Feeling for the Stones
- May 14
- 10 min read
Updated: 6 days ago
South African mining continues to attract serious foreign capital, including from China, because the opportunity is real. But the financial case is only one part of the investment. A mine that appears attractive on paper can be defeated by licensing risk, labour instability, community conflict, environmental delay, exchange-control mistakes, regulatory intervention or litigation visible only to those who know where to look.
In this article, attorney Wessel Badenhorst draws on nearly three decades of litigation and legal advisory experience, much of it mining-related, to explain why Chinese investors should approach South African mining as a river to be crossed carefully. The question is not only whether the asset is good. It is whether the investor has the right people beside him before the first stone is touched.
Feeling for the Stones
Notes for the Chinese reader approaching South African mining
There is a Chinese phrase that illustrates how one should think when working in a place where the landscape is uncertain. It emerged in China’s post-revolutionary era as a guide to cautious reform, and became one of the great expressions of disciplined progress:
摸着石头过河.
Mōzhe shítóu guòhé.
Cross the river by feeling for the stones.
If you are looking at South African mining, you are standing at the edge of a river. The far bank is the operating mine: profitable, compliant, properly run, with capital in, product out, labour stable, regulators satisfied and communities managed. The stones beneath the surface are the law, the regulators, the unions, the communities, the land, the water, and the people on every side of every table.
The first mistake is to think that the mine is the investment. The mine is only part of the investment. In South Africa, the real investment includes the right to mine, the ability to keep that right in good standing, the labour environment, the communities, the water use rights, the environmental obligations, the politics around the licence, and, one day, the lawful movement of capital out.
Many investors entering South African mining spend most of their time on the financial proposition: resource, price, extraction cost, logistics, offtake, funding and return. Those questions matter, but they are not enough. A financial model has no regulator, no union, no community dispute, no section 54 stoppage, and no exchange-control problem at exit. South African mining is where those assumptions are tested.
After nearly three decades of litigation and legal advisory experience, much of it in and around South African mining and alongside Chinese capital investors, my view is that the right hand to help with the river crossing belongs to seasoned advisers engaged at the beginning and present throughout. Not the lawyer called when something has gone wrong, but the lawyer in the room before the application is filed, the option taken, the partner chosen, the capital committed, the first stone touched.
How wide is the river?
I have made the count more than once: more than seventy distinct statutes, regulations and codes of practice bear directly on a single mining operation, not counting municipal by-laws or the general corporate, tax and financial laws that apply to any serious business. The number is not the point. The point is the landscape.
The mineral and mining landscape changed in 2004, when the Mineral and Petroleum Resources Development Act (MPRDA) replaced the Roman-Dutch system of private mineral rights. Section 3 declares the mineral and petroleum resources of the country to be the common heritage of all the people of South Africa, with the state as custodian for the benefit of all South Africans.
You do not buy a mining right in South Africa in the old private-law sense. You apply for one. The Minister grants or refuses it.
That difference matters. The grant is not an ordinary commercial transaction. It is a regulated permission, conditional on far more than financial and technical capacity. The Minister must be satisfied that the operation will be ecologically and economically sustainable, that it will contribute to the social and economic development of the area, and that it will advance the position of historically disadvantaged South Africans. These are statutory criteria, not policy aspirations.
The MPRDA is the foundation. On top of it sits the Mining Charter, in its third iteration of 2018, with requirements for ownership, procurement, employment equity and human resource development. Beneath it is the social and labour plan regime, which requires public participation, a five-year plan, annual compliance reporting, and updated submissions every five years for the life of the right.
Then the environmental layer. The National Environmental Management Act sets the framework, with specific laws on waste, air quality and biodiversity beneath it. The National Water Act governs the water use licence, without which no mine of any size operates lawfully. A water use licence application I once advised on took most of two years and a complete reconstruction of the technical case before it was issued.
