R50 billion down the drain every year

Bureaucratic backlogs cost South Africa’s mining sector between R30 billion and R50 billion annually in lost opportunities.

Compliance costs and backlogs related to mining firms have been identified as key pressure points weighing on the sector, which is now facing stagnation and decline.

To revive its mining industry, the government has been urged to conduct a comprehensive audit of the regulatory and compliance burdens faced by mining companies.

The insights gleaned from this audit should be used to inform a revised Bill that grants certain exceptions to junior mining exploration companies.

This is according to the Bureau for Economic Research’s (BER) Robert Botha, who explained in a recent research note that a heavy regulatory burden and bureaucratic backlogs are some of the main pressures weighing on the local mining sector.

He explained that South Africa’s regulatory and legislative landscape should be viewed as a cumulative framework that has mutated into a “prohibitive fixed cost of production”.

Botha explained that this framework disproportionately affects the junior mining firms, which need to spend up to 30% of their operational budgets on compliance.

Concerningly, he said incoming legislation, the Mineral Resources Development Bill 2025, could see these costs rise by another 40% to 60%.

Botha warned that this could further stifle the sector and restrict the operational flexibility required for high-risk exploration.

South Africa has seen little to no exploration of new mines over the past few decades, a concerning sign for the future of the industry. 

This is because mining investors need to contend with long lead times – around 20 years from investment to operating at full capacity – and therefore need to be certain that their investments will pan out over multiple decades.

This means that the costs associated with compliance and severe backlogs faced in the sector severely discourage new and significant investments in the local mining industry.

Backed up

Botha explained that the severe backlogs faced in the mining sector – its “administrative crisis” – originated from the Mineral and Petroleum Resources Development Act (MPRDA).

This legislation, enacted in 2002, essentially abolished private ownership of minerals, vesting them in the state to ensure equitable access to, and sustainable development of, South Africa’s resources.

“The MPRDA framework changed the ownership model and operating environment of the mining sector, giving the state a mandate to manage mineral resources,” Botha explained. 

“By transforming mineral rights from immovable property into state-granted permits, the MPRDA reoriented the sector’s operational and legal foundations.”

He said this shift to state custodianship under the MPRDA also overwhelmed the department’s capacity, leading to the failure of successive administrative systems like SAMRAD, which was characterised by a lack of transparency and over-pegging. 

“The resulting backlogs are staggering; as of 2021, over 4,400 mining rights and 36,000 prospecting rights remained outstanding, stalling capital expenditure and costing the sector an estimated R30 billion to R50 billion annually in lost opportunities,” he said.

Botha pointed out that the licensing process for mining firms takes around two years in South Africa, compared to only eight months in Australia or six months in Botswana.

To address these constraints, Botha suggested that the rollout of a new online cadastral system must be accompanied by an aggressive, dedicated program to eradicate the existing application backlog. 

“In addition to clearing the backlog, unused licences should be withdrawn and cancelled to open up new areas and opportunities,” he said.

In addition, he said structural institutional reform is necessary to insulate the licensing process from political interference. 

“Establishing an independent Minerals Commission would create a professionalised Mining Licence Authority staffed by industry experts,” he said. 

“By firewalling the administration of the cadastre from the political cycle, South Africa can begin to restore investor trust and enforce maximum processing timeframes.”