The Portfolio Committee on Environmental Affairs heard submissions on the National Environmental Management Laws Amendment (NEMLA) from the Western Cape Government (WCG), the City of Ekurhuleni and the Banking Association of South Africa (BASA).
The Department of Environmental Affairs (DEA) started the public hearings with a breakdown of the NEMLA Bill. In short, DEA clarified that the proposed amendments aimed to provide clarity by strengthening the integrated environmental management; the one environmental system; the compliance and enforcement measures; biodiversity and conservation measures; air quality management; waste management; and integrated coastal management.
The Western Cape Department of Environmental Affairs and Development Planning, gave a breakdown of the WCG’s proposed amendments which relate to the National Environmental Management Act (NEMA), the National Environmental Management Air Quality (NEMAQA), and the National Environmental Management Amendment Act (NEMAA). Among the key comments were that the definition of “financial provision” should 1) not be limited to mining activities and 2) should make adequate provision for all impacts; the inclusion of latent impacts in the scope of financial provisioning must be ensured; the Minister of Environmental Affairs should be afforded the power to act on section 31D(8), without concurrence from the Minister of Mineral Resources; and the competent authority for activities related to national priorities should be reconsidered. Furthermore, it was recommended that the licencing authority for air quality activities related to national priorities should be reconsidered. Finally, whilst the WCG does not support the principle of converting an environmental management programme (EMPr) into an environmental authorisation (“EA”), it will support the proposed amendment, only if the crucial qualifications included are retained.
The City of Ekurhuleni explained that, as a licencing authority, the City of Ekurhuleni would like more power to enforce the NEMAQA and to have more control over the licensing function. Specifically what is being asked for is the power to revoke or suspend an atmospheric emission license once it has been issued. As the Act currently stands, the City of Ekurhuleni can issue an atmospheric emission license for five years. It can review and vary it, but the Act does not allow the licensing authority to suspend or withdraw a license when it is necessary as a last resort. The City dealt with a case in 2016 in which a company started a tyre pyrolysis operation in Ekurhuleni. This particular company started this process and applied for a license. The company provided modelling predictions as to what the emissions would be. In this particular case, there were serious complaints literally from day one, especially from neighbouring companies. Some of the workers from neighbouring companies had to be booked off work and some were even hospitalised, but the City had no effective recourse to revoke the license. The amendment will serve as a last resort and will be considered rationally and legally. The decision can be repealed and companies can take the licensing authority to court if it believes the decision to suspend the license of the company is unlawful.
BASA explained that there are two areas which the Association has concerns over in the NEMLA Bill. The concerns are around clause 11 (section 28) and it pertains to the sentences “and any other person to whom the duty of care applies” (4) and “proportionally from any other person who benefited from the measures undertaken under subsection (7)”, which do not adequately define what the role of a lender is as far as that matter is concerned, nor does it adequately define who the responsible person is for the pollution or degradation of the environment. Similarly, section 28 (1) of NEMA does not adequately clarify who is responsible for the degradation of land. What the Association did when the regulations were promulgated in 2011 was go to the DEA to apply for an exemption from part 8 of the Waste Act. Unfortunately, the Association’s application was declined. BASA suggests changes to MEMA to specify who actually has the ‘duty-of-care’. The second part relates to who the responsible person is. The third recommendation that is being made by the Association is that the Waste Act, 1998 should be amended such that if a lender adhered to the best practises, they would have what is called ‘Safe Harbour’, a USA-developed piece of legislation that would suit the South African position.
The discussion concluded that the current process was to basically highlight the issues of concern. Some of the key issues that were discussed were, among others, if it is possible to incorporate the amendments proposed by the Western Cape Environment, City of Ekurhuleni, and BASA in the NEMLA Bill. The DEA will give a comprehensive response on each of the aspects raised in the DEA’s comments and response report. Whatever is discussed and engaged on further should be formalised, but has to also be in the interests of the country. Importantly, the various stakeholders have to engage even before the DEA has met with the Committee because, when the Committee engages with them, the likelihood is that the Committee will be moving towards concluding the NEMLA Bill. Where the Committee Members or the other stakeholders, are not satisfied, it will get in touch with the relevant stakeholder for clarification. At this present juncture, it is important for the various stakeholders to find each other so as to enrich the particular Bill which is before the Committee today.
The Chairperson commenced welcomed the Department of Environmental Affairs (DEA), the Western Cape Government (WCG), the City of Ekurhuleni, and the Banking Association of South Africa (BASA). He asked to be excused at about 11 am to attend to a matter that could not be postponed.
