EXPROPRIATION UNDER THE MPRDA The manner and timing of expropriation brought about by the

transitional provisions, and issues relevant to the claiming of

compensation. by Raakesh Narshai (NRSRAA001) Submitted to The University Of Cape Town

in fulfilment of the requirements for the degree LLB

Faculty of Law, University of Cape Town

Date of submission: 25 September 2009

Supervisor: Professor Hanri Mostert

Department of Private Law, University of Cape Town

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DECLARATION

1. I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is one’s own.

2. I have used the footnoting convention for citation and referencing. Each contribution to, and quotation in, this opinion from the work(s) of other people has been attributed, and has been cited and referenced.

3. This opinion is my own work.

4. I have not allowed, and will not allow, anyone to copy my work with the intention of passing it off as his or her own work.

Signature ______________________________

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Expropriation under the MPRDA

the manner and timing of expropriation brought about by

the transitional provisions, and issues relevant to the

claiming of compensation by Raakesh Narshai (NRSRAA001) Word Count: 9840 This paper was written under the auspices of the LandLawWatch project. The views and opinions expressed here are the author's own and should not be attributed to the LandLawWatch project or the University of Cape Town.

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Abstract

This paper is an exploration of the transitional provisions (Schedule II) of the Minerals and Petroleum Resources Development Act, when contrasted against the law under the Minerals Act. Particular issues which are dealt with are the determination of whether the Act brings about expropriation as well as the manner of timing of such expropriation. A consideration of the process of obtaining compensation, as well as a guide to the expected valuation of compensation claims follows.

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Contents

1  Introduction .............................................................................................................................................. 6  2  A Background of South African Mineral Law......................................................................................... 7 

2.1  Mineral law Regime Prior to the enactment of the MPRDA ................................................................ 7 2.1.1  Statutory arrangements .............................................................................................................. 8 2.1.2  Contents of common law mineral rights and prospecting rights ................................................. 9 

2.2  Mineral Law Regime after the inception of the MPRDA ................................................................... 10 2.2.1  Custodianship and the right to minerals ................................................................................... 11 2.2.2  Transitional Provisions ............................................................................................................. 12 2.2.3  New regulatory framework ....................................................................................................... 14 

3  Expropriation .......................................................................................................................................... 16 

3.1  The Constitutional Property clause and the MPRDA ........................................................................ 16 3.2  Does that which is taken away or interfered with by the operation of law amount to “property” for the purposes of section 25? ............................................................................................................................... 18 3.3  Has there been a deprivation of such property caused by the organ of state? ................................. 19 3.4  Is such deprivation lawful? ............................................................................................................... 20 3.5  Does it amount to expropriation for the purposes of section 25 (2)? ................................................ 22 

3.5.1  Original and derivative acquisition ............................................................................................ 22 3.5.2  Expropriation if new order rights are pre-MPRDA rights ........................................................... 23 3.5.3  Expropriation where old order rights are new statutory rights................................................... 24 3.5.4  Expropriation where the entitlement of exploitation vests in the state ...................................... 24 

3.6  Is the deprivation in the public interest or for a public purpose? ....................................................... 25  4  Compensation ........................................................................................................................................ 25 

4.1  Constitution and Just and Equitable compensation in general ......................................................... 25 4.2  The Constitutional Validity and Applicability of Item 12 in the Context of Compensation ................. 27 4.3  The Calculation of Compensation .................................................................................................... 30 

5  Concluding Remarks ............................................................................................................................. 31  Bibliography ................................................................................................................................................... 33 Legislation ...................................................................................................................................................... 33 

Case law ...................................................................................................................................................... 33 Articles ......................................................................................................................................................... 33 Books ........................................................................................................................................................... 33 Websites ...................................................................................................................................................... 36 

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1 Introduction

The introduction of the Minerals and Resources Petroleum Development Act1 (MPRDA) constituted a revolution in South Africa’s mineral law regime. Prior to this point, there had always been a public law administrative element to Mineral law, but the system was largely based on private law rights and duties. The MPRDA abolished the previous regime of mineral law and replaced it with a new statutory regime which had elements of strong state control in the obtaining, exercising and transfer of mineral law related rights. However, such a radical change could not be implemented rapidly without the destabilization of the mining sector of the economy.2 Therefore the transitional provisions3 of the MPRDA were created to govern the change between the two regimes of law.

Schedule II of the MPRDA came into force on 1 May 2004 with provisions regulating the conversion of prospecting and unused old order rights having already expired as of 20064 and 20055 respectively. In May 2009, the provisions allowing for the holders of used old order rights6 to lodge applications for the conversion of their existing rights into new order rights7 expired. The elimination of any opportunity of conversion for those that have not lodged claims has caused the issue of expropriation to become more significant, as the MPRDA only provided for old order rights to have effect during the conversion period.8 This paper will discuss the differences between the two regimes of mineral law (that is, the MPRDA and its predecessor, the Minerals Act 50 of 1991), as well as the transitional arrangements, with a view to determining the manner in which individual rights have been, or possibly could be affected. The conventional consequence of any unilateral intervention by the state is that it raises questions about expropriation. In First National Bank v SARS9(First National Bank) the Constitutional Court developed a formula through which the question of expropriation and

1 No 28 of 2002, 2 Item 2(a) of Schedule II of the MPRDA has the protection of the security of tenure of existing mining operations as an objective of sch II. 3 MPRDA, sch II 4 1 May 2006 5 1 May 2005 6 Mineral, mining and prospecting rights prior to the MPRDA, governed by the Minerals Act No 50 of 1991 are referred to in this instance. 7 Mining, prospecting and other rights in minerals granted in terms of the MPRDA 8 This is only in respect to those that have not lodged claims. 9 First National Bank of SA Limited t/a Wesbank v Commissioner for the South African Revenue Services and Another; First National Bank of SA Limited t/a Wesbank v Minister of Finance 2002 (7) BCLR 702 ; hereinafter referred to as First National Bank

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minerals.

the constitutional validity of the state’s actions could be investigated and answered. It is challenging to apply this process to the operation of the MPRDA, especially as regards to the questions of deprivation and appropriation. This difficulty can be sourced to the utilization of the novel concept of custodianship10 to regulate the state’s relationship to minerals as well as the manner in which rights are split between the state and parties granted new order rights.

There are generally two main views as to whether expropriation has occurred. The first view holds that expropriation does not occur until new order rights are granted as the state does not obtain the rights to minerals. The other holds that the creation of new rights as a consequence of the destruction of old rights is sufficient to constitute expropriation. The analysis of the effect of the MPRDA according to the expropriation enquiry is dealt with below.

This paper explores the notion of just and equitable compensation for lost mineral or petroleum rights. The premise is that there are at least some instances where rights have been forfeited that attract compensation when the new dispensation of mineral law came into effect. This requires that the question of the manner in which a court will calculate the amount of compensation to be asked, and in particular what a court will consider just and equitable. A central issue to this enquiry is a consideration of the effect of item 12 of schedule II, MPRDA which proposes to govern the process of obtaining expropriation and the formula by which it is calculated. A further relevant issue which arises is the prescription of compensation claims due to varying views as to when the compensation claims would have arisen and the fact that certain old order rights expired as early as 2005.

