Picture: THINKSTOCK
Picture: THINKSTOCK

THE Constitutional Court on Thursday heard a claim from farmers’ organisation Agri South Africa (Agri SA) for compensation for alleged expropriation by the state of its mineral rights.

This is widely regarded as a test case to determine if the Minerals and Petroleum Resources Development Act expropriated rights that existed prior to its coming into force in 2004.

Should Agri SA succeed, it could clear the way for huge compensation claims by some former mineral rights holders. When the case was argued in the high court, the government estimated that the claims could reach R90bn.

The act says "mineral and petroleum resources are the common heritage of all the people of South Africa". " The state is the custodian".

Agri SA argued that the act destroyed common law mineral rights and vested similar, though not identical, rights in the state. This amounted to expropriation, said Gerrit Grobler SC, for Agri SA. It said that, under common law, people who owned land also had a "mineral right" to exploit what lay beneath it, and which could be sold.

Sebenza, a company in financial difficulty, owned coal rights on two farms before 2004. It was not authorised to mine, but its right allowed it to stop others from mining. It could sell the right, and did so — to Agri SA. The organisation argued that after the act came into force, it could no longer sell the right, which showed that it had lost it.

Under the new act, Sebenza had an "old order right". This gave it the exclusive right, for a year, to apply to convert it to a "new order right" – either to prospect or to mine.

Companies that converted their rights were compensated for the state’s expropriation by obtaining their new order rights. But Sebenza was insolvent and could not afford the conversion, Mr Grobler said.

Justice Zak Yacoob asked Mr Grobler whether the legislation had deprived Sebenza, or its "own tardiness" in not converting its right and its failure to remain solvent.

Counsel for the mineral and energy minister, Cassie Badenhorst SC, said there was no expropriation because this required that the state had to acquire what Sebenza lost.

Under the new act, the state did not acquire mineral rights. "It was not a taking by the state, but a creation of a new regime" — that opened the door for more people to acquire rights to mine.

The Centre for Applied Legal Studies, a friend of the court, argued that the act needed to be understood in the context of the history of discriminatory land ownership and skewed access to mineral rights.