DEA on the National Environmental Management Laws Amendment Bill
After presenting the background to the NEMLA Bill, Mr Sibusiso Shabalala, Director: Law Reform, DEA, said the proposed amendments intended to provide clarity by strengthening the following:
Integrated environmental management
The proposed amendments intend to compel the simultaneous submission of an application for an environmental authorisation and other applications for any licences and/or permits required under any of the Specific Environmental Management Acts (SEMAs) for the same development. This approach will ensure the full utilisation of one process for information gathering to inform all decision-making related to the proposed development and to allow for the issue of integrated licences and authorisations. In addition, the amendments will provide for the streamlining and strengthening of licensing processes and requirements towards the efficient implementation of integrated environmental management.
One environmental system
Among others, the proposed amendments intend to provide a trigger for the simultaneous submission of all environmental applications under environmental legislation after acceptance of a mining right (if such applications are directly linked to the mining activity). It will clarify that an applicant and holder of environmental authorisation relating to mining activity must set aside financial resources for progressive rehabilitation, mitigation, remediation, mine closure and management of post-closure environmental impacts. In addition, it will clarify that the Minister of Mineral Resources was responsible for implementation of the licensing system and exemption provisions in terms of a waste activity directly linked to a mining activity.
The amendments, Mr Shabalala continued, also intend to clarify that an environmental management programme or plan approved for mining activities under the Mineral and Petroleum Resources Development Act (MPRDA) on, before or after 8 December 2014, was deemed to have been approved and an environmental authorisation issued under the National Environmental Management Act (NEMA). It also aimed to clarify that all pending environmental appeals lodged under the MPRDA before 8 December 2014 must be finalised in terms of the MPRDA; to provide for clarity on the continuation of environmental regulations developed under the MPRDA until such time that similar regulations are developed under NEMA; and to provide that residue deposits and residue stockpiles will be managed under NEMA and no longer under the National Environmental Management Waste Act (NEMWA).
These amendments, Mr Shabalala clarified, will ensure the full utilisation of one process for information gathering to inform integrated decision-making and to allow for the issuing of integrated licences and authorisations related to the implementation of the one environmental system. In addition, the amendments will provide for the streamlining and strengthening of licensing processes and requirements towards the efficient implementation of the one environmental system.
Compliance and enforcement measures
Mr Shabalala elaborated on the recommended amendments to the Act in terms of the compliance and enforcement measures. The proposed amendments intend to allow a successor-in-title or person in control of land to lodge a section 24G application for a structure or development, in order to close an existing legal loophole; to strengthen the powers of environmental authorities regarding the scope of persons to whom a section 28(4) directive may be issued; and to empower local authorities (municipalities) to issue section 28 directives.
The proposed amendments are also aimed at clarifying that the issuing of a section 28(4) directive must provide the recipient with an opportunity to make prior representations through pre-directive process, unless there is an urgent need for the protection of the environment; and to strengthen the powers of environmental authorities to recover anticipatory costs to be incurred by the State responding to an environmental harm from the responsible person.
The recommended amendments also intend to provide legal clarity pertaining to certain powers of the environmental management inspectors and environmental mineral resources inspectors; and to ensure that an environmental management inspector (EMI) and environmental mineral resources inspector receive the same standard of approved training. Furthermore, the purpose of the amendments is to empower the MEC to designate officials as EMIs to undertake compliance and enforcement with provincial environmental legislation; to empower the Minister to establish an EMI code of conduct through regulations; and allowed for flexibility in the drafting or formatting of templates prescribed for certain enforcement notices, but maintains a minimum standard in terms of content.
Biodiversity and conservation measures
The proposed amendments aimed to provide clarity on the actions, measures or methods to be undertaken to control or eradicate listed invasive species; that CFOs must be ex-officio members of the boards of the South African National Biodiversity Institute (SANBI) and the South Africa National Parks (SANPARKS), respectively; and in order to ensure compliance with King III Report on Good Governance.
Air quality management
Proposed amendments will clarify that the Minister has discretion to establish the National Air Quality Advisory Committee; clarify the two scenarios where a person may apply under section 22A of the National Environmental Air Quality Act (NEMAQA); provide clarity that the Minister may issue an integrated environmental authorisation where the Minister is identified as the licensing and competent authority on a listed activity that requires an environmental authorisation, atmospheric emission licence and a waste management licence; provide for a province to be the licensing authority where a listed activity falls within boundaries of more than one metropolitan municipality or more than one district municipality; and will ensure that an air quality appeal follows the appeal process implemented in terms of section 43 of the NEMA.