2 A Background of South African Mineral Law

2.1 Mineral law Regime Prior to the enactment of the MPRDA

This chapter will discuss the mineral law regime under the Minerals Act11 as well as the common law principles which formed the roots of the private rights in

10 MPRDA, s 3(1) 11 No 50 of 1991

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2.1.1 Statutory arrangements

The history of South African mining law has been to reward and protect the interests of private enterprise in the exploitation of minerals.12 However this is not to say that the state had no control involvement in mining activities. Historically, the state has always retained control over mining operations, and under the Mining Rights Act13 it even held the exclusive authority to confer mineral rights in respect of precious metals.14

The Minerals Act passed in 1991 reorganized the mineral law of South Africa and became the legal basis for any and all mineral and prospecting rights in existence prior to the coming into force of the MPRDA. Prior to the enactment of the Minerals Act, mineral law was characterized by a series of statutes15 that were differentiated by both the mineral type which they applied to and the area of mining law they regulated.16 The three primary effects of the Minerals Act were that it consolidated the fragmented mineral law17, caused all mineral and prospecting rights to conform to a common law basis,18 and amended the balance between state and private interests in minerals firmly in favour of private enterprise.19 The exclusive and vested right20 of the state to any particular minerals was converted into the same common law right as any other mineral right holder, so that the state’s right to prospect and extract minerals would be the same as any other private actor.21 The result of this conversion was that the relationship of all resources to which the Minerals Act applied continued in the form of common law mineral rights.

The Minerals Act regulated the method and manner in which mineral rights were exercised through the use of a system of authorizations. These authorizations amounted to a system of state control which was attached to a system of common law rights.22 No person could mine or prospect for minerals without first obtaining the necessary authorization provided for by the Minerals Act.23 In order to obtain an authorization, a prospective miner or prospector had to satisfy the state with regard to criteria such as compliance with environmental, safety or optimization requirements.24 Furthermore, a prospecting permit or mining authorization could not be

12 Franklin & Kaplan, Mineral Laws of SA, 1 13 Act no 20 of 1967 14 H Mostert Perspective on Mineral Law 47 15 There were approximately 26 separate statutes before the coming into force of the Minerals 16 Base metals and precious minerals were dealt with separately; H Mostert Perspective on Mineral Law 47 17 Kaplan & Dale, Minerals Act, 12 18 H Mostert Perspective on Mineral Law, 71 19 Kaplan & Dale, Minerals Act, 14; an objective of act was the privatisation of State rights 20 Mining Rights Act s2(1); H Mostert Perspective on Mineral Law 46 21 At least in respect of precious and base metals. Certain materials such as diamond in alluvial diggings were 22 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 125 23 Kaplan & Dale, Minerals Act ,48 24 Kaplan & Dale, Minerals Act, 50

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transferred to the successor in title of the relevant prospecting or mineral right.25 Indeed the authorizations would lapse on transfer and the minister had the power to suspend or cancel authorizations if a provision of the Minerals Act was not complied with.26 However the Mineral’s act did not rely entirely on the common law to give form to severed mineral rights. It also made provision for statutory mining and prospecting rights to be created, with the content determined by statute.

2.1.2 Contents of common law mineral rights and prospecting rights

The common law which applied during the period governed by the Minerals Act had two significant features, the principle of cuius est solum eius usque ad coelum et ad inferos and the notion of severance. The cuius est

solum principle provided that the “owner of the land is the dominus of the whole of the land, including the air space above the surface and everything below it”.27The consequence of this principle when applied to minerals is that the ownership of minerals would rest automatically in the hands of the owner of the land.28 The severance of minerals from the land would limit the owners right to deal with minerals situate on any land, but ‘ownership in the minerals lies in the dominus of the soil’. 29Ownership of minerals remains with the dominium of the land until such a time that the minerals are extracted from the land. At the moment of separation, the minerals become movables and ownership in the extracted minerals will lie with the mineral right holder.30

The dominium of ownership consists of the sum of the entitlements of ownership.31 Severance is the notion that the right that individual or multiple entitlements can be subtracted from the dominium and vested with a third party in the form of a limited real right.32South African law has recognized for long that the right to minerals is an entitlement which can be subtracted from the full dominium and transferred to a third party33 through the means of registration. The Minerals Act also recognized the severance of mineral rights from ownership, providing that the owner would be the holder of the mineral right unless it had been severed from the ownership of that particular land34. The exact content of severed mineral and prospecting rights would be determined by agreement at the time of severance, and agreements would often regulate matters such as surface use.

25 Minerals Act s16; Kaplan & Dale, Minerals Act pg 49 26 Minerals Act, s14 27 Franklin & Kaplan, Mineral Laws of SA, 4 28 Franklin & Kaplan, Mineral Laws of SA, 5 29 Neebe v Registrar of Mining Rights 1902 TS 65 at 85;Franklin & Kaplan, Mineral Laws of SA 5 30 Franklin & Kaplan, Mineral Laws of SA 6 31 H Mostert Perspective on Mineral Law,11 32 H Mostert Perspective on Mineral Law,12 33 Franklin & Kaplan, Mineral Laws of SA, 6 34 Kaplan & Dale, Minerals Act ,22 and Minerals Act s1(ix)(a)(i)

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A mineral right is the right to minerals which can be subtracted from the dominium. It is the same entitlement as that which would be found in full dominium over land. Therefore it would have been correct to say that both the holder of a severed mineral right and the owner of land which has not had the right to minerals severed have a mineral right.

The content of the mineral right could briefly be described as the entitlement the holder to “go upon property and search for minerals and if he finds any, to sever them and carry them away”.35 This is the core of the mineral right and could be referred to as the entitlement of exploitation. However secondary entitlements 36 in addition to exploitation exist and are as follows: The entitlements to resist unlawful interferences with the exercise of rights; the ability to alienate the right; the entitlement to encumber the mineral right with limited real rights; the entitlement of disposition’; ancillary entitlements37 ; and the revisionary interest. The entitlement of disposition is the right to decide how the surface should be used to enable exploitation, and the revisionary interest allows for the right holder to obtain the return of any encumbered entitlements once the restriction has terminated.

A mining right referred to a mineral right where the holder of the mineral right had a mining authorization to exercise the right to exploit minerals. It differs from a mineral right in that the ability to alienate the right is limited as an authorization could not be transferred.

The core of a prospecting rights consisted of the entitlement to enter land for the purpose of prospecting, and the entitlement to perform prospecting activities on that land.38

2.2 Mineral Law Regime after the inception of the MPRDA

The MPRDA became the centre of a new regime of mineral law after coming into force in 2004. Section 25(6) of the Constitution obliged the state to enact legislation in order to ensure equitable access to resources, and the MPRDA could largely be seen as the measure taken to achieve that constitutional goal. There would be two main areas in which the MPRDA would impact on existing mineral law: It would amend the vesting, creation and transfer of the right to minerals, as well provide a new public law framework for the exercise of those rights.

35 Franklin & Kaplan, Mineral Laws of SA 7 36 PJ Badenhorst and H Mostert, 2003(14), Stellenbosch Law Review, pg 385 37 Any entitlement which allows for the other entitlements to be enjoyed 38 PJ Badenhorst and H Mostert, 2003(14), Stellenbosch Law Review, pg 386

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2.2.1 Custodianship and the right to minerals

The nucleus of the MPRDA can be found by reading s 3(1), s 3(2) and s 4(2) together.39 Section 3(1) provides that “Mineral and petroleum resources are the common heritage of all the people of South Africa and the State is the custodian thereof for the benefit of all South Africans”. Section 3(2) is the provision entitling the minister to issue and manage40 mineral related rights in terms of the MPRDA. The content of s 4(2) stands out as it is in direct contrast to a core presumption of statutory interpretation that legislation is not intended to change the existing common law any more than necessary.41 This provision clearly rebuts that presumption not just for a particular point of law, but for any conflict with common law and the MPRDA. Recall that as the Minerals Act regime of mineral law was common law, s 4(2) is a powerful instrument in the reformation of the law. The three aforementioned provisions are the method by which the state interferes and alters the vesting of the right to minerals.

