When is section 54 of the MPRDA applicable?

Section 54 of the Minerals and Petroleum Development Act (“MPRDA”) provides that the holder of a reconnaissance permission, prospecting right, mining right or mining permit should notify the Regional Manager if the owner or lawful occupier refuses to allow the holder of such right to enter the land, places unreasonable demands in return for access to the land or cannot be found in order to apply for access to the land. Once the holder of the relevant right has done so, the Regional Manager has to notify the owner or lawful occupier to enable him or her to make representations in relation to the notification which has been made.

If the Regional Manager concludes that the owner or lawful occupier is likely to suffer loss or damages as a result of the activities of the mining operations, the Regional Manager must request the parties concerned to endeavour to reach an agreement for the payment of compensation for such loss or damages. If an agreement cannot be reached, the matter should be resolved by way of arbitration or by a competent court.

However, in the event that the Regional Manager, having considered the issues raised by the holder of a reconnaissance permission, prospecting right, mining right or mining permit, the submissions made on behalf of the owner or lawful occupier, and also the Regional Mining Development Environmental Committee (“REMDEC”), concludes that the objects of the MPRDA in sections 2(c), (d), (f) or (g) will be undermined by further negotiations arising in relation to the refusal to permit access, the Regional Manager may recommend that the Minister expropriate the land in terms of section 55 of the MPRDA.

Should the Regional Manager find that the failure to reach an agreement is the fault of the holder of the relevant right, the Regional Manager has the power to prohibit the commencement or continuation of mining operations until the dispute has been resolved by arbitration or by a competent court. This provides some form of protection for an owner or lawful occupier.

In essence, section 54 appears to envisage a form of mediation by the Regional Manager to assist the parties to reach an agreement and to avoid the need for litigation (which is time consuming and costly).

In the Maledu and Others v Itereleng Bakgatla Mineral Resources (Pty) Limited and Another matter (“the Maledu matter”) it was argued by the respondents that section 54 would only be triggered if there is a dispute concerning compensation as the heading of this section reads “compensation payable under certain circumstances”.  The Constitutional Court held that this interpretation is incorrect, and that section 54 has a “much broader application than simply disputes relating to compensation”.

Should a right holder first exhaust the processes provided for in section 54 before resorting to common law remedies?

In the Maledu matter, the Constitutional Court had to answer the question whether the respondents first had to exhaust the internal remedy provided for in section 54. The Constitutional Court referred to the requirements for the granting of an interdict (authoritatively set out in Setlogelo v Setlogelo). One of these is the “absence of any other satisfactory remedy”. It appears that the purpose of section 54 is to create a mechanism to resolve disputes arising from differences between the interests of a holder of a reconnaissance permission, prospecting right, mining right or mining permit and those of the owner or lawful occupier. Therefore, it would be difficult to argue that section 54 is not (in principle) another satisfactory remedy for the purposes of the Setlogelo test.

The Constitutional Court also held that because the applicants’ rights derived from the MPRDA, the processes as set out in section 54 first had to be exhausted before they could resort to the enforcement of their common law remedies by way of an interdict. In this regard the Constitutional Court also emphasised,

‘section 54 provides for a remedy must mean that resort cannot be had to an alternative remedy available under the common law [and that this] must be so because section 4(2) of the MPRDA expressly provides that “in so far as the common law is inconsistent with [the MPRDA], the [MPRDA] prevails”’.

By way of analogy, in the matter of Dengetenge Holdings (Pty) Ltd v Southern Sphere Mining and Development Company Ltd and Others (“the Dengetenge matter”) the question which the Constitutional Court had to answer was whether a court could consider a review application where the applicant had launched the review application without first exhausting the relevant internal remedies. In this case the Minister had (actually) agreed that the dispute relating to the contested competing claims regarding the grant of prospecting rights should be heard by a court as opposed to the matter being determined by way of an internal appeal in terms of section 96 of the MPRDA. The majority of the Constitutional Court concluded that the Minister does not have the power to waive the requirement to first exhaust the internal remedies as provided for in the MPRDA.

