Issued by the FW de Klerk Foundation on 12/02/2024 

The Upstream Petroleum Resources Development Bill [B13B-2021] (“the Bill”), which seeks to introduce significant amendments to laws governing the exploration and extraction of petroleum resources, will have profound implications for South Africa’s energy sector and constitutional framework. The Bill was passed by Parliament’s first house, the National Assembly (“NA”), on 26 October 2023 and is currently before Parliament’s second house, the National Council of Provinces (“NCOP”) to either pass, amend, or reject the Bill. Should the NCOP pass the Bill without any changes, it will go to President Ramaphosa to be signed into law.

The FW de Klerk Foundation remains steadfast in its commitment to make our constitutional democracy a reality for all South Africans. In light of this, the Foundation conducted a comprehensive analysis of the Bill to see if it erodes the rights and freedoms guaranteed by the Constitution. In the Foundation’s submission to Parliament, we advocated for legislative measures that uphold the rule of law, promote equality and safeguard property rights.

Fundamental concerns with the Bill:

At the heart of our assessment lie fundamental concerns regarding the Bill’s compatibility with the constitutional values of accountability, openness and the rule of law, as well as the right not to be unfairly discriminated against based on race:

1. The Bill will grant extensive powers to the Minister of Mineral Resources and Energy, which raises profound questions about accountability, transparency and the rule of law. 

2. The Bill’s lack of clear guidelines and oversight mechanisms surrounding the Minister’s discretion creates a fertile ground for arbitrary decision-making (infringing the rule of law) which poses a significant threat to democratic governance.

3. The Bill’s introduction of race-based provisions, including a 10% set-aside for Black Economic Empowerment (“BEE”) companies, fail to satisfy the stringent requirements required for it to qualify as a law advancing persons disadvantaged by unfair discrimination (in terms of section 9(2) of the Constitution). These provisions, thus unfairly discriminate based on race, which the Constitution prohibits.

Section 9(2)’s requirements:

For a law to fall within section 9(2) of the Constitution, the Constitutional Court has said (see, for example, Minister of Finance v van Heerden) it must meet three internal requirements:

1. Historically disadvantaged individuals or groups: The Bill’s measures must target individuals or groups who have been historically disadvantaged by unfair discrimination. The measures do and the Bill passes requirement one.

2. Designed to achieve objectives: The Bill’s measures must be reasonably capable of achieving their intended objectives. A rational connection between the preferential treatment of BEE companies and the achievement of the legitimate government purpose of promoting substantive equality is thus required to justify differential treatment based on race. However, because of the Bill’s lack of concrete mechanisms to prevent the economic benefits going to a politically connected minority, as opposed to the majority of black South Africans (defined as “Africans, Coloureds and Indians” by the Bill), such a rational connection fails to exist. This may perpetuate social disparities rather than alleviate them.

3. Avoidance of undue harm: Our Constitution’s long-term goal is for our society to be a non-racial one. However, the Bill’s race-based measures impose such substantial and undue harm on those excluded from its benefits that this goal would be threatened. 

Other concerns:

The Bill also raises significant concerns about mandatory state ownership requirements and compulsory joint corporate structures, potentially infringing on the rights to freedoms of trade, occupation and profession (section 22) and property (section 25). 

The Bill seeks to depart significantly from the existing regulatory framework established by the Mineral and Petroleum Resources Development Act, 2002 (“MPRDA”). By introducing a separate legislative regime specifically tailored for the upstream petroleum sector, the Bill challenges the unified approach enshrined in the MPRDA. This departure necessitates a re-evaluation of the legal landscape governing the exploration and extraction of petroleum resources in South Africa.

Foundation’s proposed remedies:

To address the myriad concerns raised by the Bill, the FW de Klerk Foundation proposed numerous remedies to Parliament, aimed at ensuring the legislation aligns with constitutional principles and international standards.

Foremost among these are:

1. That the race-based provisions either be removed, or be amended to meet the legal requirements.

2. That the mandatory 20% state ownership requirement be re-evaluated to ensure it does not infringe on rights, including, but not limited to, property and freedom of trade, occupation and profession.

3. That clear and objective criteria be included for the Minister’s exercise of discretionary powers to prevent potential abuses of power, to ensure adherence to the right to just administrative action (section 33 of the Constitution) and to ensure transparency and accountability (as mandated by section 195 of the Constitution).

The FW de Klerk Foundation calls upon all South Africans to join us in supporting our mission to make our constitutional democracy a reality for all South Africans! Your contribution will empower us to continue advocating for constitutional rights and freedoms.