MINING, LAND, AND COMMUNITY IN COMMUNAL AREAS II: MINERAL RIGHTS AND LAND RIGHTS

In my introductory brief, I provided an overview of how issues relating to mineral and land rights and community governance undermine individuals and communities in interactions with mining companies. I argue that future hardship can be prevented by keeping the basic principle that mining must benefit South Africans while changing the structure and, most importantly, the application of some of the law. In this brief, I delve more deeply into the issue of mineral rights and land rights.

 

Introduction

As I described in my introductory brief, the structure of mineral rights in South Africa was designed to prevent private landowners from blocking mining development that has potential to benefit the country as a whole. The Mineral and Petroleum Resources Development Act (“MPRDA”)[1] eliminated private ownership of mineral rights and vested ownership of minerals and petroleum in the people of South Africa under the custodianship of the state.

Under the MPRDA, mining and production rights are governed by state permits. They depend on extracting resources within a specified period of time (not more than 30 years), which prevents the rights holder from sitting on mineral resources without developing them (“sterilising” the mineral right). The rights are “use it or lose it”; they are lost if minerals are not extracted within the specified time period.

Unfortunately, and ironically given the policy objective of empowering black South Africans in the new democracy, the MPRDA often disproportionately disadvantages rural black communities. This happens because of: 1) an emphasis on commercial value as adequate compensation that compensates individual landholders better than less mobile communal owners; 2) inadequate barriers to start mining or prospecting before negotiating compensation, which undermines the negotiating position of surface owners and occupiers; 3) additional problems that arise in suing for damages in negligence or nuisance.

The relative insecurity of tenure with communal land ownership in traditional communities can compound these problems, but I address it as an issue of community governance in my third and final brief.

The point of remedying these problems is not to hamper mineral development that benefits South Africans. It is to prevent some citizens from bearing an unfairly disproportionate burden for that benefit.

 

Defining Adequate Compensation

The Land Claims Court re-emphasized in early July that “just and equitable” compensation for property under Section 25 of the Constitution requires considering “all relevant circumstances”, not only market value. Acting Judge Tembeka Ngcukaitobi insisted that although market value is important, it has played “a disproportionately significant role”.[2]

Market value works well as a proxy for “just and equitable” compensation for individual, freehold landowners who can use the payment to relocate to land of equal value. Often in rural South Africa, this still means white landowners. In contrast, rethinking compensation to include other considerations is very important for many black rural communities, the communities that the MPRDA and many other new laws seek to protect and to benefit. These communities often have a different relationship with land in which interpersonal relationships are structured around land and in which they occupy land on a communal basis. Communal landholders are less mobile in that they cannot easily recreate their relationship to land on a new plot somewhere else. Moreover, land required for mining is often the land of only a segment of a community. If relocated, this segment is ripped away from their community structure to another context.

Judge Ngcukaitobi made his assertion to justify lowering compensation below market value, not to increase compensation. He was ruling on a situation in which landowners had bought a farm in 1999, knowing that it was the subject of a restitution claim, and sought compensation now at a dramatically inflated market value. Nevertheless, other cases have affirmed that compensation may be increased above market value. For example, in Haakdoornbult Boerdery CC and Others v Mphela and Others, the Supreme Court of Appeal insisted:

The purpose of giving fair compensation is to put the dispossessed, insofar as money can do it, in the same position as if the land had not been taken. Fair compensation is not always the same as the market value of the property taken; it is but one of the items which must be taken into account when determining what would be fair compensation. Because of important structural and politico-cultural reasons indigenous people suffer disproportionately when displaced and Western concepts of expropriation and compensation are not always suitable when dealing with community held tribal land. A wider range of socially relevant factors should consequently be taken into account, such as resettlement costs and, in appropriate circumstances, solace for emotional distress.[3]

These cases deal with compensation under the land restitution process and its associated legislation and constitutional guarantees. However, the MPRDA is, ostensibly, similarly aimed at addressing historical inequalities and redressing past wrongs as they manifest in unequal land (and therefore mineral ownership) distribution. Accordingly, a similar approach to compensation should apply. Indeed, the Constitutional Court’s caution in the land restitution process that the burden on South African taxpayers needs to be taken into consideration when determining compensation[4] does not apply. This is because, under the MPRDA, private companies bear the bulk of the burden of paying compensation.

Lawyers at Richard Spoor Inc., who deal with many high-profile cases related to mining and land settlements with traditional communities[5], describe a number of disproportionately negative impacts from the disruption of surface rights. A particularly disturbing one is a dramatic decline in the status of a woman if she loses the ability to contribute to her community by helping to work land. Loss of livelihood from the disruption of community agricultural initiatives is another.

Researchers at the Institute for Poverty, Land and Agrarian Studies (based at the University of the Western Cape) have proposed starting work on quantifying the costs of resources not usually included in economic analysis to improve analysis of the costs and benefits of mining.[6] These include wild biological products and supporting ecosystems. Charlie M. Shackleton’s work on “non-timber forest products” provides an important contribution. He estimates that in certain areas, these products - such as seeds, resins, bulbs, bushmeat, mushrooms, insects, bark, and thatch grass - contribute the equivalent of billions of Rands to communities that use and trade them.[7]

The recent, acclaimed documentary on the Xolobeni dispute about mining on the Wild Coast, The Shore Break, highlights tension in that region between groups who believe that their agricultural traditions are essential to their long term stability and well-being and groups who believe that mining is the key to greater prosperity.[8]

 

Negotiating Position of Surface Owners and Occupiers

Unfortunately, although holders of mining and production rights are required to negotiate with landowners and occupiers about access to the land, barriers to beginning mining or prospecting before negotiations have concluded are few and weak. This is true even without the added problem of structurally weak land rights for people in former Homelands (which is now communal land) still governed by the Interim Protection of Informal Land Rights Act of 1996, which was meant to be a temporary piece of legislation.[9] They are significantly weaker than protections in countries like Canada and Australia, even though those countries emphasize mining as important to their national economies and also subscribe to the traditional common law rule that mineral rights trump land rights.