Despite the fact that the Dengetenge and Maledu matters differ in relation to their facts (as the first case relates to the appeal process as provided for in section 96 of the MPRDA and the latter case relates to a mechanism which aims to resolve disputes between the owner or lawful occupier and the relevant right holder as set out in section 54), it is clear that the courts have generally followed the principle that where the MPRDA provides for an internal remedy, the internal remedy should first be exhausted before the aggrieved party can utilise any other remedy (unless the court has exempted the applicant from having to comply with this requirement).

The billion dollar question – can mining continue when section 54 processes have been triggered?

The Constitutional Court the Maledu matter had to decide whether mining operations should be halted until the finalisation of the section 54 processes. In this regard the respondents sought to argue that, if the processes as set out in section 54 first had to be exhausted, it would ‘unjustifiably prevent’ the respondents from commencing with mining pending the finalisation of the processes in terms of section 54 and that if they had ‘attempted in good faith to comply with [their] consultative duties’ under the MPRDA they were free to commence with their mining operations notwithstanding the fact that the processes envisaged in section 54 had not been finalised.  However, the Constitutional Court dismissed this argument and held that the respondents had overlooked the fact that section 54 itself is intended to be a speedy dispute resolution process and were mining operations allowed to commence mining activities before the section 54 processes had been finalised, it would defeat the purposes of section 54 and render the process redundant. The Constitutional Court also noted that if the parties failed to reach an agreement for the purposes of the section, the Regional Manager could recommend to the Minster that the land be expropriated.  

The Constitutional Court did not expressly overturn the Supreme Court of Appeal’s decision in Joubert v Maranda Mining Company (Pty) Ltd, (“the Maranda matter”) where an interdict was granted against the landowner which effectively permitted Maranda to conduct mining activities in terms of its mining permit while the processes envisaged in section 54 were in progress.

The Constitutional Court in the Maledu matter held that the Maranda matter was distinguishable on the basis that the applicant in the Maledu matter did not have the objective of frustrating the legitimate endeavours of the mining right holder – which it held has occurred in the Maranda matter. The Constitutional Court pointed out that in the Maranda matter it was:

‘clear that the landowner was not only intent on refusing consent but was also not prepared to even enter into negotiations with the mining right holder [and that the] landowner’s conduct was found not only obstructive but also subversive of the objects of the MPRDA’.

As such, the Constitutional Court noted that an interdict was appropriate in those circumstances. This creates the impression that the court may have been suggesting that if the owner or lawful occupier is willing to negotiate with the holder of a reconnaissance permission, prospecting right, mining right or mining permit, mining should stop until the section 54 processes have been finalised. On the other hand, if the owner or lawful occupier’s conduct was found to be obstructive and ‘subversive of the objects of the MPRDA’, the mining right holder may potentially be able to obtain an interdict to prevent any delays caused by disgruntled owners or lawful occupiers.

It would seem that the Constitutional Court has created some wriggle room for holder of a reconnaissance permission, prospecting right, mining right or mining permit to argue that mining should be allowed to continue while the section 54 processes take place, if it can be argued that the behaviour of the owner or lawful occupier is obstructive, for example - imposing unreasonable demands in return for access to the land.

However, it may be the case that the Maranda matter is simply no longer applicable following the repeal of the previous section 5(4)(c) of the MPRDA, given the statement by the Constitutional Court that ‘[f]ollowing the repeal of section 5(4)(c), section 54 must be exhausted to ensure that the MPRDA’s purpose of balancing the rights of the mining right holders on the one hand and those of the surface right holder on the other is fulfilled’.

