Immediately prior to May 1, 2004, the principal legislation governing mineral rights in South Africa was the Minerals Act, which came into effect in 1991. The MPRDA that came into effect on May 1, 2004 replaced the Minerals Act. The MPRDA contains certain transitional measures with regard to mineral rights, prospecting permits, and mining authorizations (old order rights) obtained prior to May 1, 2004.
The MPRDA vested custodianship of all minerals in the South African State.
There are four principal authorizations available under the MPRDA with respect to minerals – a reconnaissance permission, a prospecting right, a retention permit, and a mining right.
The Minerals and Petroleum Resources Development Act (PDF- 3.49MB)
The MPRDA introduced a broad-based socio-economic charter, the Mining Charter, that sets a framework, targets and timetable for effecting the entry of HDSAs into the mining industry. Targets, timeframes and commitments are set for human resource development; employment equity; non-discrimination against foreign migrant labour; mine community and rural development; housing and living conditions; procurement; ownership and Joint Ventures (which has a target of 26% equity ownership by historically disadvantaged South Africans within 10 years); and beneficiation. In addition, applicants for a mining right must have a labour and social plan approved as part of the application process and community issues are usually prominent in such plan.
Applicants for a mining right are required to conduct an environmental impact assessment and submit an environmental management program, while applicants for a prospecting right, mining right or reconnaissance permit have to submit an environmental management plan. Prospecting and mining rights only become effective under the MPRDA on the date that the corresponding environmental management plan or program has been approved. Requirements for making financial provision for the remediation of environmental damage as well as for the issuing of a closure certificate are included in the MPRDA and include the requirement that financial provision must be in place before approval of the environmental management plan or program and the fact that an application for a closure certificate now becomes compulsory upon lapsing of the right or cessation of activities.
The South African government presented Parliament with the Royalty Bill, which proposed a royalty payable to the South African government for PGMs. Two subsequent revisions of the bill have been tabled. The proposed legislation has not yet been passed but is scheduled to become effective in 2009. It is currently not certain what the Act of Parliament resulting from the Royalty Bill will contain and the effect of any resulting legislation is uncertain.
The Minerals and Petroleum Resources Development Act (PDF- 3.49MB)
Mining companies in South Africa are taxed at the standard corporate tax rate of 29%. In addition, a secondary tax on companies is payable at the rate of 12.5% on the excess of dividends paid to shareholders over dividends received from other South African companies. The total effective nominal tax rate on distributed profits is, therefore, 36.89%. No other tax or withholding tax is payable in respect of dividends paid to shareholders.
Corporate tax is paid on all income, plus 50% of capital gains, less deductible operating expenditure and a capital expenditure allowance. Deductible expenditure includes rehabilitation expenditure actually incurred and annual contributions to an approved rehabilitation trust. Prospecting and capital development expenditure is treated as follows:
South African Taxation Matters: www.sars.gov.za
Since the adoption of a new constitution in February of 1997, South Africa has continued its status as one of the most stable countries in Africa.