Abstract

CAWOOD, F.T.. An investigation of the potential impact of the new South African Mineral and Petroleum Resources Royalty Act. J. S. Afr. Inst. Min. Metall. [online]. 2011, vol.111, n.7, pp.443-453. ISSN 2411-9717.

The new mineral royalty regime for South Africa was signed into law in November 2008, with its main objective being to compensate the State for the depletion of public minerals through a royalty charge payable from 1 March 2010. The aims of this paper are to establish the potential impact of mining royalties on State revenues, industry affordability, and explore whether the dual formula system is likely to encourage miners to become refiners. It also measures the royalty dispensation against economists' tax standards in an attempt to make a judgement on the 'equity' of the new system. This paper argues that most stakeholders should be comfortable with most of the requirements of the Act for most of the time. However, the new regime is unlikely to motivate miners to become refiners, as the benefit of the reduced rate on refined minerals appears to be insufficient to justify the additional costs to refine the mineral resource to the prescribed states of beneficiation.

Keywords : Mining royalties; mineral royalties; royalty impact; mining taxation; Royalty Act; resource rents; non-renewable resource; mine profitability; royalty formula; lease consideration; mining pay limit; mineral reserves; mining jobs; tax standards; value-addition; net smelter return; dual formula system; refined royalty; unrefined royalty.

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