SA Mines Ministry Rejects De Beers’ Royalties Warning

The South African Ministry of Mines and Energy (MME) has rejected an argument made by De Beers’ that the company would be subjected to an “unfair form of double taxation,” affecting the Finsch mine, due to a combined new draft of the Royalty Bill with the Mineral and Petroleum Resources Development Act.

According to Bloomberg, a deputy director-general in the ministry, Futhi Zikalala, told lawmakers today (Tuesday), “We don’t agree with what De Beers said. [The Finsch lease payment comes] because the state owns 70 percent of the operations. It doesn’t in any way result in them paying two royalties.”

As part of its submission to the South African Parliamentary Portfolio Committee on Finance on March 11, De Beers had warned that the combined legislation “might lead to decisions against further expansion of the [Finsch] mine as well as a danger of premature closure (possibly as early as 2015), which will in turn result in a loss of tax revenue for government, potential job losses and a detrimental impact on the local economy in the Finsch mine area.”

Although the ministry rejected De Beers’ plea, the minister of mines and energy, Buyelwa Sonjica, commented today that the government was still open to reviewing the law on royalties. "Surely we have to go back to the drawing board an see how we can accommodate those concerns,'' she told reporters in Cape Town. “It doesn't mean revoking'' the royalties outright.