The concept of custodianship is a novel entity in South African law, and the suggestion has been made that its introduction was due to an attempt to hide the expropriation consequences of the MPRDA.42 The significance of this provision is that it drastically alters the legal relationship between the holders of mineral or prospecting rights and the minerals. Custodianship has to be looked at with regard to the transition from a private law dispensation to a public law dispensation.43 Minerals have been removed from the private sphere44 and new public law powers are the only form in which minerals can be exploited. Commentators on the MPRDA all concur that the viewpoint that common law mineral rights are no more, and this has been confirmed in both Agri SA v The Minister(Agri SA)45 and De Beers v Ataqua Mining46. Hartzenberg J in Agri SA described all common law rights as having disappeared into the air, as though they were extinguished.47 Although there is some consensus of the effect of custodianship, the relevant issue still at large is whether the entitlement to exploit minerals has been vested with the state.

39 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 125 40 Amongst other powers 41JHB municipality v Cohens trustees 1909 TS 42 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 127 43 De Beers Consolidated Mines Ltd v Ataqua Mining (Pty) Ltd and Others 3215/06) [2007] ZAFSHC 74 at par 67 44 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 125 45 Agri South Africa v Minister of Minerals and Energy; Van Rooyen v Minister of Minerals and Energy (55896/2007,10235/2008) [2009] ZAGPPHC 2 at par 16 46 3215/06) [2007] ZAFSHC 74 47 par 11

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Badenhorst and Mostert take the view that the state’s custodianship48causes the cuius est solum principle to be abrogated entirely in the context of minerals, with the result that the previous dispensation of common law mineral rights is obliterated. However they propose that this abrogation coupled with state’s new authority to grant statutory mining rights is an implicit ex lege transfer of the entitlement to exploit minerals to the state.49 The principle of nemo plus iuris is relied on, which states that no-one can transfer more rights than they possess. Consequently, the argument is that unless the entitlement to exploit minerals was transferred to the state, the state cannot profess to transfer the entitlement of exploitation.50 Furthermore, Mostert claims that no other view adequately explains where ownership of minerals vests.51 Dale takes a conflicting position and is critical of the viewpoint that the right to minerals vests with the state.52 According to Dale, when the minister exercises the power to grant new order rights, the Minister is not transferring rights but creating new statutory limited real rights with the entitlements to prospect or exploit minerals.53 The private law entitlements which existed prior to the act are abolished as they are inconsistent with the new rights created and cannot exist simultaneously with the power to create new order rights.54 Additionally Dale is of the view that the cuius est

solum rule need not be abrogated completely. Ownership of minerals will remain vested in the owner of the land, in a manner similar to a landowner who had severed his minerals.55 The holder of the statutory new order mining right will then become owner of the mineral upon it’s separation from the land. It is submitted that Dale’s argument is to be preferred with respect to the view that the entitlement of exploitation does not vest in the state, but no opinion is offered as to whether the ownership of unsevered minerals remains with the landowner as it is irrelevant to this paper.

2.2.2 Transitional Provisions

Schedule II differentiated rights into two categories: old order rights and statutory new order rights granted through the MPRDA. Old order rights were split into three categories: old order prospecting rights56 , old order

48 PJ Badenhorst, H, Mostert Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 13-3 49 PJ Badenhorst, H, Mostert ,Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 12-5 50 AJ van der Walt, Constitutional Property Law, (2005), Juta, Wetton, at 380 fn 365 51 H Mostert Perspective on Mineral Law 132 52 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 129 53 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 129 54 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 129 55 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 129 56 Item 6 and table 1 of sch II

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mining rights57 and unused old order rights.58 However, poor drafting of the transitional provisions resulted in uncertainty as to whether old order rights were a new statutory right created at the inception of the MPRDA which replaced pre-existing rights, or if they referred to rights which were in existence prior to the MPRDA coming into force.59 The source of this confusion was that the drafters of schedule II had not taken into account that the entitlements of rights to minerals were often spread amongst multiple parties in complex agreements.60

Tables 1-3 of schedule II defined which entitlements gave rise to old order rights. The holder of an old order right as defined by schedule II would have an exclusive right to the conversion of the right into new order rights.61 Furthermore, as the content of a new order right is mutually exclusive, only a single statutory right can be granted at a time in respect of a single mineral deposit. However, as the incidents of a mineral right were spread, multiple parties would have an old order right in the same mineral deposit.62 Thus a problem arises where the transitional provisions provide for multiple persons to obtain an exclusive right to apply for conversion. Badenhorst and Mostert suggest that Table 1-3 of schedule II ranks the various rights in descending order of strength.63 Hence the holder of the rights listed first will have the opportunity to apply for a new order right, and the holders of other rights will have their rights discontinue upon the lapse of the transitional period, or a rejected/successful conversion application

The problem of discontinued rights64 is manifested more visibly with respect to severed mineral rights.65 Table 1-3 of the transitional provisions, define the content of the old order right to include both the content of the agreement and the content of the relevant mineral right.66 This prevented mineral rights from being revived in the hands of the common law mineral right holder, should the old-order right terminate before the lapsing of the transitional provisions.67 Dale et al points out that the mining authorization granted under the Minerals Act

57 Item 7 and table 2 of sch II 58 Item 8 and table 3 0f sch II 59 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II 210 60 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at sch II 210; PJ Badenhorst, H Mostert Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 25-3. 61 PJ Badenhorst, H Mostert, Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 25 -5 62 PJ Badenhorst, H Mostert, Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 25-2 63 PJ Badenhorst, H Mostert, Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 25 -3 64 Rights held prior to the coming into force of the MPRDA which cannot be converted. 65 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II 210 66 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II 210 67 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II 211

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becomes an element of the old order right according to the transitional provisions. Thus, the holder of a mineral lease activated by a mining authorization at the time the MPRDA was enacted and with such mineral lease expiring before 5 year conversion opportunity terminated, would be considered to have an old order mining right. The owner of the land would be not be considered to have an old order right in terms of table 368 , therefore only the holder of the mineral lease would be able to apply for conversion.69 The conclusion therefore is that the rights before the coming into force of the MPRDA lose their content, and are recognized only in so far as they are carried into the new statutory ‘old order right’.70

The opposing and simpler view is that items 6, 7, 8 all refer to old order rights as being those rights “in force immediately before the Act took effect”.71 If old order rights are a new statutory right created by the coming into force of the MPRDA, then they cannot be in existence before the Act took effect.72 Therefore the old order right referred to by schedule II would be reference to the common-law rights held by parties prior to the MPRDA. The bundling of pre-MPRDA rights into one a new entity does not occur, it would simply be a matter of Table 1- 3 poorly describing existing mineral rights, It is submitted that this view is the correct view, as a statutory old order could not be in existence prior to the inception of the MPRDA, without giving the transitional provisions retrospective effect.

2.2.3 New regulatory framework

New order mining and prospecting rights granted by in terms of the MPRDA are heavily laden with statutory content. The general entitlements bestowed on the holder of a new order right include the right to enter the land to which the right relates, build and construct any infrastructure necessary to exercise the right, prospect or mine for their own account, and finally to remove and dispose of any mineral found.73 Taking into account that any common law rights, such as the surface rights of a land owner, inconsistent with the MPDA are abolished74 it would appear as though the new order right gives far more entitlements than the old order right holder. However new order rights do not grant any form of indefinite exclusivity that a mineral right granted.

