Gwede Mantashe. Picture: SOWETAN
Gwede Mantashe. Picture: SOWETAN

The government has scrapped plans to compel mining companies to contribute 1% of their annual turnover to a new community development agency, because it fears the funds could be abused.

There was a risk that the agency "could easily be a slush fund", Mineral Resources Minister Gwede Mantashe said in a phone interview on Wednesday. "We are not going to put it in."

The levy was proposed in a draft of the Mining Charter that was introduced by former mineral resources minister Mosebenzi Zwane, and was one of a number of measures producers challenged in court, saying it would push up their costs.

Zwane was fired in February when Cyril Ramaphosa replaced Jacob Zuma as President, and appointed Mantashe, a former mine worker union leader who agreed to review the charter.

Zwane had proposed that the development agency would have directly accounted to the mineral resources minister, a provision that may have been in conflict with public finance laws that give the South African Revenue Service sole responsibility for collecting revenue on behalf of the government.

A first draft of the revised charter will be published next week and will propose that mining companies be compelled to cede a stake of 5% to communities where they mine and to give another 5% free stake to their workers, Mantashe said.

In May, Mantashe said another clause allowing naturalised citizens to benefit from provisions aimed at giving groups that were prejudiced under apartheid a bigger stake in the mining industry, would also be omitted from the charter.

Opposition parties suggested that the clause was included to benefit members of the Gupta family.

"We want to cut out anything that looks suspicious in the charter," Mantashe said on May 22.

Bloomberg