South Africa: Investor Protection: Security of tenure of mining rights in South Africa

Explore - insights from the DLA Piper Mining Sector - Issue 1
Last Updated: 23 December 2013
Article by Jackwell Feris

Do South Africa's proposed changes to its mining legislation achieve the aim of creating more certainty for the industry? Or is it yet another blow for foreign investment? Jackwell Feris takes an in-depth look at the Draft Mineral and Petroleum Resources Development Bill, 2013 and asks; does South Africa afford sufficient protection to foreign investors in the mining sector?

With a relatively stable government and a regulatory environment that is widely considered as one of the best on the continent South Africa has been an attractive destination for mining. Its business regulatory framework is generally open to foreign investment, bar the usual obstacles foreign investors are confronted with when intending to enter a market. But, at a deeper level, does South Africa afford sufficient protection to foreign investors who hold mining rights or intend to acquire such rights?

The attractiveness of South Africa as an investment destination of choice for mining has seen a significant drop due to a number of factors. The mining industry has received a significant amount of bad publicity: policy uncertainty fuelled by the calls for the nationalisation of the country's mineral resources (which now appears to have been abandoned) during 2012; the recent proposed amendments to the country's mining legislation which are perceived to be unfriendly to investors; socio-economic concerns (i.e. black economic empowerment, job creation, huge economic disparities etc.); and dangerous labour unrest (evident from the Marikana tragedy in August 2012). All these events have added to South Africa's attractiveness as a mining investment destination decreasing annually.

The bad publicity in the mining industry has also had an effect on South Africa's economic outlook in general as is clear from the downgrading of South Africa's sovereign credit rating from a BBB+ to a BBB status by rating agency Fitch and Standard & Poor. The latest report released by Canadian-based Fraser Institute reflects that South Africa's ranking as a mining destination for 2013 has dropped from 53rd place in 2012 to 64th place out of 93 mining jurisdictions. As a country with a significant percentage of the world's exploitable mineral resources and at one stage considered as a very attractive mining destination something will drastically need to change in order to ensure that South Africa does not end-up as one of the least favourite mining investment destinations.

The South African government has attempted to create more certainty in the mining industry with the release of the Draft Mineral and Petroleum Resources Development Bill, 2013 which intends to amend the current mining legislation (Mineral and Petroleum Resources Development Act No. 28 of 2002 ("the MPRDA")). The Bill, however, seems to have added more fuel and uncertainty to the situation as it in a number of respects appears to increase the administrative hurdles for mining companies to comply with. The policy reason behind the South African government's proposed amendment to the mining legislation is to:

  • improve the regulatory system
  • remove ambiguities with the current legislation
  • streamlining administrative process
  • enhancing the beneficiation of minerals in the country

At an extensive public hearing process during September 2013 mining industry stakeholders raised their concerns with a number of proposed amendments in the Bill. At the top of the list were the new proposed regulation of the transfer of rights, new proposed system for application of rights and declaration of certain minerals or petroleum resources as strategic and/or designated minerals for beneficiation to a prescribed level prior to export. As a result of the overwhelming concerns raised by the interested and affected parties, the South African Department of Mineral Resources undertook to relook certain of the proposed amendments in order to achieve the objectives of the Bill. It will have to be seen to what extent the stakeholders' comments will be taken into account by government. There is still an extensive parliamentary process which needs to be followed prior to the Bill becoming force of law. In all likelihood any proposed amendments to the current mining legislation will only become law during 2014 or even later due to the general elections scheduled for 2014.

Security of Tenure for Rights

The main concern for any foreign investor is security of tenure for his/ her investment. Investors generally feel threatened when governments start promoting policy changes which could potentially have an adverse effect on the rights they enjoy. The proposed amendment to the MPRDA does not intend to amend the principle in the South African mining law that any mining right granted to a holder is a limited real right (a form of real ownership) in respect of the mineral and land to which such right relates. That alone indicates a security of tenure.

South Africa like most other countries, concluded a number of bilateral investment treaties (BIT) with countries with which it has important trade and investment relationships. In most instances these BITs contain a provision which prohibits the expropriation of investments made by foreign nationals in South Africa, save if such expropriation is "for a public purpose or in the national interest" accompanied by "immediate, full and effective compensation". Any expropriation of an investment of a foreign national by South Africa would be open to a potential breach of its BIT should such expropriation fail to comply with terms and conditions for expropriation as contained in the relevant BIT.

Protection of Investment

The majority of South Africa's BITs are coming to an end or are being terminated by the South African government. The government intends to in future regulate foreign investment by means of national legislation, contained within the draft Promotion and Protection of Investment Bill, 2013 ("the Investment Bill") which intends to provide a legal framework for investments and to address the legal protection of all investors in line with the South African constitutional requirements.

The Investment Bill seeks to achieve several balances between the rights and obligations of all investors in South Africa, the need to provide adequate and equal protection of foreign and domestic investors. The Investment Bill raises some concerns whether sufficient protection will be granted to foreign investors from a security of tenure perspective and specifically compensation in the event of expropriation of rights or interests in South Africa.

Despite the concerns South Africa does have a regulatory regime which protects foreign investors, as recourse is available to South African court's for foreign nationals in the event of expropriation. Recourse to international arbitration is limited and dependant on terms of the BIT with the foreign investor's country of origin.

Going forward, as the BITs expire or are terminated to be replaced by the proposed Investment Bill, recourse to international arbitration would not be possible and will be an additional factor a foreign investor needs to take into account when deciding to invest in South Africa.

It is for the South African government to ensure that the policies and proposed legislative changes for the mining industry and investment protection in general do not result in a further deterrence of investments in South Africa due to overly burdensome and illogical administrative red-tape, but that South Africa's attractiveness as a mining investment destination be regained.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions