Net Zero Lawyers Alliance

Executive summary

South Africa is a sovereign and democratic state founded on the supremacy of the Constitution of the Republic of South Africa, 1996 (Constitution) and the rule of law. Any law or conduct inconsistent with the Constitution is invalid, and the obligations imposed by it must be fulfilled. All mitigation and adaptation projects thus must be developed and operated in accordance with the Constitution and the laws that are promulgated in accordance with the framework created under it.

The Constitution enshrines the right to an environment that is not harmful to health or well-being and to have an environment that is protected, for the benefit of present and future generations. In addition to the Constitution, there are various statutes which collectively create the framework within which adaptation and mitigation projects should be developed, commissioned, operated, and closed.

The National Environmental Management Act, 1998 (“NEMA”) is the first building block of this framework within which adaptation and mitigation projects should be developed, commissioned, operated, and closed. NEMA, together with specific environmental management Acts (“SEMAs”), gives effect to the environmental rights enshrined in the Constitution. Provincial and municipal laws also reflect these legislative principles and requirements.

Second, the Constitution also protects every person's right to fair labour practices. Three primary Acts govern South African employment law: the Labour Relations Act, 1995, the Basic Conditions of Employment Act, 1997, and the Employment Equity Act, 1998.

Depending on the nature of adaptation and mitigation projects, various licences and permits may be required for the construction, operation and decommissioning of these projects under various laws. Under NEMA and the various SEMAs, an environmental authorisation (“EA”) is required prior to the commencement of certain listed activities.

In respect of the SEMAs, mitigation and adaptation projects are further regulated by a host of other resource-specific statues which each contain provisions for the responsible use and management, as well as protection, of each of their various resources.

Third, energy projects are governed by the Electricity Regulation Act, 2006 (“ERA”); the National Nuclear Regulator Act, 1999; the Mineral and Petroleum Resources Development Act, 2002 (“MPRDA”); and the Gas Act, 2001. The ERA imposes licensing or registration obligations (subject to certain exceptions) on operators of generation, transmission or distribution facilities, importers or exporters of electricity and those involved in electricity trading. If any extractive activities are likely to be undertaken, rights or permits for activities such as prospecting, mining, exploration or production may need to be obtained under the MPDRA.

Further, South Africa has implemented a carbon tax regime through the Carbon Tax Act, 2019. This is the only climate change-specific law currently in force. Informed by the "polluter pays" principle, the Carbon Tax Act imposes a tax on the carbon dioxide equivalent of greenhouse gas emissions from entities in the country that operate emission generation facilities at a combined installed capacity equal to or above the carbon tax threshold.

Once it enters into force, the Climate Change Act, 2024 (which the President signed into law in July 2024) will also regulate mitigation and adaptation projects. This Act is South Africa’s first attempt at a comprehensive piece of legislation intending to encourage the development of an effective climate change response for South Africa. The Climate Change Act imposes onerous and regulatory controls, such as mandatory carbon budgets and compliance with greenhouse gas mitigation plans.

Successful projects include the Renewable Energy Independent Power Producer Procurement Programme (“REIPPPP”). To date, over 6,000 megawatts of generation capacity across a range of technologies, primarily in wind and solar, have been procured from bidders under the REIPPPP, with the aim to add more megawatts to the nation’s electricity grid through private sector investment in renewable energy.

Section 1 - Summary of South Africa's economic wealth

a) GDP and capital wealth

According to the International Monetary Fund, South Africa's gross domestic product (“GDP”) is approximately USD 373 billion. South Africa remains a dual economy with one of the highest and most persistent inequality rates in the world, with a consumption expenditure Gini coefficient of 0.67.

b) Level of unemployment (general and youth)

The high rate of inequality impacts directly on the unemployment rate, which is high. The results of the Quarterly Labour Force Survey¹ indicate that the number of employed persons decreased by 22,000 to 16.7 million in the fourth quarter of 2023 compared to the third quarter of 2023. The number of unemployed persons increased by 46,000 to 7.9 million during the same quarter. Additionally, the number of people who were not economically active for reasons other than discouragement increased by 218,000 to 13.4 million, while discouraged work-seekers decreased by 107,000 in the fourth quarter of 2023 compared to the third quarter of 2023. This resulted in a net increase of 111,000 in the not economically active population. The above changes in employment and unemployment resulted in the official unemployment rate increasing by 0.2 of a percentage point from 31.9% in the third quarter of 2023 to 32.1% in the fourth quarter of 2023. The unemployment rate according to the expanded definition decreased by 0.1 of a percentage point to 41.1% in Q4 of 2023 compared to Q3 of 2023.²

c) Human wealth, population and education

In South Africa, high levels of wealth inequality have persisted since 1994, to the extent that 1% of the population owns 50% of the wealth.³ The value of South African households’ wealth, expressed in current prices, was ZAR 16.9 trillion at the end of the first quarter of 2023, which is 2.4% higher than at the end of the fourth quarter of 2022 and 3.4% higher than in the first quarter of 2022.⁴ South Africa's population density is low, at approximately 50 people per square kilometre. The current population of South Africa is approximately 61 million people.⁵ Inequality persists in South African education with the vast majority of South African children being exposed to poor quality education and training. With respect to education, in South Africa, 46% of 15–19 year-olds are enrolled in general upper secondary education. A further 32% are enrolled in lower secondary programmes and 5% in tertiary programmes. Although an upper secondary qualification is often the minimum attainment needed for successful labour-market participation, 50% of 25-34 year-olds in South Africa have not attained an upper secondary qualification.⁶

d) Natural wealth, including metals and minerals deposits (such as critical mineral resources, rare earth elements and green/battery minerals and metals) and other natural resources

South Africa is rich in a variety of minerals, with an estimated mineral wealth of approximately USD 2.5 trillion. In addition to diamonds and gold, the country also contains the world's biggest manganese and platinum reserves, as well as reserves of iron ore, chromium, copper, uranium, silver, beryllium, and titanium. These minerals are essential for batteries, solar panels and other green technology which will underpin the energy transition from fossil fuels to renewables.

Although no commercially exploitable deposits of petroleum have been found in South Africa, there are moderate quantities of natural gas located off the southern coast, and synthetic fuel is made from coal at two large plants in the provinces of Free State and Mpumalanga.⁷ The US Energy Information Administration reports South Africa has the eighth largest technically recoverable shale-gas resources in the world. It estimates these resources, located in the Karoo, to be 11-trillion cubic metres. There are also significant oil and gas resources at Block 3B/4B in the Orange Basin, estimated to be 4 billion barrel of oil equivalent (“BOE”).⁸

South Africa is the world’s largest producer of gold and its reserves are significant; however, production is slowly declining. Gold is a highly efficient substance that can absorb light energy. When used in solar panels, gold can produce a high-quality photovoltaic cell and is accordingly useful in the energy transition.

South Africa is also the world’s largest producer of platinum and chromium, the mining of which is becoming increasingly economically significant. Platinum is a critical mineral that is essential to the technology that produces clean hydrogen through proton exchange membrane (“PEM”) electrolysers, and the PEM technology used in fuel cell electric vehicles (“FCEVs”). Chromium makes solar panels more efficient, and the mineral is also used in wind turbines and batteries.

e) Renewable/green energy wealth (opportunities and requirements)

As mentioned, South Africa has rich reserves of minerals essential for the just energy transition. In addition, the primary sources of renewable energy in South Africa are solar, wind, hydroelectric and biomass. Currently, approximately 85% of the nation’s electricity is generated via coal-fired power stations. Despite environmental concerns, coal will continue to provide the majority of South Africa’s power for the next decade, although the share from renewables will grow rapidly. Non-hydro renewables are predicted to develop faster than coal-fired power stations, with 8.7GW of additional renewable energy capacity planned to be installed between 2023 and 2032.

Solar energy will be the primary driver of this expansion because the government has relaxed the standards for local content in solar modules in order to speed up the implementation of solar projects.⁹

South Africa also operates a Renewable Energy Independent Power Producer Procurement Programme (“REIPPPP”) for utility-scale transactions. To date, over 6,000 megawatts of generation capacity across a range of technologies, primarily in wind and solar, have been procured from bidders under the REIPPPP (although most of this generation capacity is not yet operational). The REIPPPP aims to add more megawatts to the nation’s electricity grid through private sector investment in renewable energy.¹⁰

The Department of Mineral Resources and Energy (“DMRE”) – as it then was – released the Integrated Resource Plan (“IRP”), the purpose of which, generally, is to provide a roadmap for meeting South Africa’s forecasted electricity demand, which integrates financial considerations with the country’s climate change commitments to ensure a sustainable and economically viable energy supply solution. The IRP that was formally gazetted in October 2019 (“IRP 2019”) remains applicable. However, since its publication, the energy sector has been inundated with developments and challenges that have rendered the assumptions underpinning the IRP 2019 moot, thus mandating its overdue review. The former Minister of Mineral Resources and Energy (now referred to as the Ministry of Minerals and Petroleum Resources) announced the extension of the commenting period for the draft Integrated Resource Plan 2023 (“Draft IRP”) to 23 March 2024. Of concern is that compared to the IRP 2019, it is evident that renewables comprise a much smaller component of the total energy mix leading up to 2030. Excluding private sector initiatives, the total installed capacity for solar PV has been reduced from 8,288 MW to 3,615 MW, with wind down from 17,742 MW to 4,468 MW.

The DMRE, on 7 July 2023, also published for comment the South African Renewable Energy Masterplan (“SAREM”) which seeks to harness the demand for renewable energy technologies and bring about industrial progress in the renewables sector by 2030.¹¹

f) Carbon removal or reduction wealth.

South Africa's dependence on coal as a primary source of fuel for electricity makes it one of the largest greenhouse gas (“GHG”) emitters on the African continent and the 14th largest emitter globally.¹²Its total GHG emissions (excluding forestry and other land use) increased by over 67% from 1990 to 2019. The energy sector accounted for close to 86% of the emissions in 2019 and contributed to almost 91% of the GHG emission increase over the past three decades.

With respect to the mitigation of the effects which GHG emissions have on South Africa's goals to net-zero, South Africa enacted the Carbon Tax Act (“Carbon Tax Act”) in June 2019. The Carbon Tax Act imposes a tax on direct emissions from emitters which undertake any of the activities listed in Schedule 2 to the Carbon Tax Act and which are conducted in South Africa, above the thresholds prescribed for those activities. The carbon tax is levied in terms of the Customs and Excise Act, 1964 as an environmental levy. The tax is paid to, and administered by, the South African Revenue Service (“SARS”).¹³

Statistics South Africa, Quarterly Labour Force Survey Q2: 2023, https://www.statssa.gov.za/publications/P0211/Presentation%20QLFS%20Q2%202023.pdf, accessed 5 January 2024.

