Guest Opinion: Tragedy of Common Custodianship

Not knowing what to do, he did nothing; and with the fate of a double-dealer, at last he lost his power, but kept his enemies - Dr. Samuel Johnson 

The besetting phenomenon that when a resource is not ‘owned’ by any one person it is often unsustainably or recklessly used by all people has come to be called the ‘tragedy of the commons’. South Africa faces a scourge of illegal mining; being small-scale mining on otherwise ‘inactive’ mineral resources without legal authority. It both disrupts the legitimate mining industry and gives rise to ancillary criminal activity on a huge scale. The South Africa state has thus far proven unable to meaningfully combat this scourge, which does the credibility of its self-claimed role as ‘custodian’ of these resources a degree of violence. This article attempts to look at the problem from the perspective of ‘incentive’. Ultimately, custodianship itself may be a structural contributor to the devastation because of its incentive allocation, or lack thereof. 

The state became the ‘custodian’ of the country’s mineral resources through the adoption of the Mineral and Petroleum Resources Development Act 28 of 2002 (‘MPRDA’). Under the previous, the surface owner owned the minerals beneath, to which they (or a previous transferee) could transfer a sui generis limited real right to extract, prospect, and so forth.[1]This right, when coupled with the state’s permission to mine - however labeled - would entitle one to actually engage in mining.^[2] An illustration commonly used is that one may buy and own a car, but would also need a license from the state to drive it.

Because mineral rights had similar competencies to ownership, being discretionary use or disposal, they had value even when no mining was taking place.^[3] A mineral right holder had a pecuniary incentive to safeguard these rights in real terms; to actually enforce exclusive use by controlling access and preventing unlawful extraction. Previously, both landowners wanting to preserve ‘mineral rights’ market value and mining companies holding for later exploitation or alienation would be so incentivized - and indeed were - even if there was no ‘duty’ on them to do so. They had a direct pecuniary interest in not allowing mineral resources to be used as ‘commons’.

This incentive vanished with the introduction of state custodianship. In terms of section 3(2) of the MPRDA, the state may grant mining rights which comprise both the ‘ownership’ and ‘authorization’ components. This level of control is in furtherance of the state’s duty of redress as regards past patterns of inequitable ownership of mineral resources. This control came at a high price, entailing both the isolation and severity of the state’s mineral resources obligations.

As the state did not want to be liable for compensation, it framed this increase in power not as ownership (as this would amount to expropriation and necessitate compensation),^[4] but as ‘custodianship’. There is disagreement[5] as to what custodianship means in precise terms, but the consensus seems to be that the ‘right’ which a landowner could transfer ceased to exist - ‘simply disappeared into thin air’.^[6]

The prevailing theories hold that minerals are now held res communes, res publicae or in public trust. While of academic interest, going both to general doctrinal confusion and the legitimacy of no compensation, the true nature of custodianship is irrelevant for the purposes of the state’s duties. In Agri South Africa, the court stated correctly that the question regarding the nature of custodianship “seems ... neither here nor there.”^[7] Whether the state holds as ‘trustee’, or quastate in the res communes or publicae sense - and there are problems with all of these[8] - they all entail that the state has a greater duty of care than a mere owner, who may freely destroy or despoil his property.^[9]

Hence, in the state’s efforts to avoid title, it has gained something more onerous, a custodianship.^[10] This fiduciary responsibility is given further detail and extent in the MPRDA itself. It is under a positive duty to:

‘Ensure the sustainable development of South Africa's mineral...resources within a framework of national environmental policy, norms and standards while promoting economic and social development.’^[11]

The necessary and logical obverse inference is that the state should ensure that mineral resources are not: i) unsustainably developed, or extracted ii) with environmental damage, or iii) in a manner not contributing to development.

 

Illegal Mining

Sadly, the above is exactly what illegal mining causes. Illegal mining, being unregistered artisanal or small-scale mining, generally involves no environmental provision or care, no reinvestment and little return for either direct participants or local communities.^[12] The illegal miner is often only the lowest and most poorly remunerated member of a network of syndicates branching upward regionally, nationally and internationally. Further, in the South African context, the significant majority of illegal miners are not even citizens of the country. On how far removed a majority non-citizen, often violent, profit-offshoring, illegal and sprawling network of extractive criminal organizations are from environmentally friendly, sustainable development for South Africans, nothing further need be said. 

Accordingly, whatever the precise content or source of the state’s custodial duties, at the very least stopping illegal mining must be included.

While illegal mining has recently crept into active mineshafts, much happens in areas that are no longer mined, meaning that where present are only the state and the landowner. Because now only those actively mining are entitled to hold mining rights, there is no possibility of an ‘idle’ mineral rights holder.^[13] The landowner has no intrinsic incentive to combat the illegal conduct - they can derive no benefit from the minerals anyway. While there will be instances where a landowner will wish to protect other interests, these will be minimal. In South Africa, a majority of the minerals accessible to illegal mining are in abandoned mines in the Northern provinces. These are ‘brownfields’ areas and non-mining activity has long since stopped - there are often no ‘present’ landowners with the interests or resources to help stop illegal mining, only an idle mineral rights holder would have such an incentive. Where an incentive existed for untapped or currently unutilized mineral resources to be protected by those with an economic interest in them, the state has destroyed these incentives while at the same time taking on a positive duty to protect the resources. The state stands alone.

And, needless to say, it was unprepared for the magnitude of what it had undertaken. While the MPRDA criminalizes mining without authorization and prescribes fines and sentences,^[14] the actual enforcement of these sanctions have proved to be a near insurmountable challenge. The structural faults that beset the state at large do so equally severely in the mineral sector. Corruption is to be expected given the amount of money that may be illegally extracted. In 2017 the Directorate for Priority Crime Investigation (the Hawks) admitted to Parliament that corruption was one of the central obstacles to enforcement. There is enough money for both huge margins and huge payoffs. 

Ultimately, considering that the state draws no benefit from unused sites, it must in essence expend something for nothing when it attempts to police these areas. There is negligible economic or political return. This patently politically and economically ‘unprofitable’ venture naturally sees a relatively anaemic commitment of State resources.What is being lost, however, are the future benefits that would be due both the State and communities, had the sites been mined legally. 

This thought leads to a tempting impulse seeking to bring the illegal miners back into the fold. To this end, the MPRDA contemplates something smaller in scale than a mining right, namely a mining ‘permit’ granted pursuant to section 27. A permit is designed to formalize mining at the sub-industrial level. Nevertheless, even this less ambitious undertaking requires a potential miner to pay state royalties and comply with environmental directives - prohibitive or unprofitable or both. The ideal of small-scale miners uplifting themselves while complying with legislation is fantasy. Given that many are in the country illegally to begin with, there is no possibility of legitimisation. For the rest, why pay the price of compliance when there is scant enforcement? 

 

Conclusion

In South Africa, the problem therefore is not the state’s ineffectual ‘exercise’ of its custodial duties per se, but of their ‘existence’. When the state conjured the greater degree of control that the MPRDA entails, it created for itself duties that it was not alone capable of executing while ‘disincentivizing’ aid by other stakeholders. There are incentive problems in both the state’s custodianship and the landowner and now defunct idle rights holder. In other words, the state, in making itself custodian, took on obligations which it had not hitherto had, and for which it had no capacity in legal or factual terms. The results are predictable.

Written by Andrew van Wijk (LLM student in the Faculty of Law, UCT).