Obed Bapela calls for system to prevent abuse of mining royalties

SOUTH Africa plans to reform how local communities manage and spend mining royalties after a corruption probe found that a $44m fund bankrolled by Lonmin had been exhausted.

Almost all the money received by the Bapo Ba Mogale community during the past 20 years had been spent, with the biggest amount used to build a palace for a tribal leader, Public Protector Thuli Madonsela said on July 5. The palace cost at least R80m, despite an initial budget of R20m.

"We need to develop a policy mechanism that can prevent it from recurring anywhere else whilst also dealing with the remedies of what has happened with the Bapo," Co-operative Governance and Traditional Affairs Deputy Minister Obed Bapela said in an interview.

No oversight

The complexity and lack of transparency around such arrangements means residents often do not see the benefits of mining income, leading to protests. In the case of the Bapo Ba Mogale, there had been no oversight structure to look after the community’s resources, said Madonsela.

"Going forward, there are policy gaps that we need to consolidate," said Bapela, who will meet traditional leaders later this year to discuss the problem. "Maybe at the meeting we’ll come up with the norms and standards that will become policy in government."

With the Lonmin fund, Bapo community members now want to know who spent the money and where it went. The government would assist Madonsela with her investigation into the fund and develop an "action plan" once she published her recommendations, Bapela said.

Lonmin fulfilled its side of the agreement with the Bapo community by paying royalties, said spokeswoman Sue Vey. "It’s not a Lonmin problem that the money has been squandered," she said.

The company welcomed the investigations, she said.

The Bapo’s royalty payments were converted into equity as part of a 2014 black economic empowerment (BEE) deal. As part of that arrangement, Lonmin agreed to procure more services from the Bapo community. That upset some members of the community who were not involved in the contracts, and who had written to the company to voice their concerns, Vey said.

The company has responded and will continue engaging with the community, she said.

Bloomberg