68 Of sch II 69 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II at 212 70 See DALe please 71 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II at 212(2) 72 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durbanat sch II at 212(2) 73 MPRDA, Ss 5(3)a) - 5)3)c) 74 MPRDA, S3(1) & s4(1)

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Mining rights endure for a maximum of 30 years75 and prospecting rights for a maximum of 5 years.76 The exact lengths of the rights are determined by the Minister upon granting the rights, and the rights are extinguished upon lapsing of the time period.77

Another significant drawback of a new order right is the diminishment of security of tenure. The grant, renewal and cancellation of rights all occur as administrative acts, and as such an existing or would be right holder would have at most the protection and remedies granted by administrative law.78 The applicant and holder for a new order right, is not then solely at the mercy of the state when attempting to protect or obtain rights. The MPRDA states As long as certain requirements79 are met, the minister is obliged to grant a mining or prospecting right to the applicant. However, a new order holder also bears the risk of having their entire mining or prospecting right cancelled or suspended. The loss is far greater than that under the Minerals Act, where only the authorization to exercise the entitlement to exploitation of minerals is lost. The holder will suffer the loss of all the entire right, and all entitlements stemming from such right. Despite this risk, the MPRDA has a numerous clauses of reasons for which a mining or prospecting right is lost.80 These include the contravention of environment, health and safety standards, as well breaches of any term attached to the granting of the right. The decision to cancel or suspend a new order right can be judicially reviewed if made for a reason other than that specified in the MPRDA.81

One of the unexpressed principles of the MPRDA is the concept of "use it or lose it".82 New order prospecting rights expire if not used within 120 days83, and unused new order mining rights expire after 1 year.84 Furthermore item 6(1) of schedule II provides for unused old-order rights to expire within 1 year. This principle is consistent with the objects of the MPRDA which are to maintain the security of existing mining operations but also to redistribute access to minerals.85 Under the current scheme of mineral rights, no person can hold mineral rights solely for their value as a store of wealth.86 As a consequence of this limitation, the pool of minerals available to the state for redistribution is increased.

75 MPRDA, s23(6) 76 MPRDA, s17(6) 77 MPRDA, s56(1)a) 78 H Mostert Perspective on Mineral Law 100 79 MPRDA, ss17(1) and 23(1) 80 MPRDA, s47(1) 81 Promotion of Administrative Justice Act No 3 of 2000, ss 6)2)e)i and 6)2)e)iii) 82 H Mostert Perspective on Mineral Law at 102 83 MPRDA s19(2)b) 84 MPRDA s35 85 PJ Badenhorst, H Mostert Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton, at 25-1 86 Agri SA at par 9

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Under the common law, the holder of a mining right could not transfer such mining right as the authorization component would lapse on transfer. The statute based new order mining right granted in terms of the MPRDA is a similar mix of both the right to minerals and the authorization to exercise that right.87 In the context of the transfer of exercisable mining rights, the MPRDA does allow for an easier transfer of rights as the whole new order mining right can be transferred with the permission from the minister.88 However, one of the entitlements of the common law right to minerals was that the holder of a mining right could still alienate the underlying mineral rights, if not the authorization to exercise those rights. The unauthorized mineral rights still had value as a store of wealth,89 because they could be enforced to stop persons from extracting minerals even if they could not to allow the extraction of minerals. Therefore the coming into force of the MPRDA has replaced the entitlement of alienation of mineral rights and replaced it with a conditional entitlement to alienate mining rights that is approximately an equal right.

3 Expropriation

3.1 The Constitutional Property clause and the MPRDA

Van der Walt proposes that the change in the system of mineral rights raises both large and small issues. The large issues are whether the Constitution allows for such a large scale abolishment of private law rights and the smaller issues deal with the question of the whether and how individuals have been affected.90 The aim of this section is to investigate the smaller issue of whether an individual has suffered expropriation, but this inevitably involves some consideration of the larger issues. This is due to the effect of First National Bank,91 which requires all expropriations to be checked for constitutional compliance with the Constitution’s property clause before even considering the question of expropriation.92

Item 12 of the transitional provisions purports to regulate any expropriation claim brought about by the act, yet it declines to provide any definition of the meaning of expropriation or specific circumstances where expropriation is brought about. Furthermore, there is no certainty with regard to whether item 12 should be applied to determine if expropriation has occurred or if s 25 should be relied on directly.

87 There is no authorisation required to exercise a new order mineral right 88 MPRDA, s11 89 Agri Sa at par 9 90 van der Walt, Constitutional Property Law 384 91 2002 (7) BCLR 702 92 T Roux, “Property” in Constitutional Law of SA (2006) at 46.7

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The implicit acknowledgement of possible expropriation, should merely be seen as cue for the operation of s25. Thus, the starting point for expropriation brought about by the operation of the MPRDA should be section 25.93 Consequently, the question of whether expropriation has occurred must be considered with reference to s 25. The provision of legislative assistance will never prevent a court from testing such legislation against s 2594

First National Bank concluded that expropriation was a subset of deprivation of property, implicitly stating that all expropriations of property were also deprivations of property.95 In order to give effect to this definition the First National Bank court96 developed a formula to answer the question of expropriation. However, questions of expropriation would not arise if the underlying limitations on property were not permissible by the constitution. Therefore the formula developed also constituted a logical algorithm which tested the constitutionality of legislation stage by stage until it is found either to be a constitutionally valid expropriation or rejected as unconstitutional limitation of property.97 The investigation process shall be carried out according to the following formula, which is based on the process of the Constitutional Court in First National Bank98 but has been customized to suit this particular expropriation enquiry better.

i. Does that which is taken away or interfered with by the operation of law amount to “property” for the purposes of section 25?

ii. Has there been a deprivation of such property caused by the organ of state?

iii. If there has, is such deprivation lawful?

iv. If it is, does it amount expropriation for the purposes of section 25 (2)?

v. If it is, is the deprivation in the public interest or for a proper purpose?

vi. If it is, is there just and equitable compensation for the expropriation?

93 Agri at par 5 94 T Roux, “Property” in Constitutional Law of SA (2006) at 46.7. 95 Par 57 96 Par 45 97 T Roux, “Property” in Constitutional Law of SA (2006) at 46.1 98 First National Bank at 46; T Roux, “Property” in Constitutional Law of SA (2006) at at 46-3.

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3.2 Does that which is taken away or interfered with by the operation of law

amount to “property” for the purposes of section 25?

The classification of a right or interest as being property as contemplated by s25 (1) and (2) is the gateway into the constitutional property clause.99 Unless the right or interest in question meets this initial standard, the property clause is not triggered regardless of the arbitrariness or harshness of the law at issue.100

All property rights have their roots in existing private law roots and not from the constitution. However the First

National Bank court remarked that we should move from the view that s 25 protects the existing status quo of property rights to a public law view of property protection.101 The manner in which courts have implemented public law considerations is found more in the question of whether the right is arbitrarily deprived, rather than in determining whether the right is property in the constitutional sense. The public- private conflict in property is manifested in other part of the expropriation process.102 The First National Bank court approached this inquiry by considering the right from 2 perspectives: the object of the right and the nature of the right.

In South African Law, it is not entirely certain whether a right with minerals as its object is property in the constitutional sense. In Lebowa Mineral Trust Beneficiaries Forum v President of the Republic of South

Africa103(Lebowa), the court rejected the idea that a mineral right could have constitutional protection. The court in Lebowa104 took the view that if the Constitution was intended to protect mineral rights, such protection would be provided for expressly. In doing so, the judgement relied on the First Certification Case which reasoned that mineral rights were not fundamental human rights that do not need or deserve to be explicitly protected under the property clause. The inference made by the Lebowa is in fact the reverse of the correct inference to be made from the judgement in the First Certification case.105 The judgment should be interpreted to be understood as meaning that in the lack of any mention of specific property, it should be inferred that private property is constitutionally protected.106 The Lebowa judgement has been heavily criticised, and it is the view of most commentators that mineral rights do constitute property. Rights to land, and rights to use fall

99 Constitution of the Republic of South Africa, 1996, s25 100 T Roux, “Property” in Constitutional Law of SA (2006) at 46.3 101 First National Bank at 52 102 T Roux, “Property” in Constitutional Law of SA (2006) at 46.3 103 2002 1 BCLR 23 (T) 104 28G-H 105 Ex parte Chairperson of the Constitutional Assembly: In reCertification of the Constitution of the Republic of South Africa 1996 4 SA744 (CC) 799, par 74. 106 van der Walt, Constitutional Property Law pg 87

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are constitutionally protected, and mineral rights in their severed and unsevered form will fall into these categories.