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_{1. Statistics South Africa, Quarterly Labour Force Survey Q2: 2023, https://www.statssa.gov.za/publications/P0211/Presentation%20QLFS%20Q2%202023.pdf, accessed 5 January 2024.}

_{2. Ibid.}

_{3. MDPI: Wealth Inequality in South Africa: The Role of Government Policy, https://www.mdpi.com/1911- 8074/15/6/243#:~:text=In%20South%20Africa%2C%20high%20levels,a%20behavioural%20life%2Dcycle%20model, accessed 20 June 2024.}

_{4. South African Household Wealth Index, Unisa and Momentum, Q1:2023, https://retail.momentum.co.za/documents/financial- wellness/momentum-unisa-household wealth-q1-2023.pdf, accessed 5 January 2024.}

_{5. Statista, https://www.statista.com/statistics/971524/population-density-in-south-africa/#:~:text=In%202021%2C%20the%20population%20density,population%20density%20in%20South%20Africa, accessed 20 June 2024.}

_{6. OECD, South Africa: Overview of the education system (EAG 2023), https://gpseducation.oecd.org/CountryProfile?primaryCountry=ZAF&treshold=5&topic=EO.}

_{7. Britannica, https://www.britannica.com/place/South-Africa/Resources-and-power, accessed 5 January 2024.}

_{8. U.S. Energy Information Administration, South Africa, https://www.eia.gov/international/overview/country/ZAF, accessed 20 June 2024.}

_{9. Ibid, accessed 20 June 2024.}

_{10. International Trade Administration, South Africa Country Commercial Guide, https://www.trade.gov/country-commercial-guides/south- africa-energy, accessed 6 January 2024.}

_{11. South African Renewable Energy Masterplan, can be accessed here: https://pmg.org.za/call-for-comment/1324/.}

_{12. The Carbon Brief Profile: South Africa, https://www.carbonbrief.org/the-carbon-brief-profile-south-africa/, accessed 13 May 2024.}

_{13. The Carbon Tax Act 15 of 2019, can be accessed here: https://www.gov.za/sites/default/files/gcis_document/201905/4248323- 5act15of2019carbontaxact.pdf.}

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Section 2 - South Africa's Nationally Determined Contribution (NDCs)

a) Undertaking, including key dates and caveats

The most recent iteration of South Africa's Nationally Determined Contribution (“NDC”) to the United Nations Framework Convention on Climate Change (“UNFCCC”) is dated September 2021 and contains, amongst other things, South Africa’s revised emissions target. The updated NDC commits the country to an emissions range of 398–510 Mt CO₂e between 2021–2025 and 350–420 Mt CO₂e between 2026–2030.

Unlike many African countries, South Africa’s mitigation target is not expressed as encompassing both conditional and unconditional elements, however at the time that the revised NDC was submitted, the government indicated that its ability to meet the more ambitious bottom range of the trajectory would depend on the level of finance available to support the transition. The NDC prioritises the decarbonisation of the carbon-intensive electricity sector in the 2020s, followed by a deeper transition for this sector in the 2030s together with a transition in the transport sector towards low emission vehicles. According to the NDC, in the 2040s, the focus will be on the more “hard-to-mitigate sectors”.¹⁴

b) Use of net zero wealth for own target

South Africa has, so far, advanced several positive climate policies and measures:

The NDC operates alongside the Low Emission Development Strategy, 2020 (“LEDS”), which provides detail on the policies and measures the country will rely on to achieve its NDC mitigation targets. The LEDS addresses mitigation measures across the energy, industry, agriculture, forestry and other land use (“AFOLU”) and waste sectors, and seeks to facilitate “a journey towards ultimately reaching a net zero carbon economy by 2050".¹⁵

• In September 2020, Cabinet approved the appointment of the Presidential Climate Commission (“PCC”). The PCC’s mandate is formalised under the Climate Change Act, which provides that it must consist of representatives of government, organised labour, civil society and business to advise on the Republic’s climate change response, the mitigation of climate change impacts and adaptation to the effects of climate change towards the attainment of the just transition to a low-carbon and climate-resilient economy and society. It is also charged with the monitoring and evaluation of progress towards the government’s emissions reduction and adaptation goals.¹⁶

• In October 2023, South Africa's National Assembly approved the Climate Change Bill. The Climate Change Act, 2024 was subsequently signed into law in July 2024, although it will only commence on a date to be confirmed by the President. The implementation of the Act makes South Africa's NDC legally binding and requires the government to set sectoral emission targets and to allocate carbon budgets to significant GHG emitting sectors.17

• South Africa presented its Just Energy Transition Investment Plan (“JET IP”) in November 2022, which details the financing need of an amount of USD 98 billion over the ensuing five years for a sustained just energy transition. The majority of the initial offer will go to the power sector, supporting a transition away from coal and including support for impacted coal workers, with investments also in new energy vehicles, primarily battery electric vehicles, and green hydrogen.¹⁸

• South Africa is aiming to develop value chains for renewable energy and storage technologies through the SAREM with a focus on driving industrial development and creating inclusive jobs.

• In August 2021, the South African government changed the licensing threshold for new generation from 1MW to 100MW. In December 2022 it completely removed the threshold, however, such projects are still required to register with the Department of Electricity and Energy.

According to the Climate Action Tracker (“CAT”), the actions and existing policies implemented by South Africa have been regarded as insufficient against modelled domestic pathways, and it is, according to the CAT, unlikely that South Africa will meet its climate targets by 2030.¹⁹

c) Existing collaboration among countries and opportunities for future collaboration

• The board of directors of the African Development Bank Group (“the African Development Bank”) has approved a USD 1 billion guarantee program in collaboration with the UK Foreign Commonwealth and Development Office, which will allow the African Development Bank to increase its lending capacity in support of the JET IP.²⁰

• South Africa is also using the JET IP to discuss additional funding with other donors, with recent commitments from the Netherlands, Denmark, and Spain.

_{14. Climate Change Regulation, 2023, Chambers and Partners https://practiceguides.chambers.com/practice-guides/climate-change- regulation-2023/south-africa, accessed 6 January 2023.}

_{15. Ibid.}

_{16. Ibid.}

_{17. The Climate Change Bill (B9-2022), can be accessed here: https://www.parliament.gov.za/bill/2300773.}

_{18. South Africa's Just Energy Transition Investment Plan (2023-2027), can be accessed here: https://www.stateofthenation.gov.za/assets/downloads/JET%20Implementation%20Plan%202023-2027.pdf.}

_{19. The Climate Action Tracker: South Africa, as at November 2023, can be accessed here: South Africa | Climate Action Tracker.}

_{20. South Africa: African Development Bank approves $1 billion guarantee from the United Kingdom to support SA’s Just Energy Transition | African Development Bank Group (afdb.org), accessed 8 January 2024.}

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Section 3 - Examples of successful mitigation and adaptation projects in South Africa

South Africa has implemented a number of successful mitigation and adaptation projects including the following:

• In the Eastern Cape, the government embarked on a vast ecological experiment to restore huge swaths of degraded land by planting spekboom, an indigenous plant. Spekboom increases water infiltration in the ground, boosting groundwater supplies and reducing flooding. The plant also absorbs carbon dioxide (“CO₂”) faster than most other trees in dry conditions. This project, which began in 2008, has also afforded local communities with new green jobs.²¹

• A project focusing on embedding climate change into local government: in the current policy and practice of the South African government’s action on climate change, local government is regarded to be at the forefront of implementing plans and strategies. Therefore, the project aim was to support municipalities’ efforts towards transformation through skilling, training, sharing climate information for collaborative sense-making about climate change adaptation and embedding climate change adaptation into municipal planning and actions (for e.g., Integrated Development Plans). The project was piloted in Maruleng Local Municipality (“LM”), Ba-Phalaborwa LM and Mopani District Municipality (“DM”). The aim, objectives and activities were aligned with the activities of other projects directly involved with local government in the mentioned LMs and DM under the RESILIM-O program. The projects engaged the same or similar stakeholders and addressed different but complementary factors in regard to resilience building within local government.²²

• A mass solar water heater (“SWH”) rollout support in Cape Town. The project developed and launched a mass residential solar water heater programme in Cape Town, facilitated by the municipality. In November 2013, the programme was launched and was the first of its kind in the country. The work included developing motivations for political, legal, technical and financial departments within the city, development of detailed and watertight SWH service provider application, accreditation and delisting processes, designing a communications campaign and supporting the implementation thereof.²³

• The City of Cape Town is now the first metro to buy excess solar PV power from small-scale generators in exchange for municipal bill credits and cash. Key changes to policy have enabled power sellers to earn credits against their municipal bills and go beyond that to receive cash for power fed back into the grid. As of February 2024, 1,461 residential and commercial/industrial sellers benefited from the programme as part of the City’s plans to end load shedding. Municipal bills are credited automatically with the option to apply to earn cash beyond a zero balance. Businesses have been able to earn cash since June 2023, with a first applications window remaining open until 8 March 2024, for residents to also earn cash.²⁴

• A project to pioneer new urban energy access service delivery models to reduce poverty and fight climate change. This project focused on developing research and a research network with a focus on urban energy poverty; undertaking pilot implementation of alternative energy services within the municipalities of Polokwane and Cape Town; and supporting local and national integrated household energy services policy and national capacity in this area.²⁵

The South African Local Government Association (“SALGA”) renewable energy and energy efficiency strategy project. Sustainable Energy Africa (“SEA”) assisted SALGA in developing a national, SALGA-led energy efficiency and renewable energy strategy for municipalities across the country. A cornerstone of the strategy development process was the engagement and consultation with the country’s municipalities via the SALGA Provincial offices. It was clear that valuable, pioneering energy efficiency and renewable energy work is already underway within South African municipalities. The Strategy development process drew extensively on this work and experience developed by pioneering support organisations.²⁶

_{21. UNEP, 2021, 'In Pictures: How Africa is using nature to adapt to climate change', https://www.unep.org/news-and- stories/story/pictures-how-africa-using-nature-adapt-climate-change, accessed 21 May 2024.}

_{22. The details of the project can be accessed here: https://nccrd.environment.gov.za/submissions/5A36433E-F36B-1410-8C0D- 0033A331969E.}

_{23. The details of the project can be accessed here: https://nccrd.environment.gov.za/submissions/01E9423E-F36B-1410-8C10- 0033A331969E.}

_{24. IOL News, 2024, ' Businesses and households earned over R25.8 million in City of Cape Town Cash for Power programme, here’s how you can earn too', https://www.iol.co.za/news/energy/businesses-and-households-earned-over-r258-million-in-city-of-cape-town- cash-for-power-programme-heres-how-you-can-earn-too-a8da1fd4-7bde-4a4d-8917-481be9342aae, accessed 21 May 2024.}

_{25. The details of the project can be accessed here: https://nccrd.environment.gov.za/submissions/FF46433E-F36B-1410-8C11- 0033A331969E.}

_{26. The details of the project can be accessed here: https://nccrd.environment.gov.za/submissions/7448433E-F36B-1410-8C11- 0033A331969E.}

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Section 5 - Basic system and principles

Most of South African law has been codified into legislation and developed by jurisprudence. The Constitution of the Republic of South Africa, 1996 (“Constitution”) is the highest law of the land.

The South African judicial system is established by section 166 of the Constitution and is structured as follows:

• The Constitutional Court, being the highest court in South Africa on constitutional matters. It's jurisdiction to hear matters is limited to matters that are constitutional in nature and only the Constitutional Court may decide disputes between organs of state in the national or provincial sphere concerning constitutional status, powers or functions of any of those organs of state; decide on the constitutionality of any parliamentary or provincial Bill; decide on the constitutionality of any amendment to the Constitution; and decide that parliament or the President has failed to fulfil a constitutional obligation. The court functions largely as a court of appeal. The court is quorate if there are eight judges, but all matters are usually heard by eleven judges.

