royalty bill review likely  - sonjica 
20 March 2008

The draft Mineral and Petroleum Resources Royalty Bill is expected to be reviewed by the government after protests from different role players, including trade unions and the industry, Minerals and Energy Minister Buyelwa Sonjica said.   Sonjica said during the opening of the third sub-Saharan oil, gas and petrochemical exhibition and conference that the legislation was being viewed as double taxation “and it seems like there will be a review process”.

She said the reality was that stakeholders were unhappy with the provisions of the bill and there was a need for the government to look at the issues that had been raised on the matter.
The National Union of Mineworkers and several mining companies had questioned the implications of the bill.

Gold and platinum mining companies had objected to the formula proposed by the treasury for calculating royalties, saying it would result in higher rates of payment than originally proposed, and damage the sector’s competitiveness.  The industry warned that higher royalty payments, on top of the electricity crisis cutting production, could compromise investment and output.
Gold industry calculations indicated that the royalty rate for gold would average 3,3% for 2002-11, compared with the treasury’s average rate of 2,1% for 2002-06. It would also be more than double the original 1,5% flat rate.

The government had proposed an average 2,7% royalty on platinum group metal sales with 2,1% on gold and a 3,7% levy on diamonds.   On electricity supply, Sonjica said SA had invoked protocols similar to ones in Brazil in January, which demanded that all, including the mining industry, should reduce electricity consumption by 10%.  She said this had led to savings of 3000MW and while the country would still experience load shedding, “this will be organised”.  She said in order for the African oil and gas industry to achieve its full potential, there was a “dire need” to form strategic alliances with foreign investors with the necessary skills in the sector.

Sonjica said foreign investors would bring some of the capital and skills to the continent “but as Africans, we should strive to provide part of that capital and be actively involved in the provision of goods and services to the industry”.  She encouraged all the oil and gas producing countries in Africa to promote locally owned and controlled companies.

Chris van Gass, www.businessday.co.za