Environmentalists have warned of financial risk and burden on the state should the environmental affairs department relax regulations that require mines to provide enough financial provision for rehabilitation.
The Centre for Environmental Rights (CER) is worried about the department’s draft regulations proposal that seeks to reduce the amount of money mining companies have to allocate for rehabilitation.
The 2015 regulations required that companies must allocate financial provisions that would cover 10 years of rehabilitation after mining has ceased.
The new proposed draft regulations reduce financial provision to a period of three years.
Mining companies have traditionally been making these provisions in trusts, cash or bank guarantees. The department drafts the regulations and laws for rehabilitation, but the mineral resources department is responsible for their implementation.
An investigation by Oxpeckers shows that nearly R60 billion is being held in funds for the rehabilitation of mines across South Africa. Mpumalanga, the country’s most important coal mining province, holds more than R17 billion of that amount.
CER executive director Melissa Fourie warned that the blanket three-year proposal for financial provision was completely arbitrary.
“Mines vary enormously … some take six months to mine out, others take 20 years,” Fourie said.
“It’s completely arbitrary. For a 30-year-old mine it means you are at risk for 27 years. The state will have to pick up that tab and it’s a massive risk to the fiscus. The people living next to the mines also get affected by pollution and environmental degradation,” she said.
Neither environmental affairs spokesperson Albi Modise nor mineral resources spokesperson Ayanda Shezi responded to written questions.
CER has submitted its comments to the environmental affairs department and is canvassing for stricter regulations.
In correspondence to the department’s director-general Nosipho Ngcaba, dated December 11 2017, CER outlines its concerns with the proposed regulations pertaining to financial provision for prospecting, mining, exploration or production operations.
CER said in its presentation to Ngcaba that care and maintenance was crying out for regulation and this was one of the major achievements of the 2015 regulations.
“We recommend the draft regulations be amended to include the care and maintenance arrangements provided for in the 2015 regulations and that the short title, scope and purpose of the draft regulations are amended to include reference to care and maintenance.
“A failure to regulate care and maintenance [and particularly the financial provision for it creates a loophole in the law that allows mining companies to ostensibly put a mine on care and maintenance while effectively closing it without rehabilitation,” reads the presentation.
CER rejected environmental affair’s explanation that committing financial provision for 10 years upfront would affect the financial interests of mining companies. It said having no adequate financial provision had a negative financial effect on a company, its shareholders, creditors and employees, directors, the state, the environment and affected communities.
“The Financial Provisioning Regulations, 2015 (Regulations) were a much needed improvement on the previous regulatory system for financial provision under the Mineral and Petroleum Resources Development Act and its regulations. The regulations had the potential to ensure accurate and suitable cover for remediation and rehabilitation and, in so doing, significantly interrupted the ongoing trend of mine abandonment, a trend facilitated precisely because financial provision was not properly assessed or collected,” CER said.
“The regulations seemed to recognise and attempt to address the emerging acknowledgment that the prime challenge facing sustainable mine closure was the inadequate funding and poor cash flow management of the closure process.
“Thus, long-term remediation measures were usually sidelined due to budget constraints. This became especially chronic near the end of life-of-mine when cash flow becomes constrained.”
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