The realities of royalties in South African Mineral and Petroleum Royalty Bill

Everything about the Republic of South Africa is said to be entering exciting times and facing new challenges. This is usually said within the context and against the backdrop of a changing face of South African political and economic landscapes from the past history of exclusion, deprivation, segregation and prejudice to the future of inclusion, tolerance, equal distribution and social harmony. The economic equal distributive idea is likened to the socio-democratic ideals of social justice, which advocates equal distribution of wealth to all citizens of the country. The South African idea is that South Africans are now in the new social era and the social transformation, on all fronts and most particularly the economic front, must move with the times and reflect the times that all its citizens find themselves in. On the political front, the year 1994 ushered in a new face of South Africa with the first democratic elections which, for the first time in hundreds of years, saw the inclusion and participation of the African majority of its citizens. These changes were soon entrenched by the adoption of the new South African Constitution, which espouses noble ideas of respect, equality, tolerance, economic development, distribution and access to country's wealth in a fair and equitable manner. The Constitution forces its citizens and the government to seek to redress the past imbalances particularly in the economic front and proactively take measures to see to this equilibrium of South Africa's wealth. Legislature, various political fronts and various economic fronts rallied around these principles and began talking the concept of Broad- Based Black Economic Empowerment. This concept has one central theme, which is to advance the economic participation of the previously (and in many respects the current) disadvantaged individuals into the mainstream economic activities of the country. It further aims to fast track their access to economic wealth and sharing of the fruit of common market and to seek to even out the economic disparities in many sectors of the society. As to how this empowerment process is being implemented and achieved, this paper will not even begin to traverse the diverse proposals and ideas of its implementation and realisations. Various economic sectors produced sector-specific economic empowerment charters in an attempt to lay the road maps on how to achieve this equilibrium of wealth distribution into the African hands. Virtually all-economic sectors are being active in that front including the mining sector. The Mineral and Petroleum Charter was among the first industry-specific charter to be produced after much publicised debates as to the best frame within which to approach and implement this concept. After that charter has been adopted and its implementation being realised, the South African government seeks now to introduces the Mineral and Petroleum Royalty Bill, which aims to collect monies from the mining houses that conduct mining activities in many areas. The move has caused many heated debates within the industry with the government forging ahead with its proposal subject to various consultative processes, while the business is also forging ahead with its attempts to halt this move right in its drafting stages. The purpose of this essay will be to look at the concept of the royalties, what they are, why is the South African government keen to introduce this Bill, why is business against them, why do we have them over and beyond the normal mining tax systems and the requirements of Black Economic Empowerment programs. In doing so, the article will also shed some light on their (royalties) nature and make necessary proposals in the process which, it is hoped, would in the main assist government and the Department of Minerals and Energy (DME) to implement, modify and manage royalty regime(s) in the mining and the petroleum industries. The essay will, to the extent that it can, rely on case law but the topic is mostly theoretical in South Africa and very few case law authority exist to clarify and provide thoroughly researched and considered legal analysis of the topic. The theoretical research of this article will take the reader to various countries that are in more or less the same boat as South Africa in terms of their relative reliance and dependence on mining industry and mining products for economic survival and activities. Similarities also extend to the relative sizes of these countries, similar perceptions of economic participation or lack thereof by mining houses vis-à-vis paying taxes that are congruent with their incomes, non-existing developmental corporate social responsibilities, no or less royalty payments and generally prevailing negative social-environmental impact of mines and mining houses on immediate communities within which they function and carry on their businesses. It is the writer's opinion that the political backgrounds of these countries, as compared with South Africa, also have huge impact and influence on how the concept of royalties can be understood locally. A comparative analysis of their modus operandi will be undertaken to see if the legislative attempts by South Africa is in or out of order in seeking to introduce royalties and whether its reasons are in or out of tune with sound local or international economic principles. Immediate economic concerns surrounding royalties are that royalties have the potential to attract or dismiss much needed investments, be it direct or indirect investment. Their effect on shareholders’ dividends, growing local mining costs/ business and their general impact on financial upkeep of mining operations in South Africa will also be researched in this essay. The essay will therefore assume this outline of topics, definition and origin of the concept; international comparative analysis; the South African past mining regimes visà- vis royalties; the current South African Royalty Bill; critics of the South African royalty Bill; the defenders of the Bill; some proposals; way forward; and conclusion.
Mineral and Petroleum Charter, South Africa, Mineral and Petroleum Royalty Bill, Royalities, mining houses, South African government, Black Economic Empowerment