Africa Mining: South Africa scraps plan for mining community development levy

South Africa MiningSouth Africa’s government has scrapped plans to compel mining companies to contribute 1 percent of their annual turnover to a new community development agency because it feared the funds could be abused, the nation’s mining minister said.

The levy was proposed in a draft of the nation’s new Mining Charter that was introduced by Mosebenzi Zwane, the former mineral resources minister, and was one of a number of measures producers challenged in court, saying it would push up their costs. Zwane was fired in February when Cyril Ramaphosa replaced Jacob Zuma as president, and replaced by Gwede Mantashe, a former mine worker union leader who agreed to review the charter.

There was a risk that the agency “could easily be a slush fund,” Mantashe said in a phone interview on Wednesday. “We are not going to put it in.”

Zwane had proposed that the development agency would have directly accounted to the mines minister, a provision that may have been in conflict with public finance laws that give the national tax agency sole responsibility for collecting revenue on behalf of the national government.

A first draft of the revised charter will be published next week and will propose that mining companies be compelled to cede a 5 percent stake stakes to communities where they mine and to give another 5 percent free stake to their workers, Mantashe said.

Last month, Mantashe said another clause allowing naturalized citizens to benefit from provisions aimed at giving groups that were prejudiced under white minority rule, which ended in 1994, a bigger stake in the mining industry would also be omitted from the charter.

Opposition parties suggested that the clause was included to benefit members of the Gupta family, who are friends with Jacob Zuma and were in business with one of his sons. The three Gupta brothers, who have been accused of using their political connections to secure business deals, moved to South Africa in the 1990s and some of them have been awarded citizenship. They deny wrongdoing.

“We want to cut out anything that looks suspicious in the charter,” Mantashe said on May 22.source: Bloomberg

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