General

Mining royalties should benefit the community

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Read Paddy Hartdegen’s thoughts on this matter.

After months of speculation – and seemingly endless debates that just go round and round in circles – it appears that the government is certainly planning to tax the mining companies even more than they are at the moment believing, mostly erroneously, that the mining companies are making so much money they can afford it.


Of course, nothing could be farther from the truth because each one of the mining companies – in almost any sector you choose – is bemoaning the fact that profits are down, energy costs are high and labour costs are spiralling out of control.

At the same time as the government is saying that certain additional taxes are being considered, it keeps reminding the people of South Africa that the country is now part of the global community and, as such, must be responsible in its dealings with other countries and companies around the globe.

The problem is that it is precisely this fact that makes the mining companies less profitable today than they were say five years ago.

Moreover, the mining companies are contributing billions or rands to government coffers anyway. Now the Chamber of Mines, through its senior executive Vusi Mabena has called on the government to start using the money that is paid to it in the form of a royalty to improve the local communities where the mines are actually situated.

At the moment these billions pour into the Treasury’s purse and can be used (or abused) in any way that the government sees fit.  The mining royalties were introduced in 2009 and, since then, more that R5,5-billion has been paid to the government.

That figures excludes the normal levels of corporate tax and of course VAT too.  But Mabena told Parliament’s mineral resources portfolio committee that the money paid in the form of royalties should specifically be set aside for the direct benefit of the communities that are affected by mining.

In many respects this is the principle that governed the Bafokeng and their communities around Rustenburg and considerable improvements have been made in many of these small settlements like Phokeng where schools, clinics, community centres and houses have been built. And the money has come mainly from the royalties that the Bafokeng people receive from the mines.

And that has tangible benefits for the people and creates a more settled and more stable community too – something that South Africa so dearly needs.

Instead, what we have at the moment is an unstable community of disgruntled miners who go on strike demanding more and more money and whatever they earn is largely sent back to some remote and distance place to support families who are living in impoverished circumstances.

It just doesn’t make any sense at all.

And, with the increasing cries for more taxes, additional royalties and so forth, the investment community – that is so much part of the global community – gets more and more wary of South Africa as an investment destination. So while the government reminds us that what we do – as workers, as people and as a country – has global ramifications, they too should remember that what they do has just as much of an impact on stable relationships. Particularly when it comes to investments.

Fred Gona, chairman of the portfolio committee was quick to disagree with Mabena saying that for more than 100 years South Africa’s mining industry had done little to improve the country or the communities where they were mining.  Part of that assertion may be correct but the argument is facile because South Africa has moved on and changed dramatically since its earliest days 100 years ago.

Just as Welkom in the Free State owes its existence to the Oppenheimer family that built the town to support the mines decades ago. So Gona’s argument doesn’t stand up to even rudimentary scrutiny.

Not only that but you achieve nothing by trying to punish the “sons of the fathers” as it were. That is, as everyone knows, completely unjust anyway.  As we are told repeatedly by all and sundry – depending on their arguments – we are living in the ‘new’ South Africa and what happened in the past needs to remain in the past as part of our history but not part of our reality.

My own view is that Mabena is perfectly correct: if royalities are paid by the mining companies then that money should be used for the community and not to keep more government officials in a job that they might not be doing particularly well anyway.

And it would mean that the government could make some progress on the delivering services to the people that they would have to pay for anyway.

I fail to see why royalties from a mining company in Rustenburg or its surrounding areas should be used to benefit a community living in Pofadder.  Anyway the other roughly R25-billion contributed to the government in the form of corporate taxes by the mines in just one year should be used for that.

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