The amendments intend to provide a definition of “waste”; provide clarity that the Waste Management Bureau is established as a public entity with a board of directors responsible for, amongst others, the implementation of industry waste management plans; provide for governance matters; clarify that the national contaminated land register will only reflect contaminated land; ensure that a site assessment report and remediation plan regarding contaminated land are submitted simultaneously to the Minister for approval; provide for a legal mechanism to deal with exceptional instances where an MEC fails to take a decision to issue a waste management licence within the prescribed timeframes; and to provide for the payment of a processing fee for the variation of a waste management licence.
Integrated coastal management
Mr Shabalala concluded by looking at the recommended amendments on coastal management. The amendment intends to expressly provide for retrospective application of removal notices for illegal structures, because it is currently only implied and thereby bringing it in line with section 28 of NEMA.
Western Cape Government
Ms Anique Rossouw, Western Cape Department of Environmental Affairs and Development Planning official, highlighted that the presentation is just a brief summary of some of the main comments, which includes comments supporting proposed provisions included in the Bill; comments not supporting proposed provisions included in the Bill; and comments proposing additional amendments which are not included in the Bill. These comments relate to NEMA, NEMAQA and the National Environmental Management Amendment Act (NEMAA).
Ms Rossouw clarified that the definition of “financial provision” should not be limited to mining activities and should make adequate provision for all impacts. Based on the current wording of the Bill, the rationale underscoring the current definition of ‘financial provision’, namely, that it is not limited to mining, is supported. However, this rationale is not evident in the proposed wording of the draft definition. It is also not apparent from the current definition that adequate provision is being made for post closure impacts of, e.g. those in respect of shale gas.
It is proposed that the current definition is amended to read: monitoring, mitigation and remediation of latent or residual environmental impacts which become known in the future during post closure monitoring”. In addition, paragraphs (a) to (f) in the definition list certain aspects for which the availability of sufficient funds is required, e.g. decommissioning and closure of operations; and paragraph (e) should therefore refer to “and” as opposed to “or” which would mean that sufficient funds must be provided to possibly undertake all, and not only one of the activities listed in paragraphs (a) to (f).
Ms Rossouw continued that the inclusion of latent impacts in the scope of financial provisioning must be ensured. While the Bill proposes the deletion of the word “latent”, it is not clear what impact the deletion of ‘latent’ will have. NEMA does not provide a definition for “latent” or for “residual”. The legislation is not clear that latent impacts are included and must be addressed as part of financial provisioning to manage such impacts. If the word ‘latent’ is removed, residual impacts must be clearly defined to also include latent impacts.
The Minister of Environmental Affairs should be afforded the power to act in terms of section 31 D(8), without concurrence from the Minister of Mineral Resources. Currently, when Department of Mineral Resources (DMR) officials fail to perform their functions related to compliance monitoring and enforcement, the Minister of Environmental Affairs may, in concurrence with the Minister responsible for Mineral Resources, take reasonable steps where appropriate in terms of section 31 (see slide 7). However, the requirement for ‘concurrence’ should be deleted to ensure that, from a practical perspective, when the steps in sub-sections 31D(4)-(7) have failed to address the complaint, the Minister of Environmental Affairs will have the power to act in terms of subsection 31D(8).
Ms Rossouw also suggested that the competent authority for activities related to national priorities should be reconsidered. While section 24C(3) allows the Minister and a MEC to agree that applications for environmental authorisations with regards to any activity or class of activity may be dealt with by the Minister or MEC, this subsection does however not allow the Minister and a MEC to agree that applications for activities contemplated in section 24C(2B), i.e. activities related to matters declared as a ‘national priority,’ may be dealt with by a MEC. This is problematic in the following respects. Firstly, the WCG supports the principle of national priorities, but practical application of criteria determining these must be specific, transparent and reasonable. Secondly, the notion that only national government is competent to make decisions on matters declared national priorities is flawed. Thirdly, in terms of Schedule 4 of the Constitution, “environment” is a concurrent national and provincial competence. It is proposed that while the amendment which allows for a potential agreement in terms of section 24C(3), in instances where the Minister is the competent authority for activities related to a national priority, is supported, this is not the preferred option. The preferred options are to delete section 24C(2B) of NEMA and to use the existing section 24C together with an agreed set of criteria to reach an agreement between the Minister and a MEC in order for the Minister to become the competent authority in certain instances. This was a more appropriate and transparent mechanism to allocate national priority matters to the Minister in specific cases and it was consistent with the principles of differentiation.
