Financial provisioning - latest proposed changes to NEMA



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Financial provisioning - latest proposed changes to NEMA

On Tuesday, 19 June 2018, the latest revision to the National Environmental Management Laws Amendment Bill, version "B" (NEMLAA5 Bill) was tabled.

In terms of current section 24P of NEMA, the requirements to provide for financial provisioning for rehabilitation, apply only to applicants for environmental authorisations operating in the mining and oil and gas industries.

In version "B" it is no longer a hint! It is a blatant proposed shift and a direct casualty of the One Environmental System. The current section 24P of NEMA is a mirror of what was historically provided for in section 41 of the MPRDA which was brought into NEMA in terms of the One Environmental System. The original intention was never to extend these requirements to other projects outside of the mining and oil and gas industries.

This will soon change if version "B" is promulgated in its current form. The proposed new definition of "financial provisioning" is agnostic as to the NEMA listed activities to which it applies. Further, section 24P is proposed to be substituted by a new version of this section that appears to be specific to environmental authorisations issued outside of the mining and oil and gas industries (albeit with some questionable drafting) and a new section 24PA will be inserted to deal with environmental authorisations issued specific to the mining and oil and gas industries.

Something that the mining industry will find intriguing is that the new proposed section 24PA proposes that the Minister of Mineral Resources may approve "drawdowns" of financial provisioning to support final decommissioning and closure from a period of 10 years prior to the expected date for final decommissioning and closure. Unlocking the funds set aside for rehabilitation has been a gripe of the mining industry for many years and it seems that these concerns have been heard.

Another real positive of version "B" is clarification of the possibility of making financial provisioning payments to a closure rehabilitation company as a suitable financial vehicle. This offers a major opportunity to create a new specialist rehabilitation industry in the country. Other proposed vehicles include parent company or affiliate company guarantees (which won’t be welcomed by the financial sector). The catch, however, is that these new possible vehicles are subject to Ministerial approval.

The NEMLAA5 Bill is the final version of the NEMLAA Bill which now sits with the Portfolio Committee on Environmental Affairs for endorsement.


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