Then the Mine Health and Safety Act is a specialist discipline. Codes of Practice issued by the Chief Inspector of Mines form part of the legal environment. A serious incident, a fatality, or a section 54 instruction can stop even a relatively uncomplicated open-cast operation for weeks and impose criminal liability on identified individuals. These Codes are not merely best practice. They are law, and they require active involvement by employees and trade unions.
Then the employment, empowerment, corporate, tax and exchange-control layer. The Labour Relations Act, the Employment Equity Act, the Skills Development Act, the Broad-Based Black Economic Empowerment Act and its Codes, the Companies Act, the Income Tax Act, transfer-pricing rules, the Mineral and Petroleum Resources Royalty Act, the Currency and Exchanges Act and the Financial Intelligence Centre Act all form part of the operating terrain. None of this is unusual to a serious operator. All of it may be unfamiliar the first time you meet it in South Africa.
The question the new operator often thinks about last is the one that deserves careful attention at the beginning: the cross-border movement of capital. The South African Reserve Bank’s Financial Surveillance Department administers the exchange-control system, and its reach extends to every significant movement of capital across the border in both directions. Every offshore remittance of substance must be processed through an authorised dealer. The bank must satisfy itself that the transaction is compliant and that the original inward investment was properly recorded when it arrived. A foreign investor who brought capital in through a structure that was not properly approved at the time may find at exit that the money cannot be shown to be foreign in origin. The structure must be right from the beginning. The exit depends on it.
Then the land and community layer: informal land rights, spatial planning, heritage resources, customary law where it applies, municipal development plans, by-laws and rates. Each layer is operative. Each layer can stop a mine.
And lastly, there is litigation risk. A mining right is a limited real right in respect of land that may belong to another person. That can produce disputes over surface use, access, neighbours and competing operations. I have recently come to the successful end of a legal battle over the legality of a partially developed mining shaft that took six years to resolve.
This is the river full of stones. It is not one risk. It is many risks moving together.
What is the weather doing?
Anyone who tells you this is a stable regulatory environment is selling you something. It is not, and it has not been for some time – the weather constantly changes.
South African mining legislation does not stand still. The Act itself, the Mining Charter, the social and labour plan requirements, environmental regulation and the royalty regime have all seen material change since 2004. Regulatory instability makes it harder to price risk, and foreign capital that cannot price risk tends not to arrive, or not to stay. That instability also creates pricing opportunities that a more settled market does not produce. The gap between perceived risk and actual risk is often where the most attractive transactions sit. But that gap is dangerous if you cannot tell the difference.
Most recently, on 20 May 2025, the Minister of Mineral and Petroleum Resources published the draft Mineral Resources Development Bill, 2025 for public comment, at the same time as Cabinet approved South Africa’s Critical Minerals and Metals Strategy. The Bill proposes significantly enhanced sanctions, including fines of up to ten percent of annual turnover and, for certain offences, imprisonment of up to ten years. It expands categories of offences and strengthens the State’s enforcement and intervention powers, including in relation to the suspension or cancellation of rights. Whatever its final form, it is one of the clearest signals in a decade of where the political and regulatory weight is directed.
South Africa’s standing in the Fraser Institute’s annual survey of mining jurisdictions has also weakened. The most recent available ranking places the country 68th of 82 jurisdictions overall. Know this before you invest. Know also that South Africa continues to hold geological attraction, which is why serious capital still arrives despite the policy environment.
On the ground, the labour environment is a specialist field of legal practice in itself. The two main unions, NUM and AMCU, have not settled their rivalry since the Marikana tragedy. Illegal underground sit-ins were prevalent in late 2023 and have continued sporadically. Sympathy strikes can be called without underlying demands at the employer’s own operation. In one matter, 2,205 mining employees of a particular mine went out on strike days before Christmas in support of a dispute at a different mine entirely. Official unemployment remains above thirty percent, while the expanded measure is materially higher. The political undercurrents inside mines are not always visible from the boardroom, and sometimes not from the chief executive’s office either.
