When administrative actions fail to meet procedural standards, businesses can find themselves at risk of losing vast amounts of capital, even if the projects themselves are critical to economic growth. The public, too, may suffer, as the cancellation of major projects often results in lost opportunities for economic development, job creation, and infrastructure improvement. In projects involving energy, for example, the stakes are particularly high, as a project’s cancellation could negatively impact national energy security.
These were the factors at play in the case of Minister of Mineral Resources and Energy and Others v Sustaining the Wild Coast NPC and Others [2024 (5) SA 38] (Sustaining the Wild Coast). The case implicitly highlights the importance for courts to balance considerations such as fairness and justice in formulating remedies for unlawful administrative actions, particularly when public participation, economic interests, and environmental concerns are involved.
Legislative Framework
The primary legal basis that underpins this balance is found in the Constitution which guarantees the right to fair administrative action under Section 33. This right is further supported by the Promotion of Administrative Justice Act, 2000 (PAJA), which ensures that government decisions are transparent, fair and open to public participation.
PAJA requires that government decisions involving the public must include meaningful consultation. In the Sustaining the Wild Coast case the consultation process was found to be inadequate. The High Court found that exploration rights were granted unfairly, mainly because the affected communities along the Wild Coast were not properly consulted, which violated the rules of fair procedure under PAJA. In reaching that conclusion, the High Court set aside the decisions to grant and renew the exploration rights. However, this strict approach carried considerable economic risks, including the potential loss of over R1.1 billion in investments, and threats to South Africa's energy security.
The Supreme Court of Appeal (SCA) adopted a more pragmatic approach to the remedy. While it recognized the flaws in the consultation process, the court reconsidered the remedy.
In doing so the SCA chose to suspend the High Court’s orders that set aside the initial grant and subsequent renewals of the exploration rights. This suspension will remain effective until the application for renewal is resolved.
The court considered the importance of a fair and equitable remedy, taking into account amongst others the negative repercussions of loss of economic and social benefits, the substantial financial investments already made and the public interest in the exploration activities. It also proposed a new public participation process to rectify the identified issues. This flexible remedy addressed the procedural shortcomings without setting aside an entire project which would have far- reaching consequences.
Flexible Remedies under Section 172(1)(b)
Section 172(1)(b) of the Constitution gives courts wide discretion to develop remedies that are just and equitable. This flexibility is essential when balancing the need to correct procedural wrongs with broader societal and economic impacts. The SCA’s remedy in the Sustaining the Wild Coast case highlights the importance of formulating solutions that fit the unique circumstances of each case.
In administrative law, fairness is a fundamental principle. Courts are required to ensure that administrative decisions follow the correct procedures, particularly in cases involving public participation. However, rigid enforcement of procedural fairness can sometimes result in disproportionate consequences, especially when large-scale economic projects are involved.
By suspending the High Court order to allow for the resolution of the renewal application and the rectification of the consultation deficiencies, the SCA preserved significant financial investments and mitigated the risks associated with stopping a critical project in the energy sector. This approach illustrates how courts can rectify administrative errors without overlooking the broader implications of their decisions. It effectively balanced the rights of affected communities with the economic realities of South Africa's energy sector and overall economic development.
Broader Implications for Development Projects
The Sustaining the Wild Coast decision provides some guidance for how courts handle disputes related to large infrastructure and development projects. These projects often play a critical role in driving economic growth, creating jobs, and securing vital national resources. However, they also have significant social and environmental impact, particularly on marginalised communities. Public participation ensures that these communities’ voices are heard, leading to more equitable decisions. Balancing the competing interests of economic development, social justice, and environmental protection remains a key challenge for South Africa’s courts.
Key Considerations for Future Cases
There are several reasons why balancing fairness, economic considerations, and public participation are essential:
- Economic Stability and Growth: Large infrastructure projects, such as energy exploration, are vital for economic development. Overly harsh measures can disrupt these projects, deter foreign investment, and slow economic growth.
- Job Creation: Infrastructure projects create employment opportunities, and delays or cancellations can lead to job losses. This can contribute to economic stagnation and increase social inequality.
- Energy Security: South Africa’s energy security is at risk, and timely energy projects are crucial to avoiding further power shortages. Without timely development, industries that depend on stable and affordable energy supply may face increased operational costs and reduced productivity. This weakens South Africa’s global competitiveness, making it less attractive as a destination for manufacturing and other energy – intensive industries.
- Social Justice: Proper consultation ensures that marginalised communities are included in decision-making processes, promoting fairness and preventing social exclusion.
- Environmental Sustainability: Balancing economic development with environmental concerns ensures sustainable growth. Proper consultation highlights environmental risks, promoting more environmentally friendly decisions.
Conclusion
As businesses continue to engage in projects that carry significant public and economic importance, it is vital for the judiciary to balance the competing interests of procedural justice and economic development. Remedies that are too rigid risk undermining national growth, while those that overlook procedural fairness threaten the constitutional rights of the affected communities. The case serves as a clear example of how our courts handle these complex issues, balancing the rights of affected communities with the broader economic and social interests at play. This judgment underscores the importance of fair administrative action under PAJA and the Constitution, while highlighting the role of courts in ensuring that remedies are not only legally sound but also practical and balanced.
Sustaining the Wild Coast NPC and others have filed an appeal to the Constitutional Court, which is scheduled to be heard by the apex court in early 2025. The central argument of the appeal is that the renewal process, under which the SCA formulated its order, is entirely different from the consultation required during the initial application process. They contend that the SCA's order effectively gives Shell and Impact Africa an opportunity to rectify their inadequate consultation efforts from over a decade ago when they first applied for the rights.
There is currently a moratorium on these types of applications (i.e. exploration rights applications, although not on others like production rights applications). Therefore, if the Constitutional Court overturns the SCA's order, Shell and Impact Africa would be unable to submit a new application for exploration rights until the moratorium is lifted.
Perhaps it was this consideration that the SCA leaned into in making its order.
