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New bottom line

February 2015

The exploration and mining world is changing. This message could not have been clearer at the recent International Bar Association conference in Tanzania on mining in Africa. In South Africa, the many challenges facing the industry have created a need for companies to review their approach to legal compliance. It's time has come to move beyond standard compliance towards a new view of the triple bottom line.

The three aspects of this new view are the so-called social licence to mine, substantive compliance with environmental laws, and dealing with the consequences of occupational injuries and diseases. These three aspects have direct bearing in one way or another on most of the eight main challenges facing exploration and mining industry in South Africa. The challenges are the global financial crisis and its impact on global commodities demand, regulatory and legislative uncertainty, inadequate infrastructure (water, power, roads, rail and ports), labour uncertainty, health and safety, environmental compliance requirements, illegal mining and community activism.

Of the three elements of the new triple bottom line, the social licence to mine is the broadest. The licence reflects the status of the relationship between the mining company and the community at any given point. It takes into account the full spectrum of potential impacts of exploration and mining activities, particularly in relation to host communities.

The best way for an exploration or mining company to gauge the state of its relationship with a given community is to analyse the status of its social licence from time to time. An analysis will provide a useful indication of whether a company is meeting the community's expectations, and the level of risk that the state of the relationship presents.

The second aspect of the new triple bottom line, substantive compliance with environmental laws, ties up with the challenge of operating in a climate of regulatory uncertainty. Despite several amendments to the laws on environmental authorisations within the mining industry, uncertainty remains. In fact, it appears that the unintended consequence of the amendments is that there is even greater uncertainty about environmental authorisations.

This is because the question of who has the final say on the environmental aspects of prospecting and mining is still a grey area despite the "One Environmental System" which came into effect on 1 September last year. The Minister of Mineral Resources will issue environmental authorisations and waste management licences for the industry, but the Minister of Environment Affairs will still be the appeal authority for environmental authorisations.

Adding to the uncertainty is that it is unclear whether there will be a transitional period for the requirement that banks, insurance providers and trusts must include provisions for rehabilitation, de-commissioning and remediation of negative environmental impacts. This is an onerous provision, and goes far wider than the financial provisions in the Mineral and Petroleum Resources Development Act (MPRDA) prior to its amendment.

The confusion over the transitional period stems from an apparent contradiction between the newly amended National Environmental Management Laws and the amended MPRDA.

The third aspect of the new triple bottom line, dealing with occupational injuries and diseases, is being brought to the fore with proposed legislative amendments, particularly to the Compensation for Occupational Injuries and Diseases Act.

There is significant emphasis on extending the responsibility of an employer in relation to occupational injuries and diseases. This, together with the emphasis on the social licence and compliance with environmental laws, underlines the need for a fundamental shift in thinking in the exploration and mining industry. The concept of the new triple bottom line embodies that shift and could help companies safeguard their stability amid uncertainty.

The team

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