Gwede Mantashe (Gallo Images/Business Day/Freddy Mavunda) ~ Gallo Images
In place of increasing taxes on mines, Mineral Resources and Energy Minister Gwede Mantashe says that National Treasury could instead redirect mining royalties to the establishment of a sovereign wealth fund.
Mantashe made the remarks at a media briefing on Thursday. On Wednesday in a speech to Parliament the minister briefly mentioned that mining royalties could be used to help set up such a fund before his time at the podium ran out.
The establishment of a sovereign wealth fund was announced by President Cyril Ramaphosa during his State of the Nation Address last week. He said Minister of Finance Tito Mboweni would provide more information when he presents his Budget.
At Thursday's briefing Mantashe had time to further clarify his position. "It is only a small point we are making on mining royalties. The point is you do not need to tax mines more for the sovereign wealth fund - they are paying royalties, redirect the royalties to the sovereign wealth fund instead of it disappearing in fiscus," he said.
Mantashe said the creation of a sovereign wealth fund is a function of Treasury. The legislative process to enable it would probably be via a money bill. "Minerals and energy might be a source [of funding] but it is not our responsibility [to set up the fund]."
When asked for his thoughts on the proposal that the state should wait to stabilise its finances before using mining royalties in a fund, Mantashe's replied that waiting longer might worsen the problem.
He recalled learning, as a business management student, that not doing anything to avoid a crisis could at times deepen the crisis. "So the right approach is to do things, whether there is a crisis or not, because by doing certain things you might be contributing to a solution."
"As part of finding our stability, we must build the sovereign wealth fund as part of the solution."