3.3 Has there been a deprivation of such property caused by the organ of

state?

The approach of the Constitutional Court in recent case law indicates that deprivation should be given a very wide meaning.107 The court in First National Bank defined deprivation as being “any interference with the use, enjoyment or exploitation of private property involves some deprivation in respect of the person having title or right to or in the property concerned.”108 It is not necessary for something to be taken away in order for deprivation to occur.109 An interference is all that is required.

A new order mining or prospecting right is a right that is approximately equal to an old order prospecting or mining right with respect to the entitlement of exploitation. However, secondary entitlements such as alienation and the duration of the right have been diminished.110 The issue arises as to whether the limitation of these entitlements which have been stripped from the original bundle or dominium are considered to be deprivations of property rights on their own. It is a consideration as to whether the question of expropriation could arise could arise from the chipping away the entitlements of a property right (i.e. the common law mineral right).111

In Mkontwana v Nelson Mandela Metropolitan Municipality (Mkontwana)112 the constitutional court dealt with the limitation of the “right to alienate property” as a subtraction. The judgment of Jacoob J was that was an interference with an incident of a right which constitutes part of the use and enjoyment of that right under the use of enjoyment, such interference constitutes a deprivation of that right.113

Regardless of the manner in which the content of old order rights have had their entitlements modified or redistributed, the deprivation caused by the MPRDA is not to be determined by the approach of considering the effect on individual incidents of ownership. The vesting of custodianship114 in the state is the provision that extinguishes mineral and prospecting rights prior to the coming into force of the MPRDA. The Agri SA court

107 T Roux, “Property” in Constitutional Law of SA (2006) at 46.4 108 First National Bank at Par 57 109 First National Bank at 57 110 PJ Badenhorst and H Mostert, 2003(14), Stellenbosch Law Review at 397 111 van der Walt, Constitutional Property Law pg 69 112 2005 (1) (CC) 113 Mkontwana at par [33] 114 S3(1)

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declared that “Except to the extent that the transitional arrangements afford some relief to them, those rights have been extinguished by the coming into operation of the Act.” Therefore the issue of whether a right has been deprived falls to be determined by the moment at which the pre-MPRDA right is exposed to custodianship.

As discussed in 2.2.2115, there are two main theories as to how the transitional provisions protect old order rights. The first theory holds that certain rights were not ‘continued’ beyond the coming into force of the transitional provisions, and are this never received any protection from custodianship. Furthermore the continued rights were replaced with new statutory old order rights, thus continued rights were also eliminated at the inception of the MPRDA.

The remaining theory supposes that an old order right is that same right that existed prior to the MPRDA116, thus exposure to custodianship will occur only when the transitional provisions expire117, conversion occurs or the conversion application is rejected.118

The deprivation of rights to use the surface of land can be considered separately. This is only with respect to the interference of the land owner’s surface right. The surface rights of the holder of an unsevered mineral right are destroyed by custodianship. The custodianship of minerals only relates to the limitation of mineral rights, and has no bearing on a land owners right to use the surface of his land. It is the exercise of the power to grant a new order right which causes an interference with the land owners right to use the surface.119 Thus, every exercise of the minister’s power to convert and old order right modifies the legal relationship between the land owner and mineral exploitation right holder.

3.4 Is such deprivation lawful?

This particular query relates to whether the deprivation of property is arbitrary and if so, does it constitute a justifiable limitation of s 25(1). The application of the arbitrariness standard by the courts has been done

115 The discussion of the transitional provisions 116 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at sch II 212(1) 117 Items 6(8), 7(8), 8(4) 118 Items 8(3), 7(7), 6(7) 119 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban MPRDA 129

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through the use of a “thick” review of the deprivation.120 The “thick” test requires more than just a rational link between the deprivation and a legitimate public purpose, but whether there is an appropriate balance between the extent of the deprivation and the purpose sought.121 First National Bank determined that the context of the deprivation was a necessary consideration of arbitrariness, and that the term referred to something wider than mere lack of a rational connection.122 In Mkontwana the court elaborated on the balance between the deprivation and the purpose. It came to the conclusion that “the greater the extent of the deprivation the more compelling the purpose and the closer the relationship between means and ends must be.”123 In order to understand the s 25(1) test, two crucial characteristics must be understood. Firstly, that the methodology of the Constitutional Court places this consideration in a “vortex” when considering the larger issue of whether the scheme is constitutionally valid. It has the effect of obscuring the importance of other provisions.124 Secondly that the approach adopted by the courts leaves much room for judicial discretion in order balance the private and public interest in property.125

As shown above, the deprivation in question is the elimination and replacement of an entire system of mineral law. What must be considered is whether the scheme which bears such similarities to a nationalization of mineral resources should be permissible. There are two perspectives which characterize this particular relationship between means and ends: A consideration of the larger issue of whether the constitutionally of the systemic reform is permissible, and a consideration of the smaller issue of whether the effect on the individual right holder is too harsh.126

There are essentially two types of persons affected by deprivation in the MPRDA: Those who have their pre-MPRDA rights converted, and those whose pre-MPRDA rights lapse through the operation of the MPRDA. Badenhorst and Mostert 127point out that deprivation needs to be considered separately in each case as the net loss suffered by each will determine the extent of their deprivation. The individual with converted rights would argue that the diminishment of their rights and the lack of security in tenure is an unreasonable imposition of property.128 Those who have lost their rights entirely would argue that it is a severe and excessive deprivation, placing the burdens of the state on their shoulders129. However, the individual burdens

120 van der Walt, Constitutional Property Law 152 121 van der Walt, Constitutional Property Law 145 122 First National Bank at 65 123 Mkontwana at par 35 124 T Roux, “Property” in Constitutional Law of SA (2006) at 46.5 125 T Roux, “Property” in Constitutional Law of SA (2006) at 46.5 126 van der Walt, Constitutional Property Law 391 127 PJ Badenhorst and H Mostert, 2004(15), Stellenbosch Law Review 48-49 128 PJ Badenhorst and H Mostert, 2004(15), Stellenbosch Law Review 48-49 129 van der Walt, Constitutional Property Law 392

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by themselves are not sufficient to make the scheme unconstitutional, and the right to compensation mitigates against individual claims.130 If no compensation is available to an individual who loses the entirety of their mineral

Van der Walt offers the opinion that such wide sweeping change is permissible as long as the purpose of such reform is constitutionally legitimate.131 The MPRDA seeks to effect more equitable access to a vital natural resource as well effect socio-economic upliftment.132 The mere fact that it removed minerals from the private sphere of ownership is not sufficient to render the transformation irrational or unlawful.

3.5 Does it amount to expropriation for the purposes of section 25 (2)?

This particular query is driven by the need to distinguish expropriation and deprivation, as compensation is only available to expropriation of property and not deprivation of property.133 This merely allows for the deprivation to be defined as an expropriation, it does not add anything to the legitimacy of the expropriation. However, as all expropriations are now subspecies of deprivation134, that distinction is no longer clear. Indeed the only clear distinguishing feature offered by First National Bank appears to be the obligation to compensate. It has been suggested that the key distinction between expropriation and deprivation is that expropriation requires that there be an appropriation of rights by the state in addition to the deprivation of property.135 Case law has yet to determine the exact nature of this appropriation.