The effect of the Maledu judgment on right holders

Taking the above into consideration, it would be advisable for a mining company which is a holder of a reconnaissance permission, prospecting right, mining right or mining permit to first exhaust the processes provided for in terms of section 54 as the Constitutional Court held in the Maledu matter that, ‘section 54 must be exhausted to ensure that the MPRDA’s purpose of balancing the rights of the mining right holders on the one hand and those of the surface rights holders on the other is fulfilled’ and that section 54 is a ‘speedy dispute resolution process and were mining operations allowed to continue before the section 54 processes have been finalised, it would defeat the purposes of section 54 and render the process redundant’.

This may be a bitter pill for mining companies to swallow, as effectively this judgment means the following:

• if an owner or lawful occupier does not act unreasonably and seeks to negotiate with the holder of a reconnaissance permission, prospecting right, mining right or mining permit in a bona fide manner – placing, inter alia, unreasonable demands in return for access to the land in question, would potentially preclude a mining company which holds the relevant right under the MPRDA to resort to any common law remedies, such as interdicting the owner from obstructing the mining company from commencing its operations on the land in question; and
• until the section 54 processes have been finalised, the mining company is not allowed to exercise its rights in terms of the relevant right in relation to the land in question.

The legal position explained above will only be the case in relation to owners and lawful occupiers’ conduct, and not in relation to the conduct of the holder of the relevant right – as the MPRDA already stipulates that ‘If the Regional Manager determines that the failure of the parties to reach an agreement or to resolve the dispute is due to the fault of the holder of the reconnaissance permission, prospecting right, mining right or mining permit, the Regional Manager may in writing prohibit such holder from commencing or continuing with prospecting or mining operations on the land in question until such time as the dispute has been resolved by arbitration or by a competent court’. 

In other words, when owners and lawful occupiers act ‘reasonably’, mining should stop, but when holders of rights under the MPRDA act ‘reasonably’, it is not a given that mining can continue because of the Constitutional Court’s decision.

The inherent tension

The Constitutional Court explained in the Agri South Africa v Minister for Minerals and Energy matter that the MPRDA ‘had the deliberate and immediate effect of abolishing the entitlement to sterilise mineral rights’ as under the old mineral rights regime, landowners had the ability to sterilise mineral rights for as long as they wanted, if the right was not severed from landownership.  As the Court pointed out, this position changed after the promulgation of the MPRDA as the MPRDA makes it clear that the custodianship of mineral and petroleum resources is vested in the state on behalf of the people of South Africa and that one of the objectives of the MPRDA was to preclude the sterilisation of mineral resources.

However, the Maledu decision introduces a requirement that (where there is a dispute as set out in section 54) mining companies which are holders of reconnaissance permissions, prospecting rights, mining rights or mining permits must first complete the section 54 processes as set out in the MPRDA before it can resort to the enforcement of their common law remedies.

The fact that the section 54 is not regulated from a timing perspective and also that the Constitutional Court confirmed that mining may not continue during this period, potentially has the effect of sterilising the mineral resources until the finalisation of the section 54 processes, which could have detrimental implications for the holder of the relevant right.

On the other hand, the Constitutional Court also recognised the fact (in the context of the protection of informal land rights) that if mining may continue while the section 54 processes are proceeding, it may render the protections provided by section 54 nugatory. The same issue was raised by the applicants in the Baleni v Minister of Mineral Resources matter in the context of a section 96 appeal as section 96(2)(a) stipulates that an appeal in terms of section 96 does not suspend the relevant administrative decision (for example, the granting of a mining right). In this matter the applicants explained that ‘Whether the consent of the applicants is required in terms of IPILRA is central to the dispute and, while it may be possible for the applicants to review the eventual decision to grant a mining right without the applicants’ consent, the applicants fear that that it is possible that mining will commence whilst they pursue their internal remedies and possibly rendering the consent meaningless’. 

It could be that the ultimate solution would be to amend the MPRDA to set out time periods to regulate the section 54 processes. This may to some extent lessen the inherent tension in seeking to ensure that mining can proceed as rapidly as possible (where rights have been granted) and at the same time affording appropriate protection for the owner or lawful occupier of the land in question. 

Nina Greyling, attorney at Nortons Inc
Email: nina@nortonsinc.com