The licensing authority for air quality activities related to national priorities should be reconsidered. The Bill proposes that section 36(8) of NEMAQA be expanded to also allow for agreements between the Minister and MEC/municipalities for matters of national priority. This is supported as a second option and is not a preferred solution as it does not adequately acknowledge the constitutional allocation of ‘air pollution’ as a municipal function. The preferred option is the deletion of section 36(5)(c) of NEMAQA. This will allow district and metropolitan municipalities to be the licensing authorities, even for matters of national priority, but still allow the Minister and licensing authority to reach an agreement based on the facts of a specific application for the Minister to become the licensing authority.
Ms Rossouw concluded that the WCG does not support the principle of converting an environmental management programme (EMPr) into an environmental authorisation (EA), as per the current formulation of the Bill. WCG supports the proposed amendment only if the crucial qualifications included are retained. An EMPr is not an EA and the two have different roles and functions. In terms of the recent Western Cape High Court decision of Mineral Sands Resources (Pty) Ltd, which raised questions about the relationship between an environmental impact assessment (EIA) and an EMPr (see slide 14), an EA evaluates the significance of impacts and identifies mitigation measures, whereas an EMPr is an implementation tool for such mitigation measures. The proposed new section 12(4B) provides for a crucial qualification that section 2(4) and the proposed new section 12(4A) “do not apply in the instances where an application for an environmental authorisation in relation to activities ancillary to exploration, prospecting, mining, or primary processing was not obtained, was refused or there was failure to obtain an environmental authorisation”. Whilst the WCG does not support the principle of converting an EMPr into and EA, it will support the proposed amendment only if the crucial qualification mentioned above is retained.
City of Ekurhuleni
A Mr Stewart C. Green, Divisional Head: Legal Compliance, City of Ekurhuleni, explained that the City of Ekurhuleni was quite an industrialised municipality, with a large number of industries. It also has air quality issues. It was part of the Highveld Priority Area (HPA) and air quality in some areas was quite poor. As the licencing authority, the City of Ekurhuleni would like more power to enforce the NEMAQA and to have more control over the licensing function. Specifically what was being asked for was the power to revoke or suspend an atmospheric emission license once it has been issued. As the Act currently stands, the City can issue an atmospheric emission license for five years. It can review and vary it, but the Act does not allow the licensing authority to suspend or withdraw a license when it is necessary as a last resort. In contrast, other Acts, such as the Waste Act, does have a provision which permits the withdrawal of a license, especially section 56 of the Waste Act, which allows the licensing authority to revoke or suspend a waste management license. Similarly, section 93B of the Biodiversity Act allows the licensing authority to withdraw a biodiversity permit. In terms of the Environmental Impact Assessment Regulations, 2017, there is also provision to suspend or withdraw an environmental authorisation. NEMAQA does not contain these provisions and the City believes that it was a fundamental enforcement tool.
Mr Green explained that the City dealt with a case in 2016 in which a company started a tyre pyrolysis operation in Ekurhuleni. Tyre pyrolysis is a process whereby waste tyres are converted into diesel or fuel. It is a highly noxious activity. The company started this process and applied for a license. The company provided modelling predictions as to what the emissions would be. In this particular case, there were serious complaints literally from day one, especially from neighbouring companies. Some of the workers from neighbouring companies had to be booked off work and some even went to hospital. The emissions from the pyrolysis factory went into the offices of the neighbouring businesses and it really caused a problem. The City issued this company with an atmospheric emission license, but it did not have the enforcement tools to enforce compliance. It did not have a grade one EMI so the City was unable to issue a 31L compliance notice. The City cannot use section 28 of NEMA currently because it is not delegated to the local authority. The only enforcement tool available to the City is the Environmental Conservation Act 31A directive, which is not necessarily useful in an air quality-related scenario. All the City could do is engage in correspondence with the company and try to convince them to comply with the conditions of their license.
Mr Green explained that when the matter was referred to him as the enforcement manager, it was decided that the time had come to withdraw the license because the company could not be allowed to continue. The City issued a notice of intent to the company to withdraw the atmospheric license. It came to the City’s attention that it could not issue such a letter because there is the legal principle functus officio, i.e. when a government functionary makes a decision, or has discharged their responsibility, they cannot revisit, overturn or change that decision – it has to go to a higher authority, unless the law allows the decision-maker to change that decision. The only way would be to go to court to overturn the City’s own decision, which is time-consuming and costly. The City approached DEA and lodged a query at the EMI Help Desk. The response confirmed that the City was functus officio and it cannot withdraw a license once it was issued and the only enforcement tool available to the City would be to go to court and get an interdict against the company or go to court and overturn the City’s decision.