3.5.1 Original and derivative acquisition

Expropriation has always been considered to be a form of original acquisition. That is to say that it involved not only the appropriation of a right, but the “abatement or extinction of … any other existing right which is inconsistent with the appropriated right.”136 The implications are that the i) state does not transfer the old right, ii) it created a new right free of defect, and iii) as a consequence of the creation of this new right, the old right is extinguished. However, it has not yet been made clear to what extent the Constitution really supports the notion of expropriation as a mode of original acquisition. The lack of identifying characteristics requires that sources from beyond the constitution be looked at in order to navigate the grey area between the two

130 van der Walt, Constitutional Property Law 387 131 van der Walt, Constitutional Property Law 384 132 van der Walt, Constitutional Property Law 391 133 Constitution of the Republic of South Africa,1996 S25(4) 134 First National Bank at par 57 135 van der Walt, Constitutional Property Law 189 136 Beckenstrater v Sand Irrigation Board 1964 (4) SA 510 (T) 515A

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concepts.137 However, in interpreting the meaning of expropriation in the constitutional sense, one must be wary of using pre-constitutional case law138. The partial definition139 offered by the courts makes the issue of expropriation by the MPRDA more problematic, as there are multiple permutations of the manner in which expropriation occurs.

Dale proposes that it is the power of the minister to grant new rights which constitutes the expropriation of old order rights.140 This is based on the premise that expropriation in the constitutional sense occurs as original acquisition. The state derives its new power to grant exploitation and prospecting rights as a consequence of the destruction of the old order rights held by the individual.141 The simplistic view that expropriation does not occur until another party has been granted a new order right does not arise, unless it is accepted that expropriation occurs through transfer or derivative acquisition142. Acceptance of that premise necessitates the conclusion that the same right or entitlement which was lost must be appropriated. Van der Walt supports the notion that the state appropriates through original acquisition, reasoning that expropriations are unilateral acts, whilst transfer is based on a bilateral relationship. It is submitted that the view proposed by Dale, in which the acquisition by the minister of the power to grant new rights completes the expropriation, is the most accurate description of expropriation.

3.5.2 Expropriation if new order rights are pre-MPRDA rights

This juncture is an appropriate place to point out the difference between rights that expire through conversion and rights that expire due to other reasons (e.g. rejection / non-application). The conversion of an old order right143 will cause the deprivation of that old order right to occur at the moment of conversion. In truth, there is no real conversion as old-order rights are destroyed and replaced with new order rights.144 If expropriation occurs, it will occur at this moment in time. The new order right granted by the minister is no more than part of

137 van der Walt, Constitutional Property Law 188 138 First National Bank at par 59 139 van der Walt, Constitutional Property Law 188 140 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban MPRDA 127 141MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban MPRDA 128 142 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban MPRDA 127 143 An old order right being either a new statutory right or a Pre MPRDA right 144 Agri SA at par [17]

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the compensation offered by the minister to mitigate145 against an expropriation claim, it does not affect the appropriation of rights.

The expiry of an old order right through the lapsing of the conversion period has as its moment of deprivation the point at which the period lapses. In this case expropriation may occur if original acquisition is accepted, or upon the granting of a new order right, if transfer is accepted. The right to compensation which will arise is not mitigated by the grant of a new order right.

3.5.3 Expropriation where old order rights are new statutory rights

An important consideration which remains is that the above view only deals with the expropriation of old order rights as a pre-MPRDA right in force before transitional provisions came into force. However as discussed earlier,146 an old order right can be interpreted as a new statutory right. If this were the case, the obliteration of an older order right through conversion or lapsing would not constitute a deprivation of property. As mentioned above, deprivation would occur at the inception of the act.147The minister’s power to create new order rights148 and “convert” old order rights would still be relevant with respect to having the consequence of terminating the old right.

3.5.4 Expropriation where the entitlement of exploitation vests in the state

If Badenhorst and Mostert are correct in claiming that the entitlement to exploit or prospect minerals vests in the state as a result of custodianship149, then we need not consider the nature of expropriation in the constitutional sense. The right to exploit or prospect which is destroyed becomes the very same right which is vested in the state upon deprivation. Therefore the moment of deprivation will always be the moment of expropriation. It is not necessary to consider whether original acquisition of property is part of expropriation as two new rights are created150: The Minister’s s 3(2) powers and the entitlement to exploit minerals and prospect. The creation of the former right is sufficient to constitute expropriation for original acquisition and the creation of the latter for is sufficient to constitute expropriation for derivative acquisition.

145 Agri SA at par [17] 146 Chp 2.2.2 transitional provisions ; MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban, sch II 212 147 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212 148 S3(2) MPRDA 149 Chp 2.2.2 transitional provisions 150 The Minister’s s 3(2) powers and the entitlement to exploit minerals and prospect.

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3.6 Is the deprivation in the public interest or for a public purpose?

The exact wording of s 25(a)2 requires that the expropriation and not the deprivation of property be in the public interest or for a proper purpose, yet the FNB court chose to apply these requirements to the deprivation. Roux suggests that the expropriation should be preferred at this late stage of the enquiry, but that as all expropriations are deprivations, the use of the concept of deprivation is not entirely incorrect151. However, expropriation in terms of the MPRDA is a special case where the rights appropriated may not the same as the rights deprived152. The effect is that this particular enquiry will differ slightly according whether expropriation or deprivation is tested, and therefore the lead of the FNB court will be preferred in this paper.

Regard must be had to s 25(4)a) of the Constitution, which states that the public interest shall include “equitable access” to natural resources. Clearly, mineral resources fall under natural resources, thus the remaining question is whether an effect of the deprivation caused by the MPRDA is to promote such access in addition to other public interest benefits of the MPRDA. The intention of the MPRDA, was to fulfill the State’s obligation to mineral reform and promote the interests of the previously disadvantaged by Apartheid.153 It is submitted that the effect of the MPRDA is sufficiently close to its aim that the deprivation caused by mineral reform does fall under the public interest.

4 Compensation

Compensation is actually the next step of the Expropriation of process and not a separated enquiry. However it is dealt with separately as it is a lengthy consideration which has a number of unique issues.

4.1 Constitution and Just and Equitable compensation in general

“The meaning of section 25 has to be determined, in each specific case, within an interpretative framework that takes due cognisance of the inevitable tensions which characterize the operation of the property clause. This tension between individual rights and social responsibilities has to be the guiding principle in terms of which the section is analysed, interpreted and applied in every individual case.” 154

151 T Roux, “Property” in Constitutional Law of SA (2006) 46.1 152 Some incidents of ownership were deprived but not may not have been appropriated. 153 s2 MPRDA 154 First National Bank at par 50

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The above declaration by the FNB155 court above provides the character and the purpose of the property clause. It is essential that at some point in the investigation there must be a balancing of individual and public interests in property. The issue that arises however is where to place this balancing in the expropriation process. The approach of the courts has been to find this balance in the compensation enquiry of the process. In Du Toit v The Minister of Transport(Du Toit)156 the Constitutional Court took the approach of reducing the market value of a private individual’s loss in order to promote the public’s interest in the expropriation. Van der Walt agrees with notion that the balance between private and public interest must occur at the compensation phase157 if not with the methods of the Du Toit Court158.

