SA Royalties Law 'Shows Industry Unity'

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"The act. . .will see companies charged on profit rather than revenue as first proposed."

The final form of royalties legislation in South Africa (SA) shows how government and business can work together to ensure the sector is a force for good in the economy, Bain & Company partner and mining expert Alan Bird said.

SA's Mineral and Petroleum Resources Royalty Act came into force on Monday this week after being delayed by a year.

The act, which has been in the pipeline since 2003, will see companies charged on profit rather than revenue as first proposed.

Bird said the path the legislation has taken and its final outcome are to be welcomed.

"There is increased recognition and activity encouraging the view that SA mining acts as a single entity," said Bird.

Government, labor and business have worked together more closely since the leaking of the Mining Charter in 2002, and their union is beginning to bear fruit.

The industry is also managing the review of the Mining Charter in a unified way with the government first passing the results on to stakeholders before releasing them to the public.

"If we have assets available in this country that are socially acceptable, and environmentally sound, and we are not able to develop them, it is a failure of policy," said Bird.

The country also needs to ensure that if there were two identical assets—one in SA and one elsewhere in the world—that investment would come to SA, which is a challenge because we have additional policies such as transformation, which carry associated costs.

The industry must also promote the country's economic prosperity (e.g., ensuring security of supply and environmental responsibility).

"The mining royalties are an example of the smart collaboration between government and industry," said Bird.

By listening to industry's input, the government has been able to mitigate the impact of royalties on smaller players.

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