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Future Expropriation of Prospecting and Mining Rights Uncertain - International Law Office

International Law Office

Energy & Natural Resources - South Africa

Future Expropriation of Prospecting and Mining Rights Uncertain

October 20 2008

The draft Expropriation Bill 2008, if approved, is likely to affect investors with interests in South Africa's prospecting and mining rights. Although the bill provides for the expropriation of prospecting and mining rights for less than their market value, its status remains unclear following a recent suspension of government deliberations.

The bill is intended to replace the existing, pre-constitutional Expropriation Act 1975 and endeavours to give effect to Section 25 of the Constitution(1) by empowering the state to expropriate property for a public purpose or in the public interest.

The bill provides that the minister responsible for public works may expropriate any property for a public purpose or in the public interest. Since the concept of property is broadly defined in the bill, prospecting and mining rights fall within the ambit of property that can be expropriated.

In the absence of an agreement with the mineral rights holder, the compensation payable for expropriated property under the bill is determined by the minister. Such compensation must be just and equitable and must reflect an equitable balance between the public interest and the interests of those affected.

However, unlike under the act, the market value of expropriated property under the bill is not the sole factor to be considered when determining the compensation payable. The bill specifically provides that compensation may be below the market value of the property. The amount of compensation payable can be taken on review, but the courts are entitled only to approve or reject the compensation amount and may not propose an amount that they consider to be reasonable in the circumstances.

On August 14 2008 the government formally suspended deliberations on the bill. However, it was not withdrawn under the rules of the National Assembly, as required for a formal withdrawal. If the bill is not withdrawn or reconsidered by the Portfolio Committee before the next general election (expected to take place in April 2009), it will lapse.

The committee recently indicated that it hopes that the bill will be reintroduced in 2009, after “broader consultation and effective public participation”. This view is echoed by the director general of the Department of Public Works, who stated at a media briefing in Cape Town on September 17 2008 that “there is still room for… the bill… to be reintroduced”. Given its potential implications, these statements are unlikely to provide comfort and security for the holders of South Africa's mineral rights.

For further information on this topic please contact David Kriel at Fasken Martineau by telephone (+27 11 685 0800) or by fax (+27 11 685 0818) or by email (dkriel@jnb.fasken.com).


(1) Constitution of the Republic of South Africa Act (108/1996).

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