Section 25 (8) complicates the issue of balancing further by providing that “no provision of this section may impede the state from taking legislative…measures to achieve land, water and related reform, in order to redress past discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of s 36 (1).” The FNB court did not have to consider the consequences of this provision on the formulation of the expropriation enquiry as the case at hand did not relate to any type of reform”. However, as shall be shown below, it would probably be superfluous159 to the formulation of the true algorithm of FNB when a court determines expropriation or constitutional validity; as it is “neither adding to nor subtracting from the substance of the property right” The first consideration is to determine the whether the reform of mineral law by the MPRDA can be considered a legislative measure designed to achieve “related reform”. It would seem that the purpose of s 25 (8) is to assist with the reform of access to natural resources160, as that is the common heading under which both listed items fall. Item 12(3)(c) of Schedule II, requires that s 25(8) be considered when calculating compensation, indicating that from viewpoint of the transitional provisions mineral reform falls under related reform. The abundant criticism of s 25(8)161 reveals that it is almost redundant to both the property clause and the expropriation enquiry. There appears to be no logical application of s 25(8) that is not already dealt with by the limitation clause.162 There can be no arbitrary deprivation of property or expropriation without proper purpose or public interest without conflicting with s 36. 163 The main flaw in s 25(8) is that the departure from the obligation to pay “just and equitable compensation” or from any other

155 First National Bank at par 42 156 2005 (11) BCLR 1053 (CC) 157 van der Walt, Constitutional Property Law 273 158 van der Walt, Constitutional Property Law 278-279 159 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212 160 Pienaar & Brickhill, “Land” in Constitutional Law of SA at 48.1 161 De Waal,Bill of Rights, 565 162 Constitution of The Republic of South Africa, 1996, s36 163 van der Walt, Constitutional Property Law 393

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requirement is not possible, unless such departure is consistent with the limitation clause. The result is that any departure from s 25 could have been justified according to s 36, regardless of whether s 25(8) was enacted or not.164 The only purpose it could have is to reassure the state that they have the power to reform access to natural resources165, and possibly to influence the “spirit of the bill of rights166” so as to alter the balance between private and public interest in property towards the latter.

4.2 The Constitutional Validity and Applicability of Item 12 in the Context of

Compensation

Much has been said over whether item 12 of schedule II167 goes too far in attempting to regulate expropriation, especially as in some cases it may result to the infringement of the entitlement to just and equitable compensation. The first issue with to be dealt with is the extent to which item 12 is mandatory, and if it is possible to bypass its provisions. Recall that the First National Bank court took the approach that the expropriation enquiry was grounded in the constitution, and that legislation could not alter this position.168 However in Du Toit v Minister of Transport169 the constitutional court came to the conclusion that that legislation which provided for the calculation of compensation was applicable. Therefore the issue arises as to whether item 12 of schedule II must be followed in order to claim compensation or whether there are two routes to compensation. This inquiry will mainly be determined with respect to whether item 12 is to be interpreted as being restrictive or as enabling.

Item 12(1) provides that “Any person who can prove that his or her property has been expropriated in terms of any provision of this Act may claim compensation from the State”; and must be read together with reg 82 (6A) which provides that: “A claimant may not issue legal proceedings against the Minister in respect of the determination or payment of compensation for an expropriation contemplated in item 12(1)” unless a claim has been correctly lodged with the regional manager within the prescribed time period.

Clearly if Item 12(1) is interpreted to mean that any claim for compensation is a claim utilising the provision of item 12(1), then there can be no doubt that reg 82) 6A) is a restriction of s 25(2), and intends to delay access to court. However if item 12(1) is interpreted as merely being the opportunity to start the administrative process

164 van der Walt, Constitutional Property Law 394 165 De Waal,Bill of Rights, 565 166 Constitution of The Republic of South Africa, 1996, s39 167 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212 (7) 168 First National Bank at par 57 169 Du Toit at par 38

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of obtaining compensation, then reg 82) 6A) is not restrictive. It should be interpreted as a measure to prevent a party which has begun the administrative route from prematurely opting for the judicial determination rather than agreement with the State. This administrative option provides an opportunity for claimant to obtain compensation through agreement. Furthermore item12 (5) prevents prescription from running, a benefit not available to those opting out of the administrative option.

In deciding between the two options one must consider Hartzenberg J’s final words in Agri SA: “What item 12 of the schedule allows a claimant to do is to assert that he has been expropriated and to prove it in a court of law”.170 Item 12(1) could be taken to mean that the claimant can assert their rights, or to prescribe the manner in which expropriation can be claimed. Dale remarks that item 12 seems to have been created as an obstacle to compensation, rather than as a provision which supports the Bill of Rights.171 It is submitted that the constitution requires that legislation be interpreted so as to promote the Bill of Rights, and that the liberal interpretation should be preferred as it better protects the property clause and direct court access.

However clearly this view is in the minority, as both Dale et al172 and Grobler173 are of the view that item 12 should be used. Furthermore, item 12 must still be considered as a valid alternative approach under the liberal interpretation, thus a consideration of its validity and operations follow. Those provisions and regulations which restrict compensation claims must be considered to be reasonable and justifiable limitations on property.

Item 12(2) of schedule II provides for a number of requirements to be met before an expropriation claim is made in terms of item 12(1). These requirements take the form of submissions which provide certain information to the state such as the market value of the property174, the extent and nature of any loss175, as well as the history176 and current use177 of the property. Dale et al comments that some of the information required, such as the market value of a mineral right, required is difficult to ascertain.178 Furthermore, Dale points out that it would be unconstitutional to place further requirements to be met in order to obtain

170 Agri SA at par 22 171 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212(7) 172 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212(1-30) 173 G Grobler, De Rebus, (Sep 2009) 174 Item 12(2)f) 175 Item 12(2)a) 176 Item 12(2)d) 177 Item 12(2)b) 178 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212(7)

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compensation, as the right to compensation is granted by s 25(2) b) of the Constitution.179 Consequently, item 12(2) must be seen as directory and not mandatory. Dale is correct in claiming that there should be no further requirements in order to obtain compensation. However, in claiming compensation from the courts, the law of civil procedure will require the claimant to provide evidence of their claim. Furthermore many of the submission required by item 12(2) would are factors that s 25(3) of the Constitution obliges a court to consider. For these reasons, it would not be unreasonable for such information to be required before making a claim. Furthermore clearly the definition of property would be wide enough to include prospecting and mineral rights180 or the entirety of item 12 would be redundant.

The principle of reg 82A)1) is that a party must claim compensation before 30 April 2011 or within a year of becoming aware of the expropriation. This is not a harsh provision, as prescription would have ordinarily extinguished all claims by 30 April 2012, 3 years after old order mining rights lapsed on 1 April 2009. However item 12(5) prevents prescription from running from the date of expropriation, which could have been as early of 1 May 2004. Prescription would only begin to run again in those circumstances when claimant becomes able to institute legal proceedings. Therefore the director general has refused the claim and there is no appeal possible181, the minister has denied the claim, or 180 days after the minister has upheld the claim but not concluded an agreement for compensation. If Item 12 and reg 82)A were mandatory procedures they would suspend direct access to court. The procedures require for claimants to submit claims, and wait for them to be adjudicated by the Director-General before instituting legal proceedings. However, the fact that reg 82A) does allow for any applicant to eventually obtain the opportunity to have the determination of whether compensation occurs, and the quantum of compensation decided by the courts, means that it does not constitute an overly harsh limitation of s 31 of the Constitution. Indeed Hartzenberg J was of the opinion that the passing of reg 82)A allowed for item 12 to be constitutionally permissible. 182

The powers granted to the minister has effected two sets of legal rights: The holders of old order mining and prospecting rights through the structure of the act183, along with the “land owners and lawful occupiers184” through the exercise of powers in the act.185 Section 54 is intended to deal with the conflict between the

179 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212(7) 180 G Grobler, De Rebus, (Sep 2009) pg 1 181 G Grobler, De Rebus, (Sep 2009) pg 4 and item 12(5) 182 Agri SA at par 22 183 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban MPRDA 127 184 MPRDA, s 54. Hereinafter referred to as holders of surface rights 185 Dale MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban at MPRDA 129

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holders of surface rights and the holders of new order rights, including the compensation granted to an the holder of the surface right.186 However in the event of conversion of rights, the content of the new right to enter land for the purpose of extracting minerals may differ from what had been agreed upon severance of the mineral right187, or may constitute an entirely new encroachment upon surface rights in the context of unsevered minerals prior to the enactment of the MPRDA. In this circumstance item 12 of schedule II should be considered rather than s 54188 when compensation is being determined for the expropriation of property rights.