Based on this, the City of Ekurhuleni, Mr Green stressed, would like NEMAQA to be amended through the insertion of clause 36A, which is basically verbatim from the Waste Act and allows the licensing authority to revoke or suspend an atmospheric emission license where it becomes necessary, where there is serious non-compliances with the conditions of that license, where the City has already engaged the company to bring them into compliance, they have failed, and the only option available to the City is to withdraw. Under the Waste Act, there has actually been such a scenario. For example, in terms of the Shongweni Landfill in KZN, the DEA actually suspended their waste management license for a particular period due to their non-compliances. Even issuing a notice of intent to withdraw is enough to cause a company to come into compliance. The company can be put on terms whereby it is given 30 days to comply or its license will be suspended. Companies do respond when they realise that their license to operate is about to be withdrawn. This type of power is similar to other agencies. The Civil Aviation Authority has the power to suspend the operating licenses that they have granted. When it comes to air quality, where one cannot control the gasses and they have an immediate impact of health, suddenly the license cannot be suspended for a period of five years.
The proposed amendment will serve as a last resort and will be considered rationally and legally. The decision can be repealed and companies can take the licensing authority to court if it believes the decision to suspend the license of the company is unlawful.
Mr Pierre Venter, General Manager, BASA, pointed out that there are two areas which the Association has concerns over in the NEMLA Bill. The concerns are around clause 11 (section 28) and it pertains to the sentences “and any other person to whom the duty of care applies” (4) and “proportionally from any other person who benefited from the measures undertaken under subsection” (7). It did not adequately define what the role of a lender is nor does it adequately define who the responsible person is for the pollution or degradation of the environment. Similarly, section 28(1) of NEMA does not adequately clarify who is responsible for the degradation of land. When the regulations were promulgated in 2011, BASA went to the DEA to apply for an exemption from part 8 of the Waste Act, but unfortunately the application was declined.
Conditional Exemption Proposed
When the application was made, Mr Venter highlighted, the Association looked at it from a responsible lender sector perspective. The application was broken up into two parts. The first part dealt with the retrospective perspective, where clearly as lenders the banks are not in a position to exercise the retrospective control. The Association asks for a blanket exemption from retrospective liability. From a progressive perspective, the Association suggested that as a sector lenders should be responsible and, therefore, the DEA should consider imposing ‘safe harbour’ lending arrangements in which lenders would be required to comply with. If they did not, there would be a contingent liability that they would attract. In the Association’s motivation, there were five or six annexures. The Association did international research and looked at 10 countries and what their legislation says on lender liability is concerned. The South Africa position and the implications for South Africa were explored. BASA approached the Institute of Valuers and the Institute gave BASA the opportunity to present nationally to all registered valuers in the country to make them aware of contaminated land and what they should look for when they go out and value properties. These are not environmental experts and valuations are basically based on what is seen on the ground.
Mr Venter explained that in support, BASA created a contaminated land field guide that helped valuers identify what could be contaminated land. This would be reported back to the lender concerned and an environmental expert would go out and assess the site. BASA also made all frontline staff aware of land contamination though the Bankseta training course. Bank personnel who deal with these matters on an ongoing basis actually go through international training through the United Nations (UN) or the International Finance Corporation (IFC) to be experts in social environmental risk. As an industry, the Association created the document Principles for Managing Social and Environmental Risk, which was signed off by BASA’s board. In it, four areas are focussed on: Own Operations, Products and Services, Investments, and Lending Practices. Guidelines for the Association’s members were formulated and are called the Waste Management Guidelines.
South African Perspective
In BASA’s motivation to the DEA when it applied for exemption, it was stated that, from a retrospective perspective, there are principles of equity and fairness involved and the Constitution provides protection in this regard. The Association is unable to price term loans, which amounts to about R1.3 trillion and this will probably cost the sector about R10 billion. The way the sector will recover the money would be to get it back in the form of higher interest rates and other product lines. Outside of that, the Association would face a liquidity squeeze if it has sizeable books where land was contaminated and the Association had to downgrade the value of its security on which it places reliance. South Africa is a resource intensive country. At least 30% of the JSE is related to resources and there are many sectors and companies listed on South Africa’s stock exchange where there is potential for contamination. In the USA it trudged along quite nicely where the lenders felt a level of uncertainty around what is their obligation. Then there was a court case which triggered a partial withdrawal from lending to high risk sectors within the USA (62.5% of loans which were declined by lenders in high-risk sectors) and 45% of lenders withdrew from the sector. In South Africa, there has been no claim against a lender because they are granted a loan to a party which contaminated the land. There have only been two instances: one was where one of BASA’s Development Finance Institutions (DFIs) actually had an equity stake in a company and when that company went into liquidation, they became responsible for remediating that land. The second instance was where lenders have repossessed properties only to find out that they were contaminated after the fact. If there is a situation where the DEA seeks to recover money from a lender because of land contamination, and where they have just merely lent them money, it could have ramifications similar to what took place in the USA. BASA does not know how much land is actually contaminated in South Africa.