• The Supreme Court of Appeal (“SCA”) is the highest court in South Africa, save for constitutional matters. The SCA can hear all matters except for certain labour law and competition law matters and only deals with matters referred to it by a High Court. It is purely an appeal court. Three to five judges will hear and decide an appeal.

• The High Court is a provincial or local court that has jurisdiction to hear all matters arising within the area of that court's jurisdiction or over persons residing within the court's area of jurisdiction. There are thirteen high courts in South Africa and five specialist high courts that exercise national jurisdiction but only hear matters of a particular nature, such as the Labour Court and Labour Appeal Court, the Land Claims Court, the Competition Appeal Court, the Electoral Court and the Tax Court.

• Magistrates' Courts are lower courts and are limited in the matters they can hear by area, monetary jurisdiction and seriousness of criminal charge. They are divided into Regional courts and District courts.

National courts have jurisdiction to hear and determine judicial review applications regarding environmental protection. Section 24 of the Constitution enshrines the right to an environment that is not harmful to health or wellbeing and to have an environment that is protected, for the benefit of present and future generations, through reasonable legislative and other measures that prevent pollution and ecological degradation, promote conservation and secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social development. As environmental protections are enshrined in the Constitution, the Constitutional Court may hear matters that impact that right.

South Africa recognises three types of review: (1) review of proceedings of inferior courts; (2) review of proceedings of quasi-judicial bodies under the common law; and (3) review of proceedings of certain statutory bodies. Judicial review is concerned with legality of administrative action and is not used to secure or to substitute a decision by a judge in place of the decision of the administrator. Depending on where the review proceedings are taking place, the enabling legislation will dictate the time frames within which the review proceedings may be launched and dealt with. Under normal circumstances an applicant may only pursue judicial review proceedings after exhausting appeal mechanisms prescribed under the applicable legislation.

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Section 6 - Current legal framework for developing net zero wealth

South Africa is a constitutional democracy and the Constitution is the supreme law of the land. The Constitution enshrines the rights of all people to an environment that is not harmful to their health or wellbeing and to have that environment protected for their benefit, and the benefit of future generations.

The Constitution provides for three arms of government: the executive, the legislature, and the judiciary. There are also three tiers of government, namely national, provincial and local. Each branch and each level must, in accordance with the various provisions of the Constitution, protect and promote a healthy environment for present and future generations.

Schedule 4 of the Constitution provides that environmental matters, including, amongst others, nature conservation and pollution control, fall under the concurrent jurisdiction of the national, provincial, and local governments, meaning all levels of government can legislate over these matters, as well as monitor and implement the legislation.

a) Environmental laws

Environmental matters are a concurrent competence of national and provincial government, which means that both these tiers of government may make law. However, air pollution, water and sanitation limited to potable water supply systems and domestic wastewater and sewage disposal systems are areas also regulated at local government level. This means that local municipalities may publish local by-laws relating to these matters.

The National Environmental Management Act, 1998 (“NEMA”) is the framework national legislation which, together with so-called “specific environmental management Acts" (“SEMAs”), gives effect to the environmental rights enshrined in the Constitution. Provincial and local level laws also reflect these legislative measures.

NEMA prescribes a number of principles which regulate environmental management. These include that development must be socially, environmentally, and economically sustainable. In turn, sustainable development requires the consideration of various factors including that (i) a risk-averse and cautious approach is applied, which takes into account the limits of current knowledge about the consequences of decisions and actions; and (ii) negative impacts on the environment and on people's environmental rights be anticipated and prevented, and where they cannot be altogether prevented, are minimised and remedied. These provisions can be read to require the competent authorities to consider the impact of activities on the climate as well as the impact of climate change on the environment.

NEMA also imposes a duty of care on all persons that conduct activities which have caused or may cause pollution or environmental degradation to take steps to prevent that pollution or environmental degradation from occurring, continuing, or recurring.

Under NEMA, an environmental authorisation (“EA”) is required for the undertaking of certain listed activities, discussed in more detail below.

The SEMAs include:

1. The National Water Act, 1998 (“NWA”) which regulates water resources. Notably, Under the NWA, a person must obtain an entitlement to use water to undertake any water uses listed in section 21 of the Act. In addition, a general duty of care is imposed on all persons that conduct activities which may pollute water resources to take reasonable steps to prevent such pollution from occurring, continuing, or recurring;

2. The National Environmental Management Protected Areas Act, 2003 (“NEMPAA”) which regulates protected areas in South Africa and in some circumstances prohibits, or imposes consent requirements on, the conducting of certain activities within these areas;

3. The National Environmental Management Biodiversity Act, 2004 (“NEMBA”) which regulates biodiversity and conservation. Under NEMBA, permits are required for activities which may impact on listed threatened and protected species (“TOPS”). In addition, read together with the National Biodiversity Framework, 2009 (“NBF”), NEMBA provides a framework to coordinate and align efforts of various stakeholders in support of sustainable development and managing South Africa's biodiversity (e.g., through "biodiversity offsets" which involves setting aside land in the same or a similar ecosystem elsewhere to balance the impact of the development or project (at the cost of the developer);

4. The National Environmental Management Waste Act, 2008 (“NEMWA”) which regulates waste management and imposes licencing obligations on the conduct of certain listed waste management activities;

5. The National Environmental Management Integrated Coastal Management Act, 2008 which regulates the use of coastal areas and imposes permitting obligations on certain activities (e.g. dumping in coastal waters); and

6. The National Environmental Management Air Quality Act, 2004 (“NEMAQA”) (discussed below).

Each of these SEMAs contain provisions for the responsible use and management, as well as protection, of each of their various resources. The SEMAs enshrine the overall principles contained in NEMA and the Constitution and provide more specific implementation provisions for each resource they are designed to legislate.

Although not a SEMA, the National Forests Act, 1998 (“NFA”) also makes provision for the identification and listing of threatened and protected tree species. The NFA imposes licensing obligations on activities which impact tree TOPS.

The Department of Forestry, Fisheries, and the Environment (“DFFE”) is the national authority primarily responsible for implementing NEMA and a number of the SEMAs. In relation to mining and related activities, the DMPR is primarily responsible for implementing NEMA. Provincial and local authorities are also responsible for the implementation of certain aspects of NEMA and the SEMAs.

The Department of Water and Sanitation (“DWS”) is the competent authority in relation to the management of water resources and the implementation of the NWA.

b) Air quality-focused laws

Air quality is regulated under NEMAQA and its associated regulations. The implementation of NEMAQA is primarily conducted at local government level.

Some of the key air quality regulations published under NEMAQA include: (i) National Greenhouse Gas Emission Reporting Regulations, 2017; (ii) National Pollution Prevention Plans Regulations, 2017; (iii) National Atmospheric Emission Reporting Regulations, 2015; (iv) National Dust Control Regulations, 2013; and (v) National Ambient Air Quality Standards, 2009.

Under NEMAQA, a provisional atmospheric emission licence (“PAEL”) or atmospheric emission licence (“AEL”) is required prior to the operation of certain listed emission sources. Broadly, these activities are combustion installations; the petroleum industry; carbonisation and coal gasification; the metallurgical industry; mineral processing, storage, and handling; the organic chemicals industry; the inorganic chemicals industry; disposal of hazardous and general waste; pulp and paper manufacturing activities; and animal matter processing. An application for a PAEL or AEL must be preceded by an application for an EA under NEMA. In addition, mandatory emission standards are imposed on new and existing installations.

c) Climate change-specific law(s)

In line with its international commitments as a member of the United Nations Framework Convention on Climate Change, South Africa has implemented a carbon tax regime through the Carbon Tax Act. This is the only climate change specific law currently in force in South Africa. Informed by the “polluter pays” principle, the Carbon Tax Act imposes a tax on the CO₂ equivalent of greenhouse gas emissions. Initially, it applies only to Scope 1 emissions, but the Carbon Tax Act provides for various emission allowances. The South African Revenue Services is the responsible regulatory authority under the Carbon Tax Act.

President Cyril Ramaphosa signed the Climate Change Act, 2004 into law on 18 July 2024. Although the Act was published in the Government Gazette on 23 July 2024, it will only come into operation on a future date. The date is yet to be announced by the President. The Act does not impose specific obligations on private sector stakeholders. It however empowers the Minister of Forestry, Fisheries and the Environment (in collaboration with other members of the Cabinet) to impose certain restrictions or specific obligations on companies.

A key example is the duty placed on the Minister to publish lists of GHGs which the Minister reasonably believes cause or are likely to cause or exacerbate climate change as well as activities which emit, or has the potential to emit, one or more of these GHG. After publishing the lists, the Minister must allocate carbon budgets to companies that conduct listed activities. The carbon budgets will remain in place for at least three successive five-year periods and will specify the maximum amount of GHG that each company may emit during the first five-year period.

Once a carbon budget is allocated to a company, that company must prepare and submit a GHG mitigation plan to the Minister. The GHG mitigation plan must describe the mitigation measures that the company proposes to implement to remain within the allocated carbon budget and meet the additional process, procedural and reporting requirements which the Minister may prescribe in further regulations published under the Act.

d) Energy laws

In the context of net zero wealth, there are a number of South African energy laws of which to be aware. These include:

• the Electricity Regulation Act, 2006 (“ERA”):

The ERA establishes a national regulatory framework for the electricity supply industry. It regulates the licensing or registration of generation, transmission or distribution facilities, importers, or exporters of electricity and those involved in electricity trading. The National Energy Regulator of South Africa (“NERSA”) is the regulatory authority responsible for issuing licences under the ERA.

Although the ERA does not specifically address climate change or mention renewable energy, Schedule 2 of the ERA includes an exemption for facilities of 100 megawatts and below from the obligation to obtain a licence under the Act. This exemption primarily benefits renewable energy facilities which are economically feasible to construct and operate within the exempt MW range per facility, when compared to other generation facilities such as coal, nuclear or gas.

• the National Nuclear Regulator Act, 1999 (“NNR Act”):

The National Nuclear Regulator (NNR), as established under the NNR Act, is the authority responsible for regulating nuclear activities in South Africa. The NNR is authorised to issue nuclear authorisations for construction and operation of any nuclear installation, as well as monitor and implement the relevant measures for the protection of persons, property and the environment from the harmful effects of nuclear damage, amongst others. The National Nuclear Regulator Amendment Bill (“NNR Amendment Bill”) was introduced in the National Assembly in August 2023. The NNR Amendment Bill seeks to amend the NNR Act to (among other things) align the NNR Act with the International Atomic Energy Agency's (“IAEA”) best practices. South Africa is a member of the IAEA and a signatory to the Convention on Nuclear Safety.

• the Mineral and Petroleum Resources Development Act, 2002 (“MPRDA”):

The MPRDA regulates the extractive industries in South Africa, which includes prospecting, mining and the extraction and production of oil and gas. The Upstream Petroleum Resources Development Bill (“UPRDB”), which was passed by the National Assembly in 2021 and National Council of Provinces in April 2024, seeks to separate the regulation of petroleum resources from mineral resources, thus removing upstream oil and gas activities from the ambit of the MPRDA. The UPRDB has introduced a new licence which allows both exploration and production under one petroleum right. NERSA is the regulator under the UPRDB. The DMPR is the responsible regulatory authority under the MPRDA.