The problem with this is that companies can, and often do, continue to mine while negotiating, which gradually undermines the negotiating position of surface owners and occupiers.

Section 10 of the MPRDA requires applicants for mining or prospecting rights to notify surface owners and occupiers and allows the surface rights holders to object to the Minister of Minerals and Energy. Various provisions, including Section 16(4)(b) and Section 23(4)(b), require the same for the holder of a prospecting or mining right. An amendment that came into effect in 2013 removed Section 5(4), which had emphasized the requirement to make relevant environmental management arrangements and to notify and consult surface owners. In Bengwenyama Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and Others, the Constitutional Court emphasized the importance of “good faith” consultations attempting to reach an accommodation and “full information” when notifying surface owners and occupiers.[10]

Section 54 provides for compensation to be negotiated in situations in which surface rights holders try to prevent a prospecting or mining rights holder from entering the land and the Minister decides that the surface owner, “has suffered or is likely to suffer loss or damage as a result of the reconnaissance, prospecting or mining operations”. If the parties cannot agree on compensation, the matter goes to arbitration under the Arbitration Act, 1965 (Act No. 42 of 1965) or to a competent court. Nowhere does this section provide for a surface rights holder to apply to stop prospecting or mining while negotiations take place.

In contrast, laws in Canada and Australia have provisions that can stop mining or prospecting until compensation has been negotiated. In both countries, mineral law is governed by province, and each province has its own laws about mining and mineral rights. In Canada, Section 79 of Ontario’s Mining Act, for example, is similar to Section 54 of the MRPDA except that Section 79(5) allows the Mining and Lands Commissioner to prohibit further prospecting, staking, or working until compensation is determined and paid or secured. Section 79(6) affirms that, except by leave of the Commissioner, no further prospecting, staking, or performing of work may be done after the time fixed for paying or securing compensation, unless the compensation has been paid or secured.[11]

Similarly, in Alberta, Canada, Section 20 of the Surface Rights Act provides that in the case of a dispute with a surface rights holder about access to land for mining, 80 percent of compensation agreed on for the first year of mining must be paid before entering the land. Section 25 provides a list of factors that must be considered in determining compensation. Section 12 of the Act prevents entry to extract minerals without a surface rights holder’s consent, except with a right of entry order from the Surface Rights Review Board through a process laid out in section 15.[12]

Under Western Australia’s Mining Act, the holder of a mining permit may not start any mining within a depth of 30 meters from the lowest part of the natural surface of private land unless compensation has been paid or an agreement made with the owner and occupier as to the amount, timing, and mode of compensation. Other Australian provinces have similar provisions, and most also give surface owners a veto on mining on certain types of land, usually cultivated land or land close to buildings or major improvements.[13]

What is more, protection for surface owners is arguably more important in South Africa than in either Canada or Australia. The traditional common law rule that mineral rights trump land rights might be justified by the idea that mineral rights have been ceded by a landowner or his predecessors for fair value. It is not clear that this justification holds under South Africa’s new system. Moreover, although the MPRDA afforded holders of “old order mining rights” (mining rights acquired before the MPRDA) to covert them into “new order” mining rights (rights under the MPRDA), black people living on former homelands never had this opportunity because they were not able to be holders of old order mining rights in the past.  

 

Problems with Claims in Negligence or Nuisance

Surface owners are not the only landowners or occupiers who may face undue hardship because of mining. The Bapo Ba Mogale community example from my introductory brief includes people who occupy land near mines, but not the land actually being mined. They assert that the mining causes cracks in their houses and dust that kills their crops.

The MPRDA provides no protection for this type of harm. Negligence claims often fail because negligence requires proving fault. A mining company with a proper permit and diligently trying to minimize harm does not necessarily fulfill this fault requirement, even if its operations cause harm.

Another option is to sue in nuisance, which can provide compensation for unreasonable interference with the use and enjoyment of property. The hurdle here is overcoming a defence that statutory authority allows the nuisance. This is because under the MPRDA, all mining takes place as a result of specific government authorization. The defence requires that the nuisance be the “inevitable result” of the authorization, and the party committing the nuisance bears the burden of proving inevitable result.[14] Relief for the injured party depends on how broad or narrow a view a court is willing to take in determining whether the nuisance was an “inevitable result”.

This situation is not unique to South Africa. In Canada, for example, an Aboriginal group is in the process of trying to sue Rio Tinto Alcan Inc. in nuisance for damage to reserve lands caused by water diversion. The case hinges on whether or not the defence of statutory authority bars the claim.[15]

Once again, the problem with not ensuring some form of compensation in these cases is that it forces some individuals, often historically disadvantaged individuals, to suffer an unfairly disproportionate burden.

 

Tamara Jewett
Researcher
tamara@hsf.org.za