There are so many environmental ‘buzz words’ out there e.g. environmental sustainability, environmental accountability, ecological degradation and so on. However, from a developer’s point of view, whether it is a building company, a mining company or a farmer, the bottom line is: What will the costs be for development?

There are the actual costs of the development itself, such as labour-hire, machine hire, purchas ing, construction etc. but often the cost of the environment is overlooked. In this case, the referral is not necessarily towards the damage caused to the environment, but to the actual monetary value of costs involved when development is planned.

Town Development

In one case study, a townhouse development was planned on 2 Ha on an area that was classified as a Critical Biodiversity Area (CBA) according to the Municipality’s Spatial Development Plan. However, it was also zoned Residential 1. Part of the application to the Municipality was to rezone the area to a Residential 2 development. The developer focused on the fact that the site was zoned Residential 1 but neglected to regard the fact that the site was situated on a CBA. This effectively means that if the site is to be cleared of vegetation to make way for the construction of townhouses, it would require environmental authorization from the provincial Department of Environmental Affairs since this activity triggers a Basic Assessment to be completed.

Section 42 (2) of the Spatial Planning and Land Use Management Act 16 of 2013, clearly states that in considering and deciding an application, a Municipal Planning Tribunal must, when considering an application affecting the environment, ensure compliance with environmental legislation. Therefore, the developer went through the entire process of rezoning the site only to discover that the Municipality will only consider permitting subdivision if the developer can provide the environmental authorization from the Department of Environmental Affairs.

This mistake has set-back the development of the townhouse complex for a year, to allow for environmental application to the Department of Environmental Affairs. Cost-wise, construction penalties were involved and the appointment of an Environmental Assessment Practitioner (EAP) to conduct the Public Participation and the Basic Assessment and appointment of specialists to conduct the vegetation surveys and terrestrial ecological impact.

To estimate the exact cost of the development is difficult and dependent on the size and location of the site and also property value. On average, for a 6 unit townhouse, the following areas will incure costs: civil engineering, structural engineering, the surveyor, the architect, as well as all municipal connections fees.  Water, sewer, stormwater, electricity, civil works, cost of building, etc. can add up to R10 000 000. Site development plans for townhouses can be up to R100 000 or more. Land cost, estate agent, conveyancing and VAT to SARS can further increase costs to about R9 000 000. The cost of a Basic Assessment is between R80 000 – R150 000 and specialists normally charge SACNASP rates, which are between R800 – R2 236 per hour. Penalties involved in delayed construction are dependent on the contract between the developer and the building company.

Agriculture

For years farmers were under the notion that they could develop their farmland in a manner that would optimally produce crops or promote commercial farming, without approval from any person or governing body. With the promulgation of the National Environmental Management Act in 1998 (NEMA), these mindsets started changing and more awareness was brought to the attention of the farmers, that activities such as clearing 20Ha or more of vegetation for establishing irrigated land have an environmental impact. Constructing a dam has environmental impacts, confining animals in small spaces has an  environmental impact and so the list goes on.

In one case study, a farmer constructed a dam within a tributary with a capacity to store 700 000m3 of water and a dam wall of 7m high for irrigating 300Ha of crops. An additional area of 44Ha was cleared to increase the irrigated land and about 17Ha of old croplands and 9Ha of the natural vegetation was destroyed for the construction of the dam. The farmer was unaware of the legislation involved and continued with these activities without environmental authorization, water use license, or ploughing certificate.

To rectify the mistake, a Section 24G NEMA application must be made to the provincial Department of Environmental Affairs. A Section 24G application is essentially an ex post facto authorization, to legalize the unlawful activities conducted without the required approval/s. Section 24G thus provides an administrative process coupled with a calculation of a fine.

Cost-wise, the farmer would have to pay a dam engineer which can cost between R100 000 – R200 000 to be able to register the dam and for the appointment of an Environmental Assessment Practitioner (EAP) to conduct the Public Participation, the Section 24G application which can cost between R200 000 – R500 000, since a full Environmental Impact Assessment will have to be conducted. Specialists for the wetland impacts and ground studies charge SACNASP rates which are between R800 – R2 236 per hour. This farmer must also apply for a Water Use License, which can cost between R20 000 – R50 000 and a ploughing certificate which normally is R200/Ha + costs. Since the activities occurred without environmental approval the Section 24G fines were calculated to possibly be between R10 000 – R60 000 since it is an individual with no prior environmental offences.

From this case study, the agricultural section needs to take note that financially the cost of conducting illegal activities, will at the end of the day,  tally up to a substantial amount and simply is not worth it.

Most definitely a cost-effective approach would be to first contact an EAP and discuss the proposed development on the farm and enquire what approvals would all be required. Thereafter to request quotes and to decide, based on the monetary outlay for the project versus the profit gain of the agricultural development when producing, if the development would be feasible or not.

Mining

Together with the agriculture sector, the mining industry is the entry-level sector that promotes development. Mined materials are used for the construction of roads, buildings, to generate electricity, provide material to produce ceramic products, beauty products, jewellery and so forth. It is a multi-billion-rand worth of industry and undoubtedly economically important for the GDP of any country.

