“My business partner and I have embarked on a new endeavour to explore the possibility of mining chrome on land owned by myself and some of our neighbouring farms. We have been advised that we need to apply for prospecting rights. We submitted our application, but have now been advised that our application cannot succeed due to the fact that we are non-BEE compliant. Is this legally correct?” 

Rights to the exploitation of mineral and petroleum resources in our country are governed by legislative measures, with the State acting as the custodian of these resources and regulating prospecting rights in respect of these resources. Unfortunately, despite the legislative framework, there often appears to be uncertainty regarding the requirements, conditions and procedures for applying for prospecting rights, including to what extent BEE compliance is a specific requirement or condition for success.

Prospecting rights are governed by the Mineral and Petroleum Resources Development Act (“Act”). This Act prescribes the procedure to be followed when applying for prospecting rights and sets out the other requirements that have to be met in order to obtain prospecting rights. In respect of BEE compliance, the Act prescribes the following: 

Before breaking ground, an applicant must submit an application for evaluation to the Minister of Minerals and Energy for consideration. The Minister will only grant a prospecting right to an applicant if all requirements of the Act have been met, one of these requirements specifically being that the applicant has given effect to the objects referred to in the Act, which includes “to substantially and meaningfully expand opportunities for historically disadvantaged persons, including women and communities, to enter into and actively participate in the mineral and petroleum industries and to benefit from the exploitation of the nation's mineral and petroleum resources.”

The Act further states that the Minister may, having regard to the type of mineral concerned and the extent of the proposed prospecting project, request an applicant to give effect to the objectives referred to above.

From the above it is clear that the Minister will not grant a prospecting right if such application does not promote equitable access to mineral resources for historically disadvantaged people, and it can therefore be construed that BEE compliance is indeed a requirement without which a prospecting right cannot be granted.

Much of the confusion surrounding BEE compliance stems from the original Act prior to amendment thereof. In its pre-amended form, the Act simply stated that the Minister must approve an application if the applicant is not in contravention of any relevant provisions of the Act. It contained a further provision that the Minister may request the applicant to give effect to the specific objective of expanding opportunities for historically disadvantaged persons to enter into, actively participate in and benefit from the mineral and petroleum industries. The confusion arose as to whether the last mentioned provision was merely a discretionary request, or whether it was a requirement or pre-condition.
With the amendments to the Act being effective from 7 June 2013, the confusion has now been addressed with the fulfillment of the above objective now listed as a clear requirement for the granting of a prospecting right.

Accordingly, even though the Act does not expressly refer to any specific BEE requirements as a condition to prospecting rights, examining the Act as a whole reveals the necessity of promoting and expanding opportunities for historically disadvantaged persons to benefit from prospecting and will include BEE compliance. This is not to say that any condition relating to BEE compliance can be imposed by the state, but rather that generally imposing conditions relating to BEE compliance is allowable. 

It is accordingly advisable to seek the assistance of a BEE consultant to assist you with advice on how you can ensure that your new venture is BEE compliant before embarking on the application process for prospecting rights.