASM Permit holders a platform to sell and trade minerals in a transparent and protected environment.
  • ASM operators and large-scale mining (“LSM”) operators are encouraged to co-exist, including through the use of Tributing Agreements (“TAs”). The terms of the TAs may include shedding and identifying land for ASM activities within the LSM operator’s operations; exploring the potential for tribute and buy-back arrangements; technical support; equipment leasing schemes; and opportunities for ASM operators to process and refine their ores at the refining facilities of LSM operators, subject to a mutual agreement between the ASM and LSM operators.
  • The 2022 ASM Policy contemplates a framework where ASM miners will have access to the mining of “tailings dumps” and “historic residue deposits and stockpiles” and that this framework must be in line with existing jurisprudence. The MPRDA, read with the common law, limits the minister’s jurisdiction to residue stockpile and deposits to the exclusion of tailings created prior to the commencement of the MPRDA. As such, access to dumps owned by the common law owners is a complex, proprietary issue, which may present serious issues for both ASM Permit holders and owners of the tailings.
  • ASM entities will be liable to pay royaltiesas well as tax (for example, VAT) to the government subject to various incentives established in favour of small businesses by National Treasury.
  • With full recognition of the challenges faced, the 2022 ASM Policy requires ASM entities will have to comply with current environmental, and mine health and safety laws. However the government will work with industry stakeholders (MHSC, MQA, and organised business) to train, empower and educate ASM miners on aspects of compliance with environmental management, water use and health and safety requirements and will design accessible policy tools and guidelines for the ASM industry.
  • The 2022 ASM Policy contemplates stringent reporting standards to track the progress of the ASM industry. Further, it provides that the Department of Mineral Resources and Energy (“DMRE”) should enforce monthly, quarterly and annual reporting requirements by the ASM industry for production, employment statistics and the payment of taxes and royalties.
  • The DMRE is intended to be the primary regulator of ASM operations in South Africa, and will have oversight of the implementation of the 2022 ASM Policy.

The implementation of the 2022 ASM Policy is not a small feat, and will require appropriate legislative amendments for its proper implementation. Nevertheless, the publication of the 2022 ASM Policy plugs an essential gap in South Africa’s mining sector and reflects a progressive approach by government to formalise the ASM industry.

Ntsiki Adonisi-Kgame

Natural Resources and Environment | Executive

Mihlali Sitefane

Natural Resources and Environment | Senior Associate

Rewaldo Quest

Natural Resources and Environment | Associate