118 Chapter Seven
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innovative methods of financing closure and significant policy and legislative amendments to ensure post mining sustainable development and economic viable post mine land use’.624
It is submitted that the substantive content of the financial security provisions for mine closure and site rehabilitation clearly assigns the responsibility to rehabilitate the mine sites to the polluters and it is clear that the legislative provisions for mine closure in South Africa are generally consistent, if not more onerous on paper, with the international expectations internationally.625 This dissertation has shown that while the South African financial security provisions for mine closure and site rehabilitation contains some improved mechanisms for environmental protection, management and rehabilitation, the implementation of many of these mechanisms has yet to achieve the environmental ideals of sustainability as enshrined in the South African Constitution.626 The One Environmental System particularly the application of the financial security provisions for mine closure is still new with most of its provisions not yet having been properly tested, applied or understood, it is important to ensure its effectiveness going forward.627 Although South Africa has a progressive mineral law regime there are evidently some gaps and aspects that are insufficient and need to be updated by embedding the appropriate and adequate financial provisions of closure and rehabilitation of mines. The current provisions are not enough to prevent the future legacy of abandoned, derelict and ownerless mines. The government should formulate the framework that is clear, stable and predictable which can evolve but not fluctuate nor be unequally applied.628
It is trite that the purpose of the financial security is to ensure that there will be sufficient funds to pay for mine site rehabilitation and post closure monitoring and maintenance at any stage in the life of the project, including early or temporary closure.629 These financial securities are one of the regulatory mechanisms which provide confidence to both the government and the community that satisfactory rehabilitation and closure will be
624 Ibid.
625 R. Alberts et al ‘Complexities with extractive industries regulation on the African continent: What has ‘best practice’ legislation delivered in South Africa?’ (2016) Article in press, available at http://www.sciencedirect.com/science/article/pii/S2214790X16301010? (accessed on 10 January 2017).
626 Mclean and Carrick (see note 135 above)
627 R. Alberts et al (note 625 above).
628 RC Boas, ML Barreto, D Franceschi and JR Kahn ‘Mine Closure: Iberoamerican Experiences’. (2000).
(Module V, Economy and Finances). 114.
629
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achieved.630 Financial securities are not unique to the regulatory scheme governing mine closure and site rehabilitation in South Africa, but are also applied in many mining jurisdictions albeit in different forms.
In theory, such mining securities ensure sufficient funds are available to a government to rehabilitate mine sites in the event operators fail to meet their mine rehabilitation and closure obligations.631 The financial security mechanisms should be able to specifically address the financial risk to government by ensuring that mining securities provide a high level of financial security that reflects the full cost of rehabilitation for mine sites. Without proper financial security for mine closure and rehabilitation, the costs to the community and country from environmental damage will outweigh the benefits derived from mining. It is against this background that this dissertation considered alternative models that have the potential to provide sufficient and adequate levels of financial security to the government at a lower cost to the mining industry.
It is submitted that the South African financial security mechanisms ‘raise a set of design issues, including the level of security to be required, the financial mechanisms to be allowed, the conditions under which the financial security is released, and the interaction of the financial provisions with other areas of law—most importantly, insolvency law’.632 This research illustrated those issues and identified a set of correctable weaknesses present in some of the financial provision mechanisms. For example, the failure to adjust the master rates to be in line with inflation and the failure to update the DMR guideline document results in inappropriately and inadequately low levels of financial security.633 It is argued that ‘from the standpoint of economic efficiency and legal effectiveness, financial security mechanisms for mine closure and site rehabilitation can be improved’.634
It is submitted that, ‘financial mechanisms need to be in place to ensure sufficient resources exist at the end of the mine’s life to implement closure plans, and fund appropriate compensation and redundancy schemes.’635 It is beyond doubt that ‘the responsible
630 P Gorey et al ‘Critical elements in implementing fundamental change in public environmental policy:
Western Australia’s mine closure and rehabilitation securities reform’ (2016) 23(4) Australasian Journal of Environmental Management 370-381.
631 The Mining Rehabilitation Fund – The First Two Years’ (note 26 above).
632 Boyd (note 26 above).
633 Van Zyl (note 24 above).
634 Ibid.
635 A Warhurst ‘Planning for Closure from the Outset: Towards Best Practice in Public Policy and Corporate Strategy in managing the Environment and Social Effects on Mining’ in A Warhurst and N Ligia (eds) Environmental Policy in Mining: Corporate Strategy and Planning for Closure (1999) 502.