• the Gas Act, 2001 (Gas Act):

The Gas Act regulates the downstream aspects of the gas industry. In terms of the Gas Act, a person is required to be licensed and/or register with the NERSA for the importation, trade, transportation, storage, distribution, transmission, liquefication and re-gasification of gas.

f) Licensing, authorisations and permitting requirements

Depending on the nature of adaptation and mitigation projects, various licences and permits may be required for the construction, operation and decommissioning of these projects under various laws.

Under NEMA, an EA is required prior to the commencement of certain activities listed under that Act. Three listing notices have been published. By way of example, listed activities include the:

• development and operation of facilities for the storage and handling of dangerous goods above prescribed thresholds; and

• the development of facilities or infrastructure for the generation of transmission of electricity from renewable or non-renewable sources, above prescribed thresholds.

As mentioned above, the ERA imposes licensing or registration obligations (subject to certain exceptions) on operators of generation, transmission or distribution facilities, importers or exporters of electricity and those involved in electricity trading.

If any extractive activities are likely to be undertaken, rights or permits under the MPRDA may need to be obtained. These include prospecting rights, mining rights, exploration rights or production rights.

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Section 7 - Carbon Management / Mitigation law(s) in South Africa

The Carbon Tax Act came into effect on 1 June 2019. Informed by the "polluter pays" principle, the Carbon Tax Act imposes a tax on the CO₂ equivalent of greenhouse gas emissions from entities in the country that operate emission generation facilities at a combined installed capacity equal to or above the carbon tax threshold. During its first phase (1 June 2019 to 31 December 2025), it applies only to Scope 1 emitters. The second phase will take place from 2026 to 2030.

The Carbon Tax Act provides for various tax-free emission allowances ranging from 60% to 95% in the first phase. Such allowances included, amongst others:

• a basic tax-free allowance of 60 per cent for all activities;

• 10 per cent process and fugitive emissions allowance;

• A maximum 10 per cent for companies that use carbon offsets to reduce their tax liability;

• A performance allowance up to five per cent for companies that reduce the emissions intensity of their activities;

• A five per cent carbon budget allowance for complying with reporting requirements; and

• A maximum 10 per cent allowance for trade-exposed sectors.

Carbon offsets are regulated under the Carbon Tax Act and the Carbon Offset Regulations prescribing carbon offsetting in terms of section 19(c) of the Carbon Tax Act (“Regulations”).

National Treasury published the draft amendments to the Regulations on 31 July 2023 which have not yet been promulgated into law. In respect of carbon offsets, the Carbon Tax Act provides for a tax-payer to reduce its carbon tax liability in respect of a specific tax period by utilising carbon offsets, as prescribed by the Minister of Finance.²⁷Depending on the sector in which the taxpayer operates, the maximum reduction possible is 10%.²⁸

The carbon offset system starts with the approval of a specific project by the relevant project standard. Three standards are currently permitted under the Regulations, namely:

• the Clean Development Mechanism (“CDM”),

• Verified Carbon Standard (“VCS”); and

• the Gold Standard (“GS”).

Depending on the standard selected, the project will undergo the obligatory processes required for project registration and credits issuance by that standard. Once registered, an Extended Letter of Approval²⁹ will be issued by the Administrator³⁰ confirming that the project qualifies in respect of creating an offset.

The Administrator is tasked with maintaining the offset registry which consists of a project database containing information in respect of approved projects, the persons undertaking those approved projects and the documents submitted to the administrator in respect of those approved projects as well as an ownership repository consisting of an electronic database reflecting the listing, transfer of ownership and retirement of offsets.³¹

To claim an offset, a taxpayer must submit its Extended Letter of Approval and certificate of voluntary cancellation³² to the Administrator. The Administrator must issue an Administrator's certificate³³and only thereafter may an offset be claimed against tax liability.³⁴

The Regulations also make provision for the Minister of Electricity and Energy to approve another standard.

In January 2022, the former Department of Mineral Resources and Energy published the South African Carbon Offsets Programme: Draft Framework for approval of domestic standards for public comment.³⁵This programme would guide the development, assessment and approval of potential eligible domestic carbon offset standards. Although the comment period on the draft procedure closed in February 2022, there is no indication as to when the procedure will be finalised and adopted.

Carbon credits may only be claimed from the furtherance of an approved project that is operational on or after 1 June 2019 (if that project is wholly undertaken in the Republic) or in respect of an activity that is not subject to carbon tax.³⁶Carbon offsets may not be claimed in respect of renewable energy³⁷ generated in respect of a technology with an installed capacity exceeding 15MW with a cost equal to or lower than ZAR 1.09 per kilowatt hour.³⁸

_{27. Section 13 of the Carbon Tax Act.}

_{28. Section 13(2) read with Schedule 2 to the Carbon Tax Act.}

_{29. This must comply with Regulation 10 of the Regulations.}

_{30. Regulation 5 of the Regulation provides that "The Director-General of the Department responsible for Energy or an official employed in the Clean Energy branch of the Department of Mineral Resources and Energy to whom the Director General may delegate exercise of power and discharging of responsibilities conferred by these regulations must act as administrator for the purpose of these Regulations" (Administrator).}

_{31. Regulation 6(2) of the Regulations.}

_{32. Defined under Regulation 1 to mean "a document issued by the CDM, VERRA, Gold Standard or a national registry certifying that a carbon credit has been cancelled for the purpose of being used in the South African carbon tax offset scheme".}

_{33. Which complies with the content requirements stipulated under Regulation 11 of the Regulations.}

_{34. Regulation 8 of the Regulations.}

_{35. Accessible here: https://www.energy.gov.za/files/esources/kyoto/2022/Draft-Framework-for-Approval-of-Domestic-Standards-for- Public-Comment.pdf.}

_{36. Regulation 2 of the Regulations.}

_{37. Defined under Regulation 4(3) to mean "energy generated from the following source – …(e) solar; … or (g) wind".}

_{38. Regulation 4 of the Regulations.}

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Section 9 - Finance legal regime

In South Africa the finance legal regime is governed by several Laws and Regulations, such as the:

• Banks Act, 1990;

• Co-Operative Banks Act, 2007;

• Financial Advisory and Intermediaries Services Act, 2002;

• Financial Intelligence Centre Act, 2001;

• Financial Markets Act, 2012;

• Income Tax Act, 1962;

• Mutual Banks Act, 1993;

• Broad-Based Black Economic Empowerment Act, 2003;

• Commercial Paper Regulations;

• Companies Act, 2008;

• Competition Act, 1998;

• Conventional Penalties Act, 1962;

• Currency and Exchanges Act, 1933 (including the Exchange Control Regulations);

• Inspection of Financial Institutions Act, 1998; and

• Securitisation Regulations.

Under the Competition Act, 1998 and the Companies Act, 2008, companies may enter into a merger. The South African merger procedure does not require court approval and creditors can object to the merger only in limited circumstances. The procedure in implementing a merger includes:

• a merger agreement between the relevant parties;

• a solvency and liquidity test;

• the approval of the merger by shareholders and other relevant parties;

• a notice to creditors; and

• the implementation of the merger.

The aforementioned Acts also empower companies and public bodies to enter into disposal plans or policies to better regulate their asset management. Decisions to dispose of assets require thorough examination and economic appraisal. These decisions must be taken within an integrated planning framework that takes account of service delivery needs, corporate objectives, financial and budgetary constraints and the Government's overall resource allocation objectives. Disposal finance is a crucial component of the asset management life cycle as it terminates the control of a particular asset and generates the need for a replacement to support the continuing delivery of services.

The Banks Act, 1990 and the Competition Act, 1998 make reference to Joint Ventures (“JVs”). In South Africa, a JV is a contractual arrangement between two or more parties, typically companies, to undertake a specific business projects together. Unlike a merger, a JV allows each party to maintain their separate legal status while collaborating on a particular objective. In South Africa, JV Agreements must comply with various legal requirements, including the Companies Act, the Competition Act and specific sector regulations. Parties must ensure their JV does not inadvertently create restrictive practices or raise concerns under competition laws.

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Section 10 - Contract law and provisions which specifically regulate matters related to the climate and management and protection of the environment

South African contract law is derived from the Roman-Dutch law of contract, rooted in Roman and canon laws. The law of contract underpins private enterprise in South Africa and regulates fair dealing.

For a contract to be considered valid and binding in South Africa, the following six requirements must be met:

1. consensus / agreement of all the rights and obligations created by the terms of the contract;

2. the parties must have the legal capacity to conclude the contract;

3. compliance with formalities;

4. legality;

5. possibility to perform; and

6. legal certainty.

There is currently no provision in the Companies Act, 2008 (“Companies Act”) that expressly mandates the regulation and safeguarding of environmental measures in contracts for natural resource exploitation. Under the common law all contracts must be lawful, which includes the adherence to statutory legislation, regulations and principles. Section 34(7) of NEMA provides that any person who is or was a director of a company at the time of the commission by that company of a scheduled environmental offence is guilty in their personal capacity for such offence. In other words, directors can be found personally liable for environmental damage.

Some common examples of contractual safeguards included in natural resource exploitation agreements include:

• Community engagement and consultation requirements: these clauses may require a party to engage with the local communities in the vicinity that are affected by the natural resource exploitation. Such engagement and consultation must be lawful (i.e. in line with the obligations and requirements imposed on the party under NEMA, the MPRDA and the Promotion of Administrative Justice Act, 2000); and

• Environmental impact assessment requirements: certain natural resource exploitation agreements cannot be implemented (by virtue of them not being able to obtain the necessary permits / consents to conduct their intended activities) without compliance with the clauses in NEMA and the EIA Regulations pertaining to the assessment of the potential environmental impacts before the commencement of certain projects.

Undertakings to comply with all applicable laws: these undertakings are often drafted generally and will include an obligation to comply with applicable environmental and climate change laws. This obligation also includes the duty to obtain all necessary consents, licences, permits, authorisations, approvals, etc. that are required to lawfully conduct certain activities. NEMA and many of the SEMAs, as well as other environmental Acts, require authorisations, licences or permits to be obtained before particular activities may commence (or before certain agreements can be implemented). Such consents may be required under legislation regulating the storage or use of certain types of hazardous substances, nuclear and radioactivity related activities, biodiversity utilisation and impacts, conservation and activities in protected areas, and certain agricultural activities.

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Section 11 - Laws and legal instruments which regulate the protection of foreign investments

Generally, a country will have concluded a number of Bilateral Investment Treaties (“BITs”) with other countries to offer investors protection and to promote foreign investment. In 2012, South Africa decided to terminate many of its BITs on the grounds that these BITs were exploitative and excessively constrained governmental policies needed to fight poverty. South Africa mitigated against a lacuna of foreign investment by promulgating domestic legislation known as the Protection of Investment Act, 2015 (“Act”). The intention of the Act is to protect investments in South Africa while achieving a balance between investor protection and public interest. The stated purpose as per section 4 of the Act is to:

(a) protect investment in accordance with and subject to the Constitution, in a manner which balances the public interest and the rights and obligations of investors;

(b) affirm the Republic's sovereign right to regulate investments in the public interest; and

(c) confirm the Bill of Rights in the Constitution and the laws that apply to all investors and their investments in the Republic.

a) Repatriation of funds

Section 11 of the Act allows a foreign investor to repatriate funds subject to taxation and other applicable legislation.

b) Access to international arbitration

Section 13 of the Act governs dispute resolution. There is an option for mediation of a dispute arising with a foreign investor as a result of action taken by the government. This does not preclude an investor from approaching any competent court, independent tribunal or statutory body within the Republic for the resolution of a dispute relating to an investment. The government may consent to international arbitration in respect of investments covered by the Act, subject to the exhaustion of domestic remedies. The consideration of a request for international arbitration will be subject to the administrative processes set out in section 6 of the Act and is limited to an international arbitration between the home state of the investor and the Republic, that is, the investor will not be allowed to directly challenge the government.