In South Africa, the mining industry is regulated by the Department of Mineral Resources (DMR) and from an environmental point of view, the Mine Environmental Management Directorate within the DMR regulates the environmental authorization applications, which must comply with NEMA and the Mineral and Petroleum Resources Development Act (MPRDA).

In other words, depending on the size and longevity of the mine, either a Basic Assessment or a full Environmental Impact Assessment must be conducted. Depending on the site location and minerals to be mined and whether or not mineral processing will take place will further determine whether applications for a Water Use License or Air Emissions License etc. will be required.

In terms of costs, an applicant must be able to prove financially and technically that he/she can establish a mine (e.g. establishing and operating costs of mine). Also, the MPRDA is clear that no mining may commence unless financial provision, that is acceptable to the DMR, is provided and that such financial provision must be sufficient to prevent pollution, ecological degradation, and rehabilitation of the mine.

As with any development, further costs to the applicant will be the appointment of an Environmental Assessment Practitioner (EAP) to conduct the Public Participation, Environmental Impact Studies, possible Water Use License, and specialists etc.

Mining, however, is unlike most developments since it does have a lifetime limit and mostly has continuous activities that can lead to environmental degradation if not managed correctly. The responsibility is on the applicant to ensure that mining does not lead to pollution or environmental damage  or if the mine is in contravention of the conditions of the environmental authorization or cause harm to the health and safety of any person.

This responsibility carries a running financial cost as mines are normally required to have continuous monitoring programs in place, to evaluate and assess impacts and if any are detected, they should implement measures to rectify and prevent further pollution.

To save money in the long term, wise applicants apportion rehabilitation costs as part of the operational costs of mining, while in operation.

For example, if a hard rock quarry’s operational costs are estimated at R152/m3 to mine and the selling price is R300/m3, it will result in gross profit of R148/m3. The estimated rehabilitation costs (conduct profile blasting and shaping of slopes, re-establishment of vegetation, erosion control, alien vegetation control, etc.) are estimated at R2 400 000 and the estimated dolerite reserves are about 1 762 190m3.

Thus to reach the estimated rehabilitation monies, R1.37/m3 should be apportioned for rehabilitation funds. With mining, however, the financial guarantee for rehabilitation must be submitted before the permit/right is issued, thus the applicant, in this case, must submit R2 400 000 as a financial guarantee before a hole in the ground is even made.

If the applicant increases the operational costs with R2/m3 (thus from R152/m3 to R154/m3) to include rehabilitation monies as part of operational costs, the gross profit per month will decrease, but at the end of the mine’s lifetime, R3 524 380 would have been set aside for a rehabilitation/closure fund. From this fund, the EAP and specialists that are required to apply for closure can be appointed and if any additional rehabilitation work is required, it will be covered. Whatever is leftover, is money in the pocket for the applicant.

Even better would be if the applicant follows a mine development plan that makes way for concurrent rehabilitation: thus, once a phase is mined out, it is rehabilitated while the next phase is being developed and since R2/m3 are apportioned for rehabilitation, there will be a continuous supply of funding while the mine is active. This will also ensure that by the end of the mine’s lifetime only one phase will remain to be rehabilitated, which will cost much less than rehabilitating an entire mine area.

Once the Closure Certificate is issued by the DMR, the R2 400 000 will be released back to the applicant and the applicant will be free from any environmental liabilities post closure.

From the above, it is clear that good financial planning during the active phase of mining will result in savings at the end of mining. Too often mining applicants do not plan or save and mine until the mineral is exhausted and when the time comes to rehabilitate the site and apply for closure, there are no funds available. In these cases, the mines are dormant and the applicant has no means of generating money to pay for rehabilitation or closure. Thus Closure Certificates are not issued and the applicant remains responsible for any environmental degradation at infinito. Also, the financial guarantee from the DMR is not released back to the applicant.

Bad financial planning ultimately will cost the applicant more money than anticipated and opens the applicant up for lawsuits or class actions if the health and safety of communities are at risk.

Summary of costs

The possible costs involved and please note these are general estimates:

  • Environmental Impact Assessments costs vary depending on the scope of work required to conduct the impact studies, in general, Basic Impact Assessments can cost between R80 000 – R150 000.
  • Full Environmental Impact Assessments costs between R200 000 – R500 000 or more.
  • Specialists normally work according to SACNASP rates which are between R800 – R2 236 per hour.
  • Ploughing certificate applications normally R200/Ha + costs.
  • Water Use License Applications between R20 000 – R50 000 (if the same EAP is working on the environmental authorization) to R500 000 (if an external entity applies for a license on the applicant’s behalf).
  • Section 24G fines are dependent on the calculations of the Department of Environmental Affairs. In determining the fine quantum, the regulatory authority uses a so-called ‘fine calculator’ which accords a rating to each of the various environmental impacts and on this basis, arrives at a fine amount. It is very important to note that where the applicant provides incorrect, false or misleading information, or omits material information, in their section 24G application, the penalty can range from fines and/or imprisonment ranging from R5 million to R10 million and 5 years to 10 years, respectively.