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Why strong financial provision regulations are essential for South Africa’s Just Transition

11 October 2022 at 9:06 am

Here’s why financial provision regulations – the rules which ensure that mining and other extractive companies provide financial security to rehabilitate the impacts of their operations – are so important when it comes to protecting the rights of some of South Africa’s most vulnerable communities.

Robust financial provision regulations can play an integral part in South Africa’s ability to move to a resilient low-carbon economy and provide meaningful post-extractive livelihoods for mining-affected communities.

The problem of abandoned, derelict and unrehabilitated mines

Nelly Nkosi is an environmental activist who lives near Ermelo in Mpumalanga province. One of the biggest challenges that she faces in her work for the Khuthala Environmental Care Group is the problem of an abandoned and unrehabilitated coal mine.

“In our community there are no recreation centres or public swimming pools, children often swim in mine pits that have filled with water. These places are dangerous, sometimes toxic and cause drownings to happen. Such places also threaten local livestock who stray into the pits and drown, or fall to their deaths.”

The problem of abandoned, derelict and unrehabilitated mines is a growing problem in many parts of South Africa. Even in areas where now defunct mines don’t present immediate dangers, the land is often so polluted that it cannot sustain post-mining livelihoods.

“Environmentally degraded areas make poverty and inequality worse. This goes against the objectives of the Mineral and Petroleum Resources Development Act (MPRDA), which includes the need to address historical social and economic inequality,” says CER attorney Tarisai Placedes Mugunyani

It is exactly these kinds of problems that financial provision regulations are supposed to protect communities against.

How can financial provision regulations help?

Robust and enforceable financial provision regulations ensure that companies that profit from extractive operations are accountable for environmental damage they cause, and that such companies put aside sufficient funds to cover the cost of environmental rehabilitation.

“This is particularly important to ensure that communities do not bear the environmental burden of extractive operations and the state doesn’t become liable for the costs of rehabilitating and managing the negative environmental impacts of extractive operations, rather than the companies who reaped the profits of those operations,” says Mugunyani.

In the case of new mines, strong financial provision regulations can protect against communities experiencing environmental rights violations as well as ensuring that there is a plan in place to prevent economic devastation once the mine has closed down – if they are enforced by the Department of Mineral Resources and Energy. Importantly, robust regulations should also help to ensure that irresponsible projects are not approved in the first place.

Planning for closure of the extractive activity must take place when the feasibility of the project is being assessed and before it has been licensed. That planning must take into account all stakeholders and it must include meaningful, informed consultation with them.

Given the cost to society of collapsed ecosystems and polluted water, air and soil, resulting poor health, resettlement, displaced livelihoods, and reduced resilience to adapt for climate change, it is not the place of financial provision regulations to prioritise ensuring the profitability or even affordability of extractive operations to corporations.

What needs to happen now

  • We call for the Financial Provisioning Regulation to be finalised, gazetted and brought into effect for all extractive projects to ensure regulatory certainty
  • We urge that instead of pandering to the rhetoric of the oil and gas industry that compliance with financial provision regulations is too expensive, the Department reconsider its approach, upholding the precautionary principle and the polluter pays principle to place people and their needs at the forefront of its concern, by bringing the full weight of the financial provision regulations to bear on that industry.
  • We call for adequate investment for effective implementation and enforcement of the regulations that includes technical support for communities affected by extractives to facilitate meaningful consultation on financial provision for closure planning; training of adequate numbers of officials responsible for implementing the regulations, both at the licensing stage and the enforcement stage for both the mining and oil and gas industries

Read more about what you need to know about financial provision regulations in South Africa.