Section 6 of the Act states that the government must ensure that administrative, legislative and judicial processes do not operate in a manner that is arbitrary or that denies administrative and procedural justice to investors in respect of their investments as provided for in the Constitution and applicable legislation.

c) Protection against expropriation

Section 25 of the Constitution states that no one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property. Property may be expropriated only in terms of law of general application for a public purpose and subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

On 27 March 2024, Parliament passed the Expropriation Bill (“the Bill”) and sent it to the president to be signed into law. The Bill seeks to repeal the Expropriation Act, 1975 to provide a common framework in line with the Constitution to guide the process and procedures for the expropriation of property by organs of state. The preamble of the Bill states that the Bill is to provide for the expropriation of property for a public purpose or in the public interest; to provide for certain instances where expropriation with nil compensation may be appropriate in the public interest; and to provide for matters connected therewith.

d) Standards of treatment and protection

In terms of section 8 of the Act, foreign investors and their investments must not be treated less favourably than South African investors in like circumstances. This requires that a foreign investor must not be extended any beneficial treatment, preference or privilege resulting from taxation provisions in any international agreement; government procurement processes; subsidies or grants provided by the government or organ of state; any law or other measure, the purpose of which is to promote the achievement of equality in South Africa or designed to protect those persons who are historically disadvantaged; any law or other measure, the purpose of which is to promote and preserve cultural heritage and practices, indigenous knowledge and biological resources related thereto or national heritage; any special advantages accorded in the Republic by development finance institutions established for the purpose of development assistance or the development of small and medium businesses or new industries.

Section 9 of the Act states that the Republic must accord foreign investors and their investments a level of physical security as may be generally provided to domestic investors in accordance with minimum standards of customary international law and subject to available resources and capacity.

e) Import / Export controls

Import and export control is the function of the International Trade Administration Commission of South Africa (“ITAC”). ITAC was established through the International Trade Administration Act, 2002, which came into force on 1 June 2003. The Act makes provision for control, through a permit system, of the import and export of goods specified by regulation. ITAC’s primary objective is to create an enabling environment for fair trade, through the efficient and effective administration of trade instruments. ITAC is responsible for import and export control, international trade instruments and technical advice, tariff investigations and trade remedy solutions.

Each year, the Department of Trade, Industry and Competition (“DTIC”) publishes a list of goods requiring import permits in an annual Import Control Program, which covers imports from any country. The Directorate of Import and Export Control of the DTIC administers the issuance of permits, though, for some imports, the DTIC may require additional and prior authorisation from other departments. By notice in the Government Gazette, the Minister of Trade, Industry and Competition may prescribe that goods of a specified class or kind may not be imported into South Africa, except under the authority of, and in accordance with, the conditions stated in a permit issued by ITAC.

The South African Revenue Service administers certain prohibitions or restrictions in terms of section 113(8)(a) of the Customs and Excise Act, 1964 on behalf of a number of government departments, institutions or bodies – for example, the Departments of Agriculture, Forestry and Fisheries, the National Regulator for Compulsory Specifications (“NRCS”), and the South African Reserve Bank (“SARB”), to name a few.

Prohibitions and restrictions are not limited to goods carried by travellers but are applicable on all modalities of transport (road, rail, air, sea, post or other). This means that products subject to any prohibitions or restrictions will be subject to those no matter in what form of package or packaging they are imported or exported.

f) Supply Chains Risks

US companies have cited protective tariffs as a barrier to trade in South Africa. Non-tariff barriers to trade include port congestion, technical standards, customs valuation above invoice prices, theft of goods, import permits, anti- dumping measures, violations of intellectual property rights, an inefficient bureaucracy, excessive regulation, and requirements to localise supply chains.

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Section 12 - Laws which regulate the management and protection of South Africa's natural resources

As mentioned previously, South Africa’s environment and natural resources are primarily protected under NEMA, as read with various SEMAs including the NWA, NEMBA, NEMPAA, the National Environmental Management: Integrated Coastal Management Act as well as the NFA.

In addition, the MPRDA regulates the use of non-renewable mineral resources (often forming an integral part of the transition to a lower carbon economy). Exploration and production right applicants must secure an environmental authorisation in terms of NEMA as a condition for the grant of the exploration or production right. For both prospecting and mining rights, an application for the authorisation of the activity must be lodged at the oﬃce of the Regional Manager of the DMPR in the region and the area the proposed operation is situated prior to the granting of a prospecting right or mining right. The DMPR is the competent authority to grant environmental authorisations for activities relating to the prospecting, exploration, mining and production under the MPRDA, and the DFFE serves as the appeal authority.

a) Environmental impact assessment law

As mentioned above, under NEMA, an EA is required prior to the commencement of certain activities listed under that Act. Three listing notices have been published. By way of example, listed activities include:

• the development and operation of facilities for the storage and handling of dangerous goods above prescribed thresholds; and

• the development of facilities or infrastructure for the generation of transmission of electricity from renewable or non-renewable sources, above prescribed thresholds.

Activities listed in Environmental Impact Assessment Regulations, Listing Notice 1, GNR983/2014 (“Listing Notice 1”) and Environmental Impact Assessment Regulations, Listing Notice 3 GNR985/2014 (“Listing Notice 3”) have a lesser effect on the environment. Accordingly, to obtain an EA for activities listed therein, the shorter BAR process must be followed. This process is ordinarily complete within six months.

For activities with a more significant environmental impact, listed in Environmental Impact Assessment Regulations, Listing Notice 2, GNR982/2014 (“Listing Notice 2”), the scoping and EIA must be followed. This process ordinarily takes between nine and twelve months to complete.

Both processes involve periods of public participation in which interested and affected stakeholders may review the reports prepared in relation to the applications and submit comments thereon, which must be taken into consideration by the applicant during the finalisation of those reports (discussed in greater detail below). The BAR process includes one period of public participation whereas the EIA process includes two.

The EIA process typically involves several key stages:

• screening (whether a proposed project requires an EIA);

• scoping (identifying key issues and impacts that need to be assessed);

• impact assessment and reporting (conducting detailed studies to assess the environmental, social and economic impacts and compiling an Environmental Impact Report);

• public participation (engaging with stakeholders, including the public, to gather input and address concerns);

• review and decision making (submission of the Environmental Impact Report to the relevant authorities for review and decision-making); and

• monitoring and compliance (ensuring ongoing compliance with the conditions set out in the EIA approval).

From an environmental perspective, depending on the environmental impacts of a project, a number of other licences, permits, or consents, etc. may also be required, including:

• permits under NEMBA in relation to activities that impact TOPS;

• licences under the NFA in relation to activities that impact tree TOPS;

• entitlement to use water under the NWA if any water uses under section 21 of the NWA are to be undertaken;

• PAEL or AEL if listed activities under NEMAQA are undertaken;

• a waste management licence under NEMWA if any listed waste management activities are to be undertaken.

b) Relevant consultation law such as public participation in environmental decision making:

Public participation is a critical component of the EIA process and applies with respect to EA applications under NEMA and also the various SEMAs (in relation to water use licences (“WULs”), AELs and waste management licences (“WMLs”), amongst others).

The principles espoused by NEMA reflect public participation in environmental decision-making and promote the decision-making to be made in an open and transparent manner with access to information.⁴⁰NEMA also requires the participation of all interested and affected parties for environmental governance to be promoted, and all people to have the opportunity to develop the understanding, skills and capacity necessary for achieving equitable and effective participation by vulnerable and disadvantaged persons.⁴¹

Section 24 of NEMA provides for the Minister of Forestry, Fisheries and Environment to take any environmental decision insofar as it relates to prospecting, exploration, mining or production instead of the Minister of Mineral and Petroleum Resources in certain circumstances, to clarify the provisions relating to integrated EAs and to provide for consultation with state departments and other stakeholders.

The public participation process also allows for interested or affected parties to make submissions to the relevant authority as to whether the authorisation should be granted or regarding the requirements that should be imposed as conditions so any adverse effects that would arise as a result of the issuing of the consent can be mitigated.

Once the EA has been issued or refused by the relevant authority in terms of NEMA or any other SEMA, appeals may be lodged against the decision of the authority. Pending the outcome of the appeal, the decision of the authority subject to the appeal under NEMA or a SEMA will usually be automatically suspended.

The public participation aspect of the EA application process has come under the spotlight in the South African courts, in the well-publicised Shell judgments; namely, Sustaining the Wild Coast NPC and others v Minister of Mineral Resources and Energy and others [2022] 1 All SA 796 (ECG). The judgments have shown the importance of the public participation process with all interested and affected persons in demonstrating that the proposed prospecting or mining activities will not result in unacceptable pollution and (or) environmental degradation. Reports of environmental impact assessments and public participation processes should be submitted to the DMPR for consideration and the issuing of an environmental authorisation. The DMPR must be satisfied that the reports submitted satisfy the requirements for the granting of an environmental authorisation.

_{40. Section 2(4)(k) of NEMA.}

_{41. Section 2(4)(g) of NEMA.}

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Section 14 - Conservation and protection of nature and biodiversity law

As mentioned previously, the Constitution enshrines the environmental right of all people under section 24 and specifically, the obligation that the environment is to be protected for the benefit of present and future generations.

Biodiversity and conservation are key pillars in preserving our environment and are key tools in tackling climate change. Biodiversity and conservation are primarily regulated under NEMA, NEMBA, NEMPAA and the NFA. In addition, the National Veld and Forest Fire Act, 1998 was promulgated to reform the law on veld and forest fires; its purpose is to prevent and combat veld, forest and mountain fires and provide for a variety of institutions, methods and practices for achieving this purpose.⁴²

Under NEMBA, the following policies have been published:

• National Biodiversity Framework (2008):

The purpose of this framework is to co-ordinate and align the efforts of the many organisations and individuals involved in the conservation and management of South Africa's biodiversity, as well as the support of sustainable development.⁴³

• The National Biodiversity Strategy and Action Plan (2015) (NBSAP):

The NBSAP sets out the strategy and plan for contracting parties to fulfil the objectives of the Convention on Biological Diversity. The plan identifies the priorities for biodiversity management in South Africa for the period of 2015 - 2025.⁴⁴

• Draft White Paper on the Conservation and Sustainable Use of South Africa's Biological Diversity (1997):

This policy builds on the three objectives of the Convention on Biodiversity: i) the conservation of biological diversity; ii) the sustainable use of biological resources; and iii) the fair and equitable sharing of benefits arising from the use of genetic resources.⁴⁵

In addition to biodiversity, together with NEMPAA, the following laws also govern conservation in South Africa:

• Conservation of Agricultural Resources Act, 1983:

This Act provides for control over the utilisation of the natural agricultural resources of the Republic in order to promote the conservation of the soil, the water sources and vegetation and the combating of invasive plants.⁴⁶

• Draft Policy Document on the Preservation and Development of Agricultural Land (2016):

