January 20, 2020

South Africa’s Financial Provisioning Regulations’ transitional period extended to 2021

The transitional period for South Africa's Financial Provisioning Regulations, 2015 has again been extended, this time until 19 June 2021. This article outlines the rationale behind extending the deadline, and the different deadlines which now affect the stakeholders in South Africa's mining sector, including the oil and gas industry.

The transitional period for South Africa's Financial Provisioning Regulations, 2015 ("Financial Provisioning Regulations"), which regulate the determination and making of financial provision for the costs associated with undertaking rehabilitation and remediation of environmental impacts caused be prospecting, exploration, mining or production operations, as well as latent or residual environmental impacts caused by such activities, has again been extended, this time until 19 June 2021.

Previous Transitional Periods

The Financial Provisioning Regulations, which are published in terms of the National Environmental Management Act 107 of 1998 ("NEMA"), came into effect on 20 November 2015. A transitional period of 15 months was initially applicable for holders prospecting and mining rights and permits and exploration or production rights, who had applied for such rights and permits prior to 20 November 2015 ("existing rights and permit holders"). However, this transitional period has already been extended twice, initially until 19 February 2019, and thereafter until 19 February 2020.

A different transitional period for holders of offshore oil and gas exploration and production rights was published in April 2018, with such offshore oil and gas exploration and production rights holders being given until 19 February 2024 to comply with the Financial Provisioning Regulations.

In terms of the new extension of the transitional period, which was published on 17 January 2020, existing rights and permit holders (other than who had applied for offshore oil and gas exploration and production rights prior to 20 November 2015) will now have until 19 June 2021 to comply with the Financial Provisioning Regulations.

Effect of the new deadline

The new deadline is no doubt aimed at achieving the finalisation of revised regulations which will replace the Financial Provisioning Regulation before the end of the new transitional period. The revised regulations have gone through several iterations following extensive stakeholder engagement. The last draft was published for public comment in May 2019, and at the last stakeholder meeting in June 2019 it was indicated that the aim was to publish the revised regulations in October 2019. However, the revised regulations have not yet been published, and in light of the new extension of the transitional period, it is unclear when this will happen.

This extension of the transitional period further extends the differing obligations placed on existing rights and permit holders (ie those who applied for rights and permits prior to 20 November 2015) and new entrants into the market, who have had to comply with the Financial Provisioning Regulations since their enactment on 20 November 2015.

A copy of the notice amending the transitional period until 19 June 2021 can be accessed here.