The discipline you bring to compliance at home is the discipline you will need here. Anti-corruption posture, compliance culture, documentation, audit trail: these are disciplines serious capital already understands. I am not telling you about a foreign value system. I am telling you where the local regulator’s eye sits, and what happens when it sees something it does not like.
This is a moment of regulatory and political flux. Flux is not impossibility. For those who know the terrain, it is the condition in which preparation matters most. If you arrive with the right professional support and a properly assessed asset, you may be buying into a sector at a discount because of the noise. If you arrive without that support, you may simply be buying the noise.
Who walks with you across?
In China, the private commercial lawyer’s role in business life is often different from the role senior lawyers play in South African mining. The lawyer may be seen as the person called at the end of a problem, after a charge, a regulator’s instruction, a breakdown in the relationship, or before a court process begins.
In South Africa, that approach is too late. Senior commercial and mining lawyers are among the first advisers you should engage. They remain close throughout the acquisition of the asset and, in serious matters, beyond it. Legal advice should be obtained before the option is taken, the partner chosen, the application filed, or the first manager hired. By the time the problem is visible, the most important decisions may already have been made, and the most consequential of them were made before the lawyer arrived.
The experienced mining lawyer is not valuable because he can recite the legislation. He is valuable because he knows where transactions and operations actually break, and which risks are legal only in form but commercial in consequence. He knows when to bring in the specialist and how to integrate their advice before the investor commits. He reads the regulatory weather alongside the chief executive. He is in the room when the union arrives, and when the inspector arrives.
The lawyer should not be the person called at the end of the road. Properly used, legal judgement walks the road with the investor.
This matters because the South African commercial mining lawyer is the only professional in the room whose advice carries legal professional privilege. The engineer’s report can be ordered in discovery. The environmental consultant’s assessment can be called for by a regulator. The financial adviser’s analysis can be demanded in arbitration. The advice your lawyer gives you cannot. Legal privilege belongs to the client, not the lawyer. It allows the frank assessment of your position, the honest evaluation of your exposure, and the options you considered and did not pursue, to be discussed in full confidence. You can therefore tell your lawyer everything, and you should.
No commercial lawyer of any seriousness pretends to have all the answers. The serious lawyer has a network: mining engineers, hydrologists, tax counsel, labour counsel, forensic accountants, community specialists and security advisers. Knowing whom to call, when, and how to integrate their work is much of the job. What makes that network useful is having a single point of first call who knows your operation well enough to hear a problem, assess what it is, and put you in front of the right expertise before you have spent time and money in the wrong room.
Where does the crossing actually end?
The grant of the mining right is not the end of the road. It is the permission to begin.
What follows is the operating mine, where the regulatory weight, labour pressure, community work, environmental compliance, capital discipline and political weather are felt most heavily. The licence to mine is not the destination. It is the beginning of a long journey in which a strong river must be crossed.
The stones in the river are felt for one at a time. There is no map of the riverbed that someone hands you on the day the first cheque is signed. There is the lawyer at the elbow, the engineer beside the lawyer, the accountant beside the engineer, and the chief executive making the calls only the chief executive can make. The crossing takes years because the river is the mining industry itself: heavily regulated, politically exposed, commercially attractive and unforgiving of assumptions.
“Cross the river by feeling for the stones” is a warning against the certainty of doctrine. It is also a warning against the certainty of any plan that has not been tested against the ground.
South African mining does not punish foreign investors because they are foreign. It punishes assumptions. It punishes late advice, informal arrangements, undocumented understandings, weak local structures, underpriced labour risk and the belief that a mining right is the end of the legal work rather than the beginning of operational accountability.
The way through is not optimism. It is sequence, discipline and early judgement.
If you come to South African mining with certainty, you may lose. If you come prepared to feel for each stone, and you have chosen carefully whose hand you will take, you have a very different prospect.
"The hand you take matters. The moment you take it matters even more."
Written by:
Wessel Badenhorst
May 2026