This Draft Policy aims to ensure sustained long-term national and household food security; promote a balanced approach to the use of the agricultural land; ensure the sustainable development of the agricultural sector; ensure a reduction in poverty levels and a sustained improvement in quality of life; increase agricultural land that remains available for agricultural production and development; promote and encourage the maintenance of the economic value of agricultural land so as to ensure the sustainable and continued agricultural production and/or utilisation of land parcels; and promote and ensure the development of agricultural infrastructure and services.⁴⁷

• National Heritage Resources Act, 1999:

This Act seeks to introduce an integrated and interactive system for the management of national heritage resources; to promote good governance at all levels and empower civil society to nurture and conserve their heritage resources; to lay down general principles for governing heritage resources; to introduce an integrated system for the identification, assessment and management of the heritage resources; to establish the South African Heritage Resources Agency and set norms and controls on the movement of significant heritage objects.⁴⁸

_{42. Accessible here: National Veld and Forest Fire Act (No. 101 of 1998).}

_{43. Accessible here: National Biodiversity Framework (2008).}

_{44. Accessible here: https://www.dffe.gov.za/sites/default/files/docs/publications/SAsnationalbiodiversity_strategyandactionplan2015_2025.pdf}

_{45. Accessible here: Draft White Paper on the Conservation and Sustainable Use of South Africa's Biological Diversity (1997).}

_{46. Accessible here: Conservation of Agricultural Resources Act (Act No. 43 of 1983).}

_{47. Accessible here: Draft Policy Document on the Preservation and Development of Agricultural Land (2016).}

_{48. Accessible here: https://www.gov.za/sites/default/files/gcis_document/201409/a25-99.pdf.}

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Section 16 - Relevant corporate governance, transparency, reporting and disclosure, and access to information law Corporate governance in South Africa

Corporate governance is regulated in South Africa and is informed by common law, international law, codes of good practice and statute. The principal sources of corporate governance in South Africa are the following:

• the Companies Act, 2008 which governs the incorporation and management of companies in South Africa;

• the common law under the Companies Act, with respect to the regulation of the fiduciary duties of directors of companies;

• the Companies Regulations, 2011 (“Companies Regulations”);

• the JSE Listings Requirements (“Listings Requirements”) which applies to public companies listed on the Johannesburg Stock Exchange (“JSE”).

• the Financial Markets Act, 2012, which, amongst other things, regulates financial markets and exchanges, and contains the South African Insider Trading and Market Abuse Legislation;

• the King IV Code, issued by the Institute of Directors in Southern Africa (the latest iteration of the code), which came into effect on 1 April 2017;

• the common law (derived from case law);

• sector-specific legislation and/or codes that regulate corporate governance of entities within the same industry, for example the Code for Responsible Investing in South Africa prescribes governance standards for institutional investors as asset owners (pension funds and insurance companies, etc), and their service providers (asset managers, fund managers, etc); and

• the Public Finance Management Act, 1999, which contains financial governance measures and the responsibilities of persons entrusted with financial management of state-owned entities.

The key source of a company’s corporate governance requirements is it's constitutional document (e.g. memorandum of incorporation (“MOI”), articles of association or trust deeds). The Companies Act contains both mandatory unalterable provisions and default alterable provisions, in terms of which the latter allows for variation by a company in its MOI. Significantly, certain provisions relating to corporate governance concerns (such as shareholder rights, annual disclosure requirements in the case of regulated companies and directors' duties) cannot be altered by the MOI.

The King IV Code (Code) on corporate governance for South Africa, 2016

The Code is a set of voluntary principles and good practices of corporate governance. Although not legally binding, a court will consider the Code when evaluating what is regarded as good practice in certain situations where governance duties are involved. The Code sets out the philosophy, principles, practices and outcomes which serve as the benchmark for corporate governance in South Africa. It contains seventeen principles which include principles for an entity's ethical culture, performance and value creation and adequate and effective control, trust, good reputation and legitimacy. The Code provides extensive guidance in relation to the implementation of each of the principles. While compliance with the Code is voluntary, the Listings Requirements oblige issuers to adopt certain of its recommendations, with the remainder being implemented in accordance with the Code's “apply and explain” disclosure policy. In order to give effect to this policy, a company should (i) apply the recommended practices meticulously, with common sense, and proportionally in accordance with the company’s size, resources, and the extent and complexity of its activities; and (ii) provide a narrative explanation of that application with reference to the recommended practices. It is important to note that non-compliance with the principles of the Code can be interpreted as non-compliance with the Listings Requirements, and result in sanctions being imposed by the JSE.

The Code and JSE disclosure reporting requirements

The Code is intended to apply to any organisation that has a governing body, extending its potential scope further than the boards of incorporated companies to include municipalities. Entities listed on the JSE must report on their compliance with the Code's disclosure and application regime as part of their annual report.⁴⁹

In addition to the annual reporting requirement mentioned above, certain aspects of governance as set out in the Code are mandatory as listings requirements on the JSE:

• there must be a policy evidencing clear balance of power between directors, so that no one director has absolute powers of decision-making;

• a mandatory audit committee, remuneration committee and social and ethics committee must be appointed in accordance with the requirements of the Companies Act;

• a brief curriculum vitae of each director must accompany a new listing application, as well as notice of every annual general meeting where the director stands to be elected or re-elected;

• the CEO and the financial director must sign off on the annual financial statements confirming a list of prescribed issues.⁵⁰

The Companies Act, 2008

The Companies Act is the primary source of company law in South Africa. Each public company is constituted in accordance with the Companies Act and its constitutional document, the MOI, establishes the company's capacity, legal powers, and governance.

The Companies Act regulates corporate governance in South Africa by, amongst other things, including a statutory statement of directors’ duties. The statement is based on the common law fiduciary duties of directors and officers and on the duty to act with care, skill, and diligence. Section 76(3)(a) and (b) of the Companies Act provides that a director of a company, when acting in that capacity, must exercise the powers and perform the functions of the director in good faith and for a proper purpose, and in the best interests of the company. Section 76(3)(c) provides that a director must exercise the powers and perform the functions of a director with the degree of care, skill and diligence that may be reasonably expected from a person carrying out the same functions as the director and having the general knowledge, skill, and experience as the director. These statutory duties do not represent a codification of the common law and the common law duties still apply to directors. Directors owe their duties to the company.

Company disclosure requirements

The Companies Act and the Listings Requirements together impose a demanding accountability and transparency regime.

Amendments to the Companies Act and Companies Regulations came into effect in early 2023. These amendments impose enhanced reporting obligations on all South African companies (enhancing regulation around anti-money laundering and the combatting of terrorist financing). These amendments require companies to file certain information in respect of those persons who hold a beneficial interest in, or have effective control over, the Company. Depending on the form of the company, a business must: (a) file its securities register with the Companies and Intellectual Property Commission (“CIPC”) together with its annual return; and (b) may also have to file a separate register containing the details of those persons who hold a beneficial interest in the company equal to or in excess of 5% of the total number of issued securities of any class of securities issued by the company, together with the extent of that beneficial interest (“BI Register”). Only companies that fall within the definition of an "affected company" are required to file a copy of the BI Register.

Access to Information law

Section 32 of the Constitution regulates the right of access to any information held by the state, and any information held by another person, and which is required for the exercise or protection of any rights.⁵¹

The Promotion of Access to Information Act, 2000 (“PAIA”) gives legislative effect to the right in section 32 and aims to foster a culture of transparency and accountability in public and private bodies. Under PAIA, both private and public bodies have a duty to provide access to requested records, unless specifically refused in terms of PAIA. Any person, including foreign nationals, can make a request under PAIA. Requests can be made for any record held by a public or private body subject to certain limitations (protecting national security, personal privacy or confidential business information). A request under PAIA is made by submitting a written request to the relevant public or private body.

Another important piece of legislation is the Protection of Personal Information Act, 2013 (“POPIA”). POPIA safeguards individuals' personal information and privacy. When written requests for access to records are made in terms of PAIA, POPIA must be considered as well, especially when the record in question contains the personal information of third parties.

_{49. Par 8.63(a) of the JSE Listings Requirements Service Issue 27.}

_{50. Par 3.84 of the JSE Listings Requirements Service Issue 27.}

_{51. The Constitution of the Republic of South Africa, 1996, section 32.}

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Section 17 – Enforcement/monitoring law

Generally, enforcement and monitoring of the implementation of environmental protection are provided for under NEMA and the relevant SEMAs, with penalties for non-compliance typically indicated.

Penalties under NEMA and the SEMAs are usually in the range of ZAR 5 million up to a maximum of ZAR 10 million and/or imprisonment for up to five or ten years, depending on the offence. There is also the potential for personal criminal liability for directors, employees, and agents in the case of NEMA Schedule 3 offences, which include offences for contravening legislation regulating heritage resources, water, forests, veld and forest fires, biological diversity, and air quality.

a) Duty of Compliance

NEMA, along with many other statutes, empowers officials to issue compliance notices and directives requiring the holder of any authorisation to comply with the conditions thereof, or with applicable legislation, or to ensure that pollution or environmental degradation is addressed. Any failure to comply with directives or compliance notices usually constitutes an offence in terms of legislation and may be followed by criminal prosecution and, after the administrative process has been followed, the suspension or ¬withdrawal of the relevant authorisation. If a directive which has been issued under NEMA or the NWA relating to pollution or environmental degradation is not complied with, the environmental authority may take the required remedial steps itself and seek to recover the costs thereof from the responsible person, as well as a wide range of other persons (which have been interpreted broadly to include shareholders and lenders, although this interpretation has not been confirmed in jurisprudence).⁵²

b) Reporting and monitoring requirements

In the context of incidents, section 30 of NEMA contains onerous reporting obligations. It prescribes that, after gaining knowledge of the occurrence of an incident,⁵³the responsible person or their employer must report it through the most effective means reasonably available. It is crucial to identify who the ‘responsible person’ is: a ‘responsible person’ is defined as any person who (i) is responsible for the incident occurring; (ii) owns any hazardous substance involved in the incident; (iii) was in control of any hazardous substance involved in the incident at the time of the incident; or (iv) his/her employer.

Two stages are envisaged for reporting of incidents, namely (i) the initial incident response stage (“Initial Stage”), followed by (ii) the second reporting stage (“Second Stage”).

The Initial Stage provided for under sections 30(1)-30(4) of NEMA focuses on the containment, clean up, remediation and preliminary assessment of the incident. Section 30(3) of NEMA requires initial notification of the incident occurring to the relevant authorities, who may include the Director-General of the Department; the South African Police Service; the relevant fire prevention service; the relevant Provincial Head of the Department or municipality; and all persons whose health may be affected by the incident.

The Second Stage provided for under section 30(5) of NEMA focuses on post-clean up assessment and reporting within 14 days of the incident occurring.

The EIA Guidelines (“Guidelines”):

a) provide that the occurrence of an incident is regulated by the provisions of section 30 of NEMA and the Guidelines when all the key concepts as indicated in the definition are present – in other words, there must be an unexpected loss of containment of a substance that is identified as such in the list of hazardous substances set out in the Guidelines that has or may cause significant harm to the environment, human life or property; and

b) explain the type and extent of the information that a responsible person must provide to the relevant authorities when reporting on an incident and which must be contained in the incident reporting template annexed to the Guidelines.