4.3 The Calculation of Compensation

The approach of any court when determining compensation will be to determine what is just and equitable, regardless of whether item 12 applies. Item 12(3) clearly implies that that the aim of the court must be to determine what is just and equitable. However, item 12(3) also supplies additional factors to be considered. If the consideration of these factors would lead to a different outcome, then the question of whether item 12(3) is a reasonable limitation on s 25(3) would arise.189It is submitted, that that situation does not arise. The considerations in items12 (3)(a)-(c) are all relevant to transformation of the mineral sector and thus to the public interest190.

The Du Toit court utilized a two stage market value centered approach in the calculation of compensation for the expropriation of property rights191. This approach required the court to first calculate the market value of the property expropriated according to the applicable law and then to determine whether that value is within the range that is just and equitable according to the relevant circumstances.192 This approach is somewhat inflexible and may not entirely suitable. The payment of the full market value will most likely prevent the state from providing equitable access to mineral wealth. The approach of Khumalo and Others v Potgieter and Others193 should be preferred. In this case the court first determined the market value, and then adjusted it to take into account relevant circumstances.194 Dale et also favours this approach but warns that compensation

186 S54(4) 187 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban MPRDA 129 188 Moster,Mendy,Badenhorst LAWSA 18 par 87 189 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212(11) 190 S 25(4)a) places reform of access to natural resources as being under the public interest for the purposes of the property clause. 191 Du Toit dealt with the calculation of compensation for expropriation of gravel and the use of land. 192 Du Toit at par 33 193 [2000] 2 All SA 456 194 Par 93

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should not be adjusted downwards so as to make the individual bear the burden of reform. Such a result would hardly be equitable.

The issue of determining market value post-MPRDA becomes difficult. The act has destroyed the entire market for market for mineral rights. In Kangra Holdings vs Minister of Water Affairs195 the court defined market value for an unsellable commodity as being the value if commodity could attract buyers. Despite this difficulty, it must always be kept in mind that determining market value would be primarily a factual issue, and not one of legal rules.196

Item 12(3)d) and reg 82A) 3) might have an effect on compensation due to those that have converted their pre-MPRDA rights. Item 12(3)d) refers to any continued benefit received from the property, and reg 82A) 3) requires the claimant to describe difference in rights before and after the conversion. It would appear as though the roughly equal value of new and old order rights is intended to be a consideration in calculating compensation

An unmentioned relevant circumstance is the failure of a right holder to apply for conversion. The Agri SA197 court mentioned that such a failure need not necessarily count against the expropriated individual. The application process is quite costly and may not be feasible for smaller enterprises or those who wish to utilize the surface of land rather than the mineral deposits.

5 Concluding Remarks

The radical reform of mineral law would appear to have performed a complete transformation of the legal underpinnings of the mining sector. However, private persons remain as the actors of the new order, and the state merely controls the manner of their operations. The significant change is that the state now has greater to decide who those private persons will be.

The transformation as a whole appears to be robust enough to be constitutionally permissible. There is a rational basis for the deprivation, as well as a legitimate purpose. However the states assumption of new powers have naturally had implications for certain parties, and the constitution does provide some recourse for such persons. There are still too many open questions surrounding the MPRDA and s 25 to be entirely sure of

195 1998 (4) SA 330 (SCA) 196 MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum Law (2005), Lexis Nexis Butterworths , Durban sch II 212(14) 197 Par 14

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the manner of expropriation, yet it appears that it is highly likely that some that some form of expropriation has occurred.

The good news for such persons is that the route to compensation is very much available. Although item 12 does delay the compensation process, it is in many ways more beneficial than an obstacle. The delay in prescription as well as the opportunity for court determined compensation means it may well be the preferred route. The question of compensation is likely to favor the public interest rather than the private interest. Mineral reform is an important and valid constitutional goal, and courts are unlikely to impede such reform by granting the full value of rights.

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Bibliography

Legislation

Minerals and Resources Petroleum Development Act Minerals Act No 28 of 2002 Mining rights Act no 20 of 1967 Promotion of Administrative Justice Act No 3 of 2000

Case law

First National Bank of SA Limited t/a Wesbank v Commissioner for the South African Revenue Services and Another; First National Bank of SA Limited t/a Wesbank v Minister of Finance 2002 (7) BCLR 702 ;

Neebe v Registrar of Mining Rights 1902 TS 65 at 85 Agri South Africa v Minister of Minerals and Energy; Van Rooyen v Minister of Minerals and Energy

(55896/2007,10235/2008) [2009] ZAGPPHC 2 De Beers Consolidated Mines Ltd v Ataqua Mining (Pty) Ltd and Others 3215/06) [2007] ZAFSHC 74 Mkontwana v Nelson Mandela Metropolitan Municipality 2005 (1) (CC) JHB municipality v Cohens trustees 1909 TS Ex parte Chairperson of the Constitutional Assembly: In reCertification of the Constitution of the Republic of

South Africa 1996 4 SA744 (CC) 799 Beckenstrater v Sand Irrigation Board 1964 (4) SA 510 (T) 515A Du Toit v Minister of Transport 2005 (11) BCLR 1053 (CC)

Articles

PJ Badenhorst and H Mostert, “Revisiting The Transitional Arrangements of The Mineral and Petroleum Resources Development Act 28 of 2002 and the Constitutional Property Clause: An Analysis in Two Parts – Part One: Nature and Content of Rights Acknowledged by The Revised Transitional Provisions”, 2003(14), Stellenbosch Law Review, 377

PJ Badenhorst and H Mostert, “Revisiting The Transitional Arrangements of The Mineral and Petroleum Resources Development Act 28 of 2002 and the Constitutional Property Clause: An Analysis in Two Parts- Part Two: Constitutionality of the Minerals and Petroleum Resources Development Act’s Transitional Provisions” 2004(15), Stellenbosch Law Review, 22

Books

BLS Franklin and M Kaplan, Mining and Mineral Laws of South Africa, (1982), Butterworths ,Durban M Kaplan and MO Dale, A Guide to the Minerals Act 1991, (1992) , Butterworths, Durban MO Dale, L Bekker, FJ Bashall, M Chaskalson, C Dixon, GL Grobler, South African Mineral and Petroleum

Law (2005), Lexis Nexis Butterworths , Durban AJ van der Walt, Constitutional Property Law, (2005), Juta, Wetton I Currie & J De Waal, Bill of Rights Handbook, (2005), Juta, Landsdowne H Mostert Perspective on Mineral Law (manuscript in publication – copy on file with author)

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PJ Badenhorst, H Mostert Mineral and Petroleum Law in South Africa, (2004), Juta, Wetton S Woolman, M Chaskalson, T Roux, Klaaren, M Bishop Constitutional law of South Africa (2006), Juta, Cape

Town PJ Bdenhorst, H Mostert , Mendy “Minerals and Petroleum” in LAWSA volume 18 (2007) para 87

Websites

G Grobler, “Expropriation of Mineral Rights”,(Sep 2009) De Rebus, http://www.derebus.org.za/nxt/gateway.dll?f=templates&fn=default.htm&vid=derebus:10.1048/enu(Accessed 20.09.2009)

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