By Yushanta Rungasammy, Director, Co-Head of Corporate & Commercial Practice at CMS South Africa
South Africa sits atop one of the most extraordinary concentrations of mineral wealth on earth. Its gold and platinum group metal deposits have shaped the country's economic identity for more than a century, contributing significantly to export earnings, employment and foreign direct investment.
However, the legislative architecture meant to govern that wealth, the Precious Metals Act 37 of 2005, has not been substantively amended since its regulations took effect in 2007. That is not a matter of administrative delay, but rather a structural failure with measurable consequences for the fiscus, for organised crime and for South Africa's credibility with global regulators.
Administered by the South African Diamond and Precious Metals Regulator (SADPMR), the Act covers the acquisition, possession, smelting, refining, beneficiation and disposal of precious metals. Recently, the regulator itself has signaled, through its own parliamentary disclosures, that the law it enforces is no longer fit for purpose.
The SADPMR's own 2025–2030 Strategic Plan, tabled before Parliament, acknowledges the regulator's intention to "develop a process plan to finalise the review of the Act and Mandate". The same document notes that illegal mining "may also result in illegal metals being laundered and legitimised through refinery licenses" and that the SADPMR has approved a strategy to combat illicit trade. And yet, the legislative tools required to enforce that strategy remain absent. When a regulator's own strategic plan contains both the diagnosis and the admission that it lacks the statutory power to act on it, the legislature must respond.
This is not a legal nuance for specialists. It is an economic drain, and one that deserves sustained national attention.
When laws stand still, crime moves forward
Sector-specific regulations are fundamentally different from constitutional or foundational law. They govern industries that are defined by technological change, shifting commodity dynamics and evolving international compliance standards.
The Precious Metals Act was designed for the market conditions of 2005. Since then, refining technology has changed substantially, digital trading has transformed how gold moves across borders, and global Anti-Money Laundering standards have been significantly upgraded through successive rounds of FATF methodology revision. A legislative framework that predates these shifts by nearly two decades can not hope to regulate them effectively. In the absence of regular review, ideally every few years for sectors this dynamic, the Act has calcified into something closer to an obstacle than a tool.
The financial cost is substantial and well-documented. The Department of Mineral and Petroleum Resources has stated that the South African economy lost an estimated ZAR60 billion to illicit precious metal trade in 2024 alone. The Minerals Council South Africa, which represents approximately 80% of the domestic mining industry, has documented that illicit mining costs the sector ZAR21 billion in lost sales and taxes annually. This is a documented hemorrhage of public revenue through a gap that a properly updated legislative framework should be closing.
The mechanism through which this hemorrhage occurs is precisely where the Act's inadequacies bite hardest.
The SADPMR's own strategic planning documents acknowledge that illegal mining is "linked to serious crimes, including illicit financial flows, high levels of violence and the smuggling of weapons and explosives". Illegally extracted metal enters the formal economy most commonly through two channels: refinery licences, which the Act's current provisions do not restrict with sufficient rigour, and the scrap jewellery trade, which the Act does not regulate at all. Gold stolen from operational mines or extracted without a permit can be melted into scrap, presented to a jeweler or small refiner, and re-enter the formal supply chain with apparent legitimacy. In a country losing tens of billions of rands a year to this trade, the persistence of those two loopholes is not acceptable.
The FATF stakes are higher than they appear
South Africa's FATF grey-listing in February 2023 was one of the more consequential regulatory events in the country's recent economic history. The listing reflected longstanding concerns about weak anti-money laundering supervision across multiple sectors, inadequate beneficial ownership transparency and insufficient prosecutions of financial crime.
South Africa was removed from the grey list in October 2025, following a significant whole-of-government effort to address 22 action items. This was a significant and genuine achievement as the cost of that listing, in investor confidence, in elevated compliance costs and in reputational damage, was real and enduring.
Relief, however, needs to be tempered by what comes next. South Africa's next FATF Mutual Evaluation is expected to commence in the first half of 2026 and conclude in October 2027. A regulator that has tabled a strategic plan acknowledging the need to review its founding legislation, but that has not yet secured the statutory tools to enforce its own mandate, is precisely the kind of supervisory gap that FATF evaluators are trained to identify.
South Africa worked for nearly three years to exit the grey list. Maintaining that progress in future evaluation cycles will require continued alignment with the standards that enabled the exit, including ensuring that sector-specific laws are appropriately updated and implemented to support sustained compliance.
Reform Is the revenue strategy
The path forward is neither obscure nor technically complex in principle: the Act requires amendment to tighten licensing criteria for refiners, establish regulatory oversight of the scrap jewellery trade, align reporting obligations with current international AML standards and introduce supply chain transparency requirements in line with global best practice, including guidelines from the Organisation for Economic Co-operation and Development.
These are achievable reforms. What they require is political prioritisation and the recognition that regulatory modernisation in this sector is a fiscal and governance imperative, not a background administrative task.
South Africa's mineral endowment remains a genuine competitive advantage in a world increasingly focused on critical resource security. The Precious Metals Act was designed to govern that advantage responsibly and in the interests of all South Africans. As it stands, the Act is doing the opposite. Instead, it provides cover, however unintentionally, for the organised criminal networks and illicit financial flows that drain public wealth and corrode institutional trust.
South Africa has spent years, and considerable political capital, rebuilding its financial integrity credentials. Updating this legislation is a prerequisite for protecting what has been earned and for ensuring that the next FATF evaluation reflects the country's genuine commitment to sustainable reform.