Safe Harbour (USA)
The USA created legislation called Safe Harbour. It distinguished between participation and management. Where one had an equity stake in a company, or direct control of operations or the management within that company, one is, along with all other parties, potentially liable if land is contaminated to pay for the remediation of that land. The second part of what they did was to create the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), which consisted of the best practises in terms of the processes that lenders need to follow, prior to granting a loan, during a loan, during the step-in or takeover by the lender and where a lender is closing on a property. If a lender adhered to the best practises, they would have what is called Safe Harbour, which is essentially what BASA is proposing for South Africa to adopt.
There are two parts of NEMA, Mr Venter emphasized, which the Association is suggesting ought to be changed, where it becomes much more specific as to who actually has the ‘duty-of-care’. The wording within section 28(4) “and any other person to whom the duty of care applies, to…” to be amended to read “an owner of land or premises, a person in control of land or premises or a person who has a right to use the land or premises on which or in which any activity or process is performed or undertaken, to-…”.
The second part relates to who the responsible person is. The proposed definition in respect of “the responsible person” for section 28(4) should be used in respect of “a beneficiary”. The third recommendation is that Waste Act should be amended, as detailed in abovementioned application for exemption attachment.
Problems Associated with Register
There is a second area in NEMLA that also relates to the Waste Act which the Association is concerned about. In section 41(1) there are a number of problems.
Firstly, the register is held outside the Deeds Registry. South Africa has a world class Deeds Registry that is rated among the top ten in the world. To contain the register outside of this dilutes the registry. BASA is suggesting that it should be in the registry. Outside of that, the Department of Rural Development and Land Reform DRDLR), who actually own the Deeds Registry, are busy with a strategic project at the moment. BASA has had the opportunity to engage with NEDLAC on what is known as the Electronic Deeds Registry Bill. This is where the Deeds Registry will be converted into an e-platform, where all the paper will be removed and it will create a bespoke system to interface with the numerous bodies that are required to be involved when the transfer of property is affected (SARS, Department of Home Affairs etc.).
Secondly, Mr Venter elaborated, the register is unavailable to the public. If one wants it, one must go through a lot of trouble to actually source information. It is not actually a solution because of the timelines that apply to getting the information. It will affect the normal transfer of properties because of undue delays. In South Africa, there are over a million loans and almost 100 000 transfers that are affected. In terms of the Banks Act, annually, lenders must revalue their property portfolio at market value. This information must be obtained from nearly 1 million properties every year and this is not feasible or practical. It also places BASA in contravention of the Banks Act. Lenders are very strictly regulated in South Africa. Commercial Banks adhere to the Banks Act and regulations thereto. South Africa’s Banks Act is taken from a global regulatory framework in Basel. Because there could be over-valuing or overstating the value of properties because it is not known if they are contaminated or not, the Association is in contravention of the Banks Act. BASA had to go to the Reserve Bank to explain the position to them and the Reserve Bank suggested that BASA keep looking to see if South Africa’s legislation cannot be brought into alignment with international best practice.
Thirdly, Mr Venter stressed, this prejudiced consumers where they purchase and acquire a property and do not know if the land is contaminated. The legal fraternity, lenders and intermediaries are all adversely affected. Another concern in keeping a singular register off sight is that it becomes outdated and inaccurate.
Mr Venter said in 2011 BASA went to the Law Society and the DEA. A methodology was worked out for the immediate capturing of all contaminated land in South Africa without changing anything. The Note System refers to a subservient registry in the Deeds Registry in which the initials ‘CL’ is used to designate contaminated land. Anyone who interrogates a particular property would know whether it is a contaminated piece of land. In addition, given the project that is underway to convert the Deeds Registry into an e-platform, is an opportunity to create an electronic bespoke link between the Deeds Registry and the DEA, where it can go straight into the register if someone is looking for information around the remediation plan on a particular property. Banks have got a number of IT specialists and if the DEA needed any guidance or assistance in designing a bespoke register, the Association would be happy to assist.
Acting Chairperson, Mr Z Makhubele (ANC) gave over to Members for questions and clarifications.
Mr T Hadebe (DA) asked the DEA if it is possible to incorporate the amendments proposed by the WCG, City of Ekhurhuleni, and the BASA in the NEMLA Bill.
