JOHANNESBURG (Business Day) -- Finance Minister Trevor Manuel has agreed to ring-fence royalties imposed on South African mining companies, so the money can be invested in mining communities.
The move follows pressure from the minerals and energy department and is a victory for its former minister Phumzile Mlambo-Ngcuka, since the only other government receipts which are restricted to a particular purpose are those for skills development.
The Royalty Bill, which is sponsored by the treasury, has had its initial draft heavily criticised by analysts and the sector as being punitive.
A second draft is expected "fairly soon" and is expected to include the ring-fencing provisions.
Pumping the billions of rand that is expected to be raised in royalties into mining communities would also have the positive effect of improving lifestyles and boosting production.
Mlambo-Ngcuka, who was made deputy president last week, announced the breakthrough in a speech to government officials, mining bosses and union leaders in Pretoria on Tuesday.
She said money raised under the bill would be "earmarked" for mining communities.
She told new Minerals and Energy Affairs Minister Lindiwe Hendricks: "The finance minister has agreed to this exemption - make sure he doesn't forget!"
The Royalty Bill has stirred much controversy in the sector, with analysts and miners arguing that it would be punitive to the sector if introduced.
Industry had been concerned about an initial draft of the bill, which proposed royalties of between 1% and 8%, depending on the mineral in question.
It was also proposed that the royalty should be based on revenue, rather than on profit.
"The industry had a number of problems with the basis of calculation," said Chamber of Mines chief economist Roger Baxter.
"Using gross revenue has a far more damaging effect on com-panies which are more marginal in nature. The chamber also thought the rates were too high."
But Baxter welcomed the ring-fencing of royalties. "I think industry supports this - that funds generated are used to help communities around mines or from which workers are recruited."