It is foreseeable that, by their very nature, certain incidents may take longer than 14 days for the Initial Stage to be adequately deployed to contain the incident and minimise the effects thereof; to remedy the effects of the incident; and for an assessment of the immediate and long-term effects on the environment and public health to be conducted and completed. Regrettably, the Guidelines do not appear to clarify whether, in such circumstances, the responsible person may simply proceed with the Second Stage, or whether the responsible person must first engage with the relevant authority/ies to obtain a directive confirming that the Second Stage can be proceeded with.

It is noteworthy that the relevant authorities are empowered by NEMA to take measures they consider necessary to contain and minimise the effects of the incident. This includes undertaking clean-up operations and claiming reimbursement of all reasonable costs incurred by the relevant authorities in doing so from every responsible person (on a joint and several basis) in instances where –

a) the responsible person(s) fails to comply with the provisions of section 30 of NEMA;

b) the responsible person(s) fails to comply with a directive issued by the relevant authority/ies;

c) the identity of the responsible person(s) is uncertain; and/or

d) there is an immediate risk of serious danger to the public or potentially serious detriment to the environment.

Non-compliance with the provisions of section 30 of NEMA is an offence bearing criminal liability and is taken seriously by the relevant authorities, with the penalty for non-compliance being liability upon conviction to a fine of up to ZAR 10 million and/or imprisonment for a period up to ten years.

c) Record-keeping requirements

NEMA provides that the Director-General must keep a record of all environmental implementation plans and environmental management plans, relevant agreements between organs of state and any reports submitted under subsection (1)(b); and such plans, reports and agreements must be available for inspection by the public.⁵⁴

d) Inspections

NEMA provides for the appointment of environmental management inspectors, with national and provincial enforcement directorates in various government departments.⁵⁵The Environmental Management Inspectorate (“EMI”) was introduced through an amendment to NEMA in 2005. EMI's were introduced to provide for a single set of compliance and enforcement powers for all relevant officials at national, provincial and local authority level. Section 31G of NEMA sets out the functions of the EMI's which includes, amongst others, monitoring and enforcing compliance with specific pieces of national environmental legislation, and investigating any act or omission on a reasonable suspicion of a breach of this legislation.

With respect to the MPRDA, the principles set out in section 28 of NEMA are underscored by sections 44 and 45 of the MPRDA, which provide that if any exploration or production operation causes or results in ecological degradation, pollution or environmental damage, or contravenes the environmental authorisation, the Minister of Mineral Resources may, in consultation with the DFFE, direct the right holder to investigate and report on the impact of the ecological degradation, pollution or contravention and take any steps specified by the Minister in the directive. If the holder of a right fails to comply with the directive, the Minister of Mineral Resources may take the steps necessary to remedy any ecological degradation and pollution and recover the costs required to fully implement the rehabilitative measures from the right holder.

e) Enforcement measures

The South African National Environmental Compliance and Enforcement Reports (“NECE Reports”), which are prepared on an annual basis by the DFFE, reflect enforcement and compliance statistics across all provinces and various sectors. The NECE Reports indicate compliance monitoring inspections and administrative steps, such as the issuing of pre-compliance and compliance notices, as well as directives, which are generally the most common initial enforcement measure (aside from minor admission of guilt fines for more trivial offences). There has been a general trend of increases in the number of compliance-monitoring inspections of facilities, issuing of pre- compliance notices, as well as compliance notices. The number of matters which proceed to criminal prosecution and trial is substantially lower, with the environmental authorities and the National Prosecuting Authority being more selective as to which non-compliance matters proceed to prosecution. However, there have been successful prosecutions on environmental matters in recent years.⁵⁶

f) Administrative Enforcement

Administrative enforcement is not generally permitted under NEMA and the other SEMAs. However, where any activity has commenced without the necessary environmental authorisation or waste management licence, section 24G of the NEMA makes provision for “rectification”, coupled with the imposition of a mandatory administrative fine. Similar provisions are included in section 22A of NEMAQA in relation to activities undertaken in the absence of a PAEL or AEL where one is required. Currently, the maximum administrative fine payable is ZAR 10 million per activity. This is an administrative fine, and, if the applicant is prosecuted for not having the relevant environmental authorisation, a criminal fine can also be imposed if the applicant is convicted.

Further, section 33 of the Constitution of the Republic of South Africa entrenches the right to administrative action that is lawful, reasonable, and procedurally fair. It further provides that reasons must be furnished to anyone whose rights have been adversely affected by administrative action. The Promotion of Administrative Justice Act, 2000 (“PAJA”) gives effect to this constitutional right. PAJA provides that any person affected by unjust administrative action may institute an action in a court or tribunal. The grounds for review for specific wrongful conduct an administrator can make when taking action are set out in section 6 of PAJA, and include:

• illegality;

• procedural unfairness;

• irrationality;

• unreasonableness; and

• other unconstitutional or unlawful action.⁵⁷

_{52. National Environmental Management Act, Section 28(8).}

_{53. An incident, for the purposes of NEMA, is defined as: "an unexpected, sudden, and uncontrolled release of a hazardous substance, including from a major emission, fire, or explosion, that causes, has caused, or may cause significant harm to the environment, human life, or property".}

_{54. Supra note 55, Section 16(5). The reports referred to under subsection (1)(b) refer to the reports that every organ of state must report annually within four months of the end of its financial year on the implementation of its adopted environmental management plan or environmental implementation plan to the Director-General.}

_{55. NEMA, Chapter 7.}

_{56. See https://bowmanslaw.com/wp-content/uploads/2020/06/GUIDE-SA-Environmental-Digital-2020.05.26.pdf, accessed on 22 February 2024.}

_{57. Promotion of Administrative Action Act 3 of 2000, section 6(2).}

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Section 18 - Laws relating to obligations and rights of natural resource exploitation companies and public bodies

Under the MPRDA, before mining can take place, permission from the government must be obtained. In order to get permission, the applicant is required to assess the potential impact on the environment and the mine affected community and consult with everyone who will be impacted by the proposed mining.

The South African Government requires the following four approvals with reference to the exploitation of natural resources:

1. A mining or prospecting right;

2. An authorised environmental management programme or plan;

3. A water use licence; and

4. An environmental authorisation

The MPRDA and the Mineral and Petroleum Development Regulations issued thereunder (“Petroleum Regulations”) are the national legislation that regulates both the mining sector and the upstream petroleum exploration and production sector. In addition to the MPRDA, the Mining Titles Registration Act, 1967 (“MTRA”) seeks to ensure that permits and rights granted under the MPRDA are properly registered and enforceable against third-party claims. Upon such registration, the exploration and production rights become a real right to property; property in this context being the natural resource. The main regulatory bodies responsible for overseeing upstream oil and gas operations are the DMPR, the Petroleum Agency of South Africa (“SOC”) Limited (“Petroleum Agency”) and the Mineral and Petroleum Titles Registration Office (“MPTRO”).

The new Upstream Petroleum Resources Development Bill [B13-2021] (“Upstream Bill”) in South Africa seeks to ensure that the upstream petroleum sector is regulated. The Upstream Bill introduces a separation of the regulatory frameworks governing mining and upstream petroleum exploration and production. The separation allows for the upstream oil and gas sector to be regulated entirely separately from the more established mining sector.

In terms of the application process for permits or rights, the Upstream Bill proposes the introduction of a petroleum right which will govern the key terms of both the exploration and production phase and will replace the granting of separate exploration and production rights. Applications for the issue of a reconnaissance permit, TCP, exploration rights and production rights are processed on a first-come, first-served basis if there are competing applications (namely, applications over the same area) received on different dates. If applications are received on the same day, they are regarded as received at the same time and, in this particular scenario, the MPRDA expressly states that a competing application that has been submitted by a historically disadvantaged South African (“HDSA”) company must be given preference over all other applications submitted on the same day. Upon registration of exploration rights and production rights at the MPTRO, it constitutes a real right that is enforceable against third-party claims.

To obtain a mining or prospecting right, the company or public body will need permission from the DMPR to mine minerals within the respective area. The mining right may not exceed a period of 30 years and a mining right will be granted if:

• the mineral can be mined optimally;

• the prospective holder of the right has the funds and expertise to conduct the proposed mining operation optimally;

• the financing plan is compatible with the intended mining operation and for the duration thereof;

• no unacceptable pollution or damage to the environment will occur as a result of the mining operation;

• the prospective holder of the right has made financial and other provisions for the prescribed social and labour plan;

• the prospective holder of the right is not contravening the MPRDA; and

• the operation is in line with the Mining Charter.

After acquiring a mining right, the company or public body must acquire an EA. Depending on the nature of the proposed activities, other environmental consents may be required (e.g. WULs, conservation permits and licences, WMLs, AELs etc.)

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Section 19 - Criminal, civil and administrative enforcement sanctions

All signatories to the UNFCCC are expected to match their domestic policies with that of the convention. The Paris Agreement requires member countries to report on their emissions and on their progress towards their climate targets. Countries that do not meet their targets can be subject to diplomatic pressure and possible sanctions on things like trade and aid. South Africa has committed to reach net zero because it is a signatory to (among others) the Paris Agreement. It must therefore shift domestic policy to align with this commitment.

In 2020 South Africa submitted a Low Emission Development Strategy to the UNFCCC committing to developing a pathway to reaching net zero emission by 2050.

The Climate Change Act (which was signed into law, but is yet to enter into effect) enables the development of an effective climate change response and a long-term just transition to a low-carbon and climate resilient economy and society for South Africa in the context of sustainable development. The Republic has a role to play in the global effort to reduce greenhouse gas emissions identified by the international community and has committed to implement an effective contribution to the global climate change response. which a person (including a juristic person such as a company) would commit an offence. Key examples include failing to provide, or providing false, data, information, documents, samples or materials to the Minister, or failing to prepare and submit a GHG mitigation plan. A person or company convicted of an offence may be fined up to ZAR 5 million or imprisoned for a period not exceeding five years. In the event of a second or subsequent conviction, the person or company may be fined up to ZAR 10 million or be imprisoned for a period not exceeding 10 years or receive a fine and be imprisoned.

The legal framework around net zero emissions encompasses various sanctions, ranging from criminal to civil and administrative. These sanctions are tied to several legal principles such as justiciability, ripeness, exhaustion, finality, standing, political questions, and advisory opinions.

Criminal sanctions for non-compliance with environmental laws, including those related to net zero emissions, can include fines and imprisonment. These sanctions are generally applied when there is a clear violation of statutory provisions, such as illegal emissions beyond permitted levels, or failure to comply with regulatory requirements. Civil sanctions involve fines, penalties, and compensatory damages imposed on entities violating environmental regulations. Administrative sanctions are imposed by regulatory bodies and can include fines, revocation of licenses, or other penalties for non-compliance with environmental regulations. In all instances, the following is applicable:

a) Justiciability: Criminal and civil cases are justiciable if the courts have the authority to adjudicate on the matter. Environmental laws are enforceable under criminal and civil law if there is a statutory basis or a legitimate claim arising under the common law. Administrative action is subject to judicial review. Environmental claims are justiciable when there is a clear legal basis for action. This includes statutory provisions on emissions, pollution control, and climate change regulations.

b) Ripeness: A case is ripe for adjudication if all the facts have matured into an existing substantial controversy warranting judicial intervention. Environmental cases must be ripe, meaning the environmental harm or regulatory violation must have occurred or be imminent.

c) Exhaustion: Regulatory and administrative remedies must often be exhausted before approaching a court unless immediate action is necessary to prevent harm. Complainants in an environmental matter must typically pursue all available administrative remedies before turning to the courts.

d) Finality: Criminal sanctions and civil judgments represent final decisions unless appealed. Administrative decisions are final but can be reviewed by the courts.

e) Standing: The state, typically through the National Prosecuting Authority, has standing to prosecute environmental crimes. Individuals, communities, or organisations directly affected by environmental harm have standing to institute civil action. Affected parties have standing to challenge administrative decisions. To have standing, plaintiffs must show they are directly affected by the environmental issue. South Africa’s constitution and environmental laws support broad standing for individuals and communities affected by environmental harm.

f) Political Questions: Courts avoid adjudicating on issues deemed political in nature; however, clear statutory violations are within judicial purview.

g) Advisory Opinions: Courts and administrative tribunal do not issue advisory opinions in matters but decide on actual controversies.