Dr Z Luyenge (ANC) asked DEA to ensure monitoring and evaluation of local government level. It was equally important to facilitate the full participation of the begging community because of where they are located. DEA must also determine the feasibility of decentralising or delegating some of their functions to local government, especially the metros, because of the existing capacity that might exist in metros. Where local authorities and municipalities do not have capacity, DEA must engage further and ensure that these levels of government do participate.
The Acting Chairperson reminded everyone that the Committee usually gives DEA some time to go and think about some of the issues raised and come back to the Committee on all the submissions. The City of Ekurhuleni presented on a clear issue that can be responded to. The other two presentations may need to be gone through by the DEA and for the DEA to return and present its own case. He asked what BASA meant when it said its application was declined. What was the basis on which its application was declined?
Mr Venter responded that, at the time, they simply received a one pager that did not give any reason for why the application was declined. As a responsible sector, banks believe it needs to play a role and ensure that it lends properly and that the necessary due diligence is done. This would have been advantageous to the DEA because now there would be a sector that is also supporting them in terms of contaminated land. Secondly, concerning the register, the Bank has never been able to get any explanation from the DEA as to why they could just put the initial ‘CL’ against properties who sit in the bank’s deed registry. Since 2011, the BASA has stated that it would support the DEA where it can and help them to get a proper bespoke registry in place. The board could be approached to see if money could be gotten if funding is the issue. This is very important, because banks are unable to quantify properties, which is its A-Class security in respect of contamination. Every now and again, it crops up, but banks needs to quantify it and access this information on an on-going basis to, among others, improve its lending and protect its assets.
The Acting Chairperson said at some point, the DEA will perhaps give clarity on its own view. ON WCG’s presentation, he asked if DEA has ever engagement with them? Or does the DEA have any questions for any of the presenters today, issues that the DEA would like them to clarify even more?
Mr Ishaam Abader, Deputy Director-General: Legal, Authorisation, Compliance and Enforcement, DEA, agreed that where the DEA has to give a more comprehensive response, the Department will do so. This process today is to basically highlight the issues of concern what can be addressed, will be addressed. However, the proposal that the DEA go back and discuss some of issues is preferred. Some of the issues raised by the Western Cape the DEA has already been discussing and the Department were in support of some of the proposals; and not in support of others. They have also made additional comments on what the DEA is proposing to amend. Therefore, the DEA has engaged with the Western Cape Government, which will answer Mr Hadebe’s question whether the DEA can make these amendments. If there is anything additional that the DEA or the Committee would like included in the Bill, it is during this process that these additional issues are distilled based on what the DEA and the presenters have proposed and eventually the Committee, as the decision-makers. Concerning delegations and functions to the local authorities, specifically making capacity available, the DEA has presented previously to the Committee about local authority capacity development. In this regard, the DEA has indicated that is does so from a waste perspective and an EMI perspective, by ensuring that EMIs are designated at a local authority level. The DEA has also indicated that there has been an increase from the time that DEA started, to the present, in terms of the numbers of designated EMIs, which provinces and the numbers which each province has. From the perspective of some of the issues that were raised, the DEA has interacted with some of the sectors in relation to addressing them. The DEA will give a comprehensive response on each of the aspects raised in the DEA’s comments and response report.
Mr Mark Gordon, Deputy Director-General: Chemicals and Waste Management, DEA, in response to the presentation made by BASA, highlighted that part 8 of the Waste Act deals with contaminated land as well as the remediation of the contaminated land. DEA has been in engagement with BASA and in terms of the original Apartheid provisions of the Waste Act, BASA had applied to be exempted from all provisions. At that time, the Minister had refused. DEA values the contributions and there have been valuable contributions with which the DEA would like to engage BASA. Currently, there are some difficulties with the Deeds Act. According to the current provisions of the Deeds Act, it does not allow the current register to be completely taken over in terms of the deeds registry. The DEA is engaging with DRDLR, but the information is available as a register with the Department. It is public information and there is a process underway to transfer it onto the South African Waste Information Centre website, but DEA do not have a problem with making the information available to the public. The Department will value the engagement on the exact provisions, especially in terms of international best practises as well, to see how that can be incorporated.
The Acting Chairperson asked whether there is a response to the City of Ekurhuleni’s proposal.
Ms Linda Garlipp, Chief Director: Law Reform and Appeals, DEA, responded that the proposal sounds very reasonable but it was discussed at Working Group 2 of the MINTECH process. MINTECH members were not in favour of including that proposal in the Bill. DEA requested permission to go back and consult on exactly what the reasons were for not including it in the current Bill. On BASA, she said section 14 of the Waste Act, which deals with contaminated land, stated once land is contaminated the Minister has the obligation to provide that information to the Deeds Office to include it in the Deeds Registry. Moreover, once land is found to be contaminated, the seller has the obligation to inform any potential buyer that the land is contaminated. Why is this not sufficient?
