How energy projects can navigate land use laws in South Africa

The complexities surrounding Sections 53 and 54 of the Mineral and Petroleum Resources Development Act (MPRDA) present a risk of significant challenges for developers in South Africa, particularly those involved in energy and large infrastructure projects, unless understood and managed appropriately.

The use of agricultural land, usually identified as being appropriate for energy developments, is no longer as straightforward, with pushback from the Department of Agriculture and its newly appointed minister, John Steenhuisen, who have stressed the importance of preserving agricultural land for food security and sustainable agricultural practices.

These land use considerations and the risk of conflicting rights and uses are vital for the development of energy projects. We touch on these conflicts in more detail below.  

Understanding Section 53 land use and ministerial consent

As we previously explored, section 53 of the Mineral and Petroleum Resources Development Act (MPRDA) in South Africa mandates that any land use potentially conflicting with the objectives of the MPRDA requires approval from the minister of mineral resources. This provision aims to ensure that land use does not impede the exploitation of mineral and petroleum resources. However, the practical application of this requirement has revealed several challenges for developers, as we unpick below.

Overlap of rights

Energy and large infrastructure development rights often overlap with existing mineral or petroleum rights, leading to legal and operational challenges. In South Africa, this overlap can result in significant delays and increased costs for developers, as they navigate the complex web of regulatory requirements and competing claims. Moreover, lenders and off-takers face heightened risks and uncertainties due to these overlaps, which can affect project financing and viability. They must conduct thorough due diligence and often require additional assurances or risk mitigation measures to safeguard their investments.

Deficient applications

Section 53 applications are sometimes submitted without thorough assessments, leading to flawed submissions that are vulnerable to legal challenges. This often occurs when developers, eager to advance their projects, fail to conduct comprehensive due diligence or misunderstand the requirements of the MPRDA. Furthermore, deficiencies within various departments that need to liaise with each other exacerbate these issues. The lack of standardised responses, which vary geographically and jurisdictionally, complicates the process even more. This inconsistency frequently results in delays and increased costs as developers navigate the bureaucratic maze.

Lack of assessment

There is often inadequate assessment by the Department of Mineral Resources (DMR) of existing mineral and petroleum rights, creating a false sense of security for developers. Many rights granted under the MPRDA are quite broad, which can further complicate the situation. Oversight by the DMR and developers can lead to significant legal and financial repercussions if conflicting rights are discovered after a project has commenced. Developers may face unexpected legal battles, project delays, and increased costs as they attempt to resolve these conflicts. In addition, the lack of thorough initial assessments can undermine investor confidence and affect the overall viability of the project.

Resolving conflicts between surface and mineral rights

Section 54 of the MPRDA provides a mechanism to resolve disputes between landowners or lawful occupiers and holders of mineral rights. This section is particularly relevant when there is a conflict between surface rights and mineral rights. There are key provisions within section 54 that developers need to be aware of.

Notification and negotiation

If access to land is refused, the mineral rights holder must notify the DMR regional manager, who facilitates negotiations. This process is designed to encourage dialogue and cooperation between the parties, with the aim of reaching a mutually acceptable agreement.

Mediation and court intervention

If negotiations fail, mediation is the next step, followed by court intervention if necessary. Mediation involves a neutral third party who helps the disputing parties to reach a compromise. If mediation is unsuccessful, the matter can be taken to court, where a judge will make a binding decision.

Expropriation

In extreme cases, land may be expropriated to meet the objectives of the MPRDA. This is a last resort measure, used only when all other avenues of resolution have been exhausted. Expropriation involves the compulsory acquisition of land by the state, with compensation provided to the landowner.

Implications for energy and large infrastructure project developers

For developers, understanding and navigating Sections 53 and 54 is crucial. A range of strategies can be deployed to help mitigate risks and ensure compliance with the MPRDA, including:

• Undertake thorough due diligence: conducting comprehensive due diligence can help developers identify any existing mineral or petroleum rights over the property. This activity should include reviewing public registers and consulting with legal experts in the field to ensure all potential conflicts are identified and addressed. Due diligence should also involve a detailed assessment of the land’s suitability for the proposed development, taking into account any environmental or regulatory constraints;

   

• Engage with stakeholders: proactively engaging with all relevant stakeholders, including mineral and petroleum rights holders and the DMR, can help developers to clarify overlapping rights and negotiate solutions. Early and ongoing engagement can help to build trust and foster cooperation, reducing the likelihood of disputes arising;

• Harness legal and technical expertise: harnessing legal and technical expertise can help developers to navigate the complexities of sections 53 and 54 of the MPRDA. This will help developers ensure that all applications are complete and accurate, and that all necessary assessments are conducted before submission. Legal experts can provide valuable guidance at the outset of projects on the interpretation of the MPRDA and the preparation and reviews of robust permit applications.

The increasing complexity involved in navigating sections 53 and 54 of the MPRDA presents both challenges and opportunities for energy and large infrastructure project developers in South Africa. By adopting a proactive and informed approach, developers can navigate these complexities and contribute to the sustainable development of the country’s energy infrastructure.

The Preservation and Development of Agricultural Land Bill has the potential to significantly improve the management of land use and these conflicts in South Africa. By promoting cooperative governance, enhancing transparency, and aligning land use planning with broader spatial objectives, the bill could help mitigate the challenges associated with sections 53 and 54 of the MPRDA. For developers, this will mean a more predictable and supportive regulatory environment, which can facilitate the sustainable development of energy projects and other large infrastructure projects. The Bill has yet to be signed into law by the President and once it is applicable, the existing Subdivision of Agricultural Land Act 70 of 1970 will be repealed.   

Co-written by Christin Kleingeld of Pinsent Masons.