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Section 22 - Dispute resolution law and framework

a) Annulment and Cancellation of exploration or exploitation permits

The Minister of Mineral and Petroleum Resources (“Minister”) may cancel or suspend a right, permission or permit where the holder:

• conducts prospecting or mining operations in contravention of the MPRDA;

• breaches any term or condition of such right, permit or permission;

• contravenes any condition in the environmental authorisation; or

• has submitted inaccurate, false, fraudulent, incorrect or misleading information for the purposes of the application or in connection with any matter required to be submitted under the MPRDA.

Before acting upon these contraventions, the Minister must notify the holder of his intention to suspend or cancel the right, permission or permit and allow him or her a reasonable opportunity to remedy the contravention.

The challenging of the decision of the Minister to cancel any rights will need to be challenged in the traditional court system.

With respect to abandonment, a prospecting or mining right holder under the MPRDA may abandon such right totally or partially, subject to, amongst others, obtaining a closure certificate from the DMPR.

b) Expropriation of property rights by the state

Section 25 of the Constitution expressly provides that no one may be deprived of their property (including the expropriation of a limited real right) except in terms of a law of general application, for a public purpose or in the public interest. If the rights holder is deprived of its property, the Constitution further provides that such rights holder is entitled to compensation. The amount of compensation to be paid and the time and manner of payment is subject to what the rights holder and state agree to or what is determined by a court. The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances.

In terms of the MPRDA, the Minister of Mineral and Petroleum Resources may, in accordance with section 25 of the Constitution, expropriate any land or any right for the purposes of providing equitable access to the nation’s resources, stimulating economic growth, advancing employment and promoting the sustainable and ecological development of mineral and petroleum resources.

c) Lawsuits brought against projects

Lawsuits in South Africa can be brought for breaches of statutory duties (in these cases, it is normally to compel the government to take action against the proposed project), judicial review proceedings or normal delictual claims.

South Africa has enshrined the right to freedom of expression through section 16 of the Constitution. This, however, is not an absolute right and is limited in that such protection does not extend to expressive acts of:

• propaganda for war;

• incitement of imminent violence; or

• advocacy of hatred that is based on race, ethnicity, religion, gender and that constitutes incitement to cause harm…

The Constitution thus protects the right to freedom of expression, where the intention of such expression aids the advancement and realisation of constitutional rights, rather than in instances that would violate the spirit and purport of the Bill of Rights. The right in section 16 of the Constitution protects, amongst others, environmental groups, local communities, and even competing individuals or companies within the extractives industry who initiate lawsuits against extractive projects. These lawsuits can range from challenging environmental impact assessments to contesting the grant of mining licenses or alleging corruption. The High Courts have the jurisdiction to hear and determine cases involving project-related conflicts.

d) Types of ADR available

Various alternative dispute resolution (“ADR”) options, including arbitration, mediation, conciliation, and facilitation are available for resolving disputes outside of the traditional court system. Some sectoral laws also provide for community engagement and other traditional approaches towards dispute settlement.

Arbitration is governed by the Arbitration Act, 1965. This Act sets out the procedural rules for arbitration, including the appointment of the arbitrator, the conduct of the arbitration proceedings, and the enforcement of the arbitrator’s decision.

Mediation is governed by the Mediation Rules of the High Court of South Africa. These Rules set out the procedural guidelines for mediation, including the appointment of the mediator, the conduct of the mediation proceedings, and the enforcement of any settlement agreement reached by the parties.

e) Transparency and Corruption Risk

According to the Transparency International’s 2023 Corruption Perceptions Index, South Africa ranks 83/180 in the world with a score of 41 out of 100,⁵⁸highlighting the need for increased transparency and accountability.

_{58. Transparency International’s 2023 Corruption Perceptions Index can be accessed here: https://www.transparency.org/en/cpi/2023/index/zaf.}

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Section 23 - Liability and compensation regime for environmental duty of care, remediation and rehabilitation

In terms of section 2(4)(p) of NEMA “the costs of remedying pollution, environmental degradation and consequent adverse health effects and of preventing, controlling or minimising further pollution, environmental damage or adverse health effects must be paid for by those responsible for harming the environment”. South Africa follows the "polluter pays" principle; therefore, the polluter will be responsible for the remedial costs. The polluter may however raise the defence that they are not responsible for the pollution.

Section 28 of NEMA provides for a duty of care and remediations of the environment. Section 28 states that every person who causes, has caused or may cause significant pollution or degradation of the environment must take reasonable measures to prevent such pollution or degradation from occurring, continuing or recurring, or, in so far as such harm to the environment is authorised by law or cannot reasonably be avoided or stopped and rectify such pollution or degradation of the environment.

Most environmental legislation in South Africa contains criminal sanctions and significant penalties for non-compliance, including the possibility of imprisonment, a fine, or both.

Penalties under NEMA and the SEMAs are usually in the range of a maximum of ZAR 5 million up to a maximum of ZAR 10 million and/ or imprisonment for up to five or ten years, depending on the offence.

NEMA provides for the recovery of losses or damages caused by an environmental crime from the convicted person, including a director convicted under NEMA. In particular, an organ of state or private party that has incurred costs to rehabilitate the environment can claim such costs, losses or damages in the criminal trial without having to lodge a separate civil claim against the convicted person.

The court may also assess the financial advantage that the offender gained as a result of the environmental crime and order the convicted person to pay back the fruits of the crime as damages, or compensation, or a fine. Furthermore, the convicted person may be required to pay the costs of the prosecution of the crime.

As seen in section 36 of NEMWA (discussed in further detail in Section 15), the landowner or person responsible for a contamination must notify the Minister of Forestry, Fisheries and Environment and the provincial MEC of Environmental Affairs (“environmental authorities”) as soon as they become aware of the contamination. Once the environmental authorities have been notified of the nature of the contamination on the site, they may issue a directive to the person who caused the contamination or to the current landowner to conduct a site assessment in order to determine the extent of the contamination, and whether it presents any environmental or health risks that would warrant urgent remediation.

Once a site assessment has been concluded and if it indicates that the site is significantly contaminated and poses an immediate risk to the environment or to people’s health, then the environmental authorities, issue a remediation order.

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Section 24 - Regulations, policy guidance, norms, and case law [included in relevant legal section]

Policy

The IRP 2019 and 2023 Draft IRP, discussed in Section 1 and Section 21.

Case Law

Fuel Retailers Association of Southern Africa v Director-General: Environmental Management, Department of Agriculture, Conservation and Environment, Mpumalanga Province and Others 2007 (10) BCLR 1059 (CC):

This case concerned the proposed construction of a filling station and whether it would be socially, environmentally, and economically sustainable. The Constitutional Court confirmed the interrelationship between the protection of the environment and socio-economic development. The Court confirmed that the Constitution recognises the interrelationship between the protection of the environment and socio-economic development. It also confirmed that sustainable development requires a balance between environmental protection and socio-economic development.

High Change Investments (Pty) Limited v Cape Produce Co (Pty) Limited trading as Pelts Products and others 2004 (2) SA 393 (EDC):

In this case, the respondent carried on business as a semi-processing tannery. The tanning process produced several chemical waste products. The applicant alleged that noxious gases created by the tannery were discharged in the atmosphere, causing not only a foul and offensive odour but the rapid and uncontrollable corrosion of metal structures and equipment on its property. The applicant claimed that the respondents, which included, amongst others, the Director- General: Environmental Affairs and Tourism and the Chief Air Pollution Control Officer had failed, neglected or refused to take such reasonable steps as were required to bring the pollution to an end, notwithstanding its attempts to persuade them to do so. In this decision, the court confirmed that the significance threshold (when assessing a breach of the NEMA duty of care) requires a “considerable measure of subjective import”. The court further held that it was of the view that the applicant had shown that the respondent failed to take measures required under NEMA to minimise the significant pollution it was causing or to prevent such pollution from occurring, continuing or recurring.

Company Secretary of Arcelormittal South Africa v Vaal Environmental Justice Alliance [2014] ZASCA 184:

This case concerned a non-profit organisation, VEJA, which requested environmental information from a private entity, ArcelorMittal (“AM”). The information requested by VEJA related to AM’s past and present activities regarding its operational and strategic approaches to the protection of the environment in areas in which they operated steel plants. In this decision, the Supreme Court of Appeal confirmed the right of third-party access to information to protect the environment. The most important aspect of this decision is that it concluded that VEJA met the strict threshold established under PAIA regarding the request for information from private entities. Moreover, not only did the Court order the disclosure of the documents, it also established that environmental organizations can monitor the operations of private entities in order to protect the environment.

Earthlife Africa Johannesburg v Minister of Environmental Affairs and Others [2017] 2 All SA 519 (GP):

This case concerned the court having to determine whether, under NEMA, "relevant" considerations for environmental review of plans for a new 1200 MW coal-fired Thabametsi Power Project include the project’s impacts on the global climate and the impacts of a changing climate on the project. The court remitted a decision by the Minister of Environmental Affairs (now the Minister of Forestry, Fisheries and Environment) back to the competent authority on the basis that no climate change impact assessment had been conducted as part of the environmental impact assessment process. The court, after observing that NEMA does not expressly contemplate climate change, held that such considerations are relevant and that their absence from the environmental review of the project made its approval unlawful.

South African Renewable Energy Masterplan

In recognition of the rapid increase in the rollout of renewable energy and storage technologies globally and the opportunities it presents in South Africa, the DMPR published the draft SAREM for comment in July 2023. The vision, objectives and pillars of the SAREM align with South Africa’s sustainability needs, which aim to foster industrial and inclusive socio- economic development as part of a broader decarbonisation trajectory. The SAREM lists the following as the key objectives to reach by 2030:

• grow the economy by fostering the rollout of renewable energy and battery storage projects;

• grow the industry capacity in the renewable energy and battery storage value chain;

• create and sustain decent employment across the value chain;

• build capabilities needed for the industry; and

• contribute to a just energy transition.

According to President Cyril Ramaphosa in the National Budget Speech held on 21 February 2024, the following updates with respect to renewables include:

• A tax incentive to be introduced for producers of electric vehicles in South Africa who will be able to claim 150 per cent of qualifying investment spending as a tax deduction to aid the transition to new energy vehicles; and

• The Government will reconsider the generation threshold and leasing restrictions of section 12B of the Income Tax Act. Any proposals will be designed to take effect from 1 March 2025.

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Get in touch

Ernst Muller

ernst.muller@hsf.com

South Africa