Mr Venter responded that the Association engaged with representatives from the Deeds Registry, the Law Society and the DEA to seek a solution. The ‘CL’ coding that was spoken about in the presentation would allow one to accurately know that a piece of land has been contaminated. But the conversation has never gotten to the position where there has been a formal dialogue between the DEA and the Deeds Registry to actually take that information and put it into the Deeds Registry. It just died despite the Association’s best efforts to get it in. This engagement would be welcomed by the Association because it is a very easy task. If there are 5 000 contaminated properties in South Africa, it would take somebody to capture that code onto these properties and it will be there until such time that they have been remediated where the DEA would have to request the Deeds Registry to remove the ‘CL’ indicator off the property. There is an obligation on a seller to disclose that the land is contaminated, but it does not always happen. This happens particularly in sectors like commercial agriculture, where the pesticides and fertilisers have soaked into the underground water system and actually contaminated it. This is very seldom disclosed. There are legal ramifications that the purchaser can take against the seller not disclosing it, but this only comes after the fact. The lawyer or conveyancer who acts for the buyer of that property is unable to check whether there is an indicator in the Deeds Registry that highlights that it is contaminated. The intermediary, unless the seller tells them, is unable to identify that the land in question is contaminated. If money is lent over a 30-year period, the bank will only find out after the fact that money has been lent against a property where the value has been inflated because what has been subtracted from the market value is the cost of the remediation.
The Acting Chairperson assured everyone that more time will be given for further engagement.
Mr Abader said that all the relevant experts have been brought to the public hearing just to assist in terms of their specific areas of work.
Ms Frances Craigie, Chief Director: Enforcement, DEA, for clarification, asked about BASA’s concerns around section 28. By way of illustration, she said the the DEA had a particular land owner who destroyed part of a pristine ridge within Knysna. What the DEA has found lately is that quite a number of people are going insolvent. They obviously take out a loan from a financial institution. At that point, they could not pay the bank back anymore. The bank then repossesses that property. The DEA then issued a directive to the landowner, who could not do the rehabilitation required. The DEA then realised that the property was going back to the bank. It then issued a directive to the bank, because at that point the bank was the owner of the property, which forced the bank to do the work which the landowner should have done. From the perspective of the Association, that would be fine because the bank is the owner of the property because they had repossessed it. If, for example, the bank had not repossessed it in that instance, and the landowner had not been able to do the work, the DEA would have stepped in and paid for the work, which was quite substantial. The bank would have benefited from the DEA’s intervention because their loan would have been protected. They then would have been able, if they later repossessed the land, to sell it onto somebody at a higher price and would have benefited from what the government and the taxpayer had paid for. The DEA would never be able to recover the money back but the bank would have benefited. Is that the situation that the Association is trying to avoid from the amendment that the DEA is proposing?
Ms Venter answered that Ms Frances’ referred to a process issue, clarifying that if a person went insolvent and they had degradated their land, it is not clear why the DEA would want to remediate the land prior to it being taken over by somebody else. For example, what a bank would do in a situation like that is, depending on the cost of the remediation, it may even abandon the property. If they do not, and the land is bought and sold, they would have to take into consideration the cost of the remediation. Anybody who buys the property at an auction would have to do exactly the same thing. If the cost exceeded what the value of the land is, the bank would repossess it and a third party would buy it at an auction sale. In the USA, a super fund was created to protect against instances like that, where the high risk sectors contribute a portion of their money into a big pot to make sure that where the state has to step in to remediate land where there is nobody to hold liable, that there is money sitting in a fund that will allow the DEA to do the remediation out of a fund, rather than out of its own pocket. There is a solution to this. It was proposed back in 2011 that South Africa should also consider implementing the super fund. In instances, for example, that have just been mentioned, a super fund would be ideal.
The Acting Chairperson highlighted that whatever is discussed and engaged on further should be formalised but has to also be in the interests of the country. There is an impression that banks are untouchable, but discussions should be in the interests of even the poor so that the laws that are passed by Parliament takes care of almost everybody. At this juncture, it is important for the various stakeholders to find each other so as to enrich the particular Bill which is before the Committee today. All the presenters were quite clear on what they were proposing. The Committee is happy that the DEA has heard the points. They will need to find each other in further engagements which will simplify the work of the Committee.
The meeting was adjourned.