Hon Chair, hon Ministers and Deputy Ministers, hon members as well as officials from Treasury, the Taxation Laws Amendment Bill deals with, among other issues, payment of royalties by mining companies. As the beloved movement of South Africans and the pride of Africans, the African National Congress fully supports the amendments being proposed in this Bill with regard to refinements to the minerals royalty legislation.
Notwithstanding the argument suggesting that these amendments are just but scratching the surface of the economic transformation of our country, the ANC believes that the introduction of these changes will help to promote our strategy of minerals beneficiation and thereby, grow the economy. The changes will also help in establishing co-ordination between the implementation of the Minerals and Petroleum Resources Royalty Act and other taxation laws. This co-ordination is important for increasing our tax base.
Hon Chair, it is our insistence that the proposed changes will ensure that we expand the reach of tax policy as one of the potential forms of redistribution mechanisms. Hon members, the concept of royalty in relation to taxation is defined as a payment to the owners of natural resources such as minerals and petroleum by the party licensed to extract such. Royalties, or, as commonly known, resource rent, is paid for the exclusive or nonexclusive licence granted to the operator to extract the minerals which they sell for profit.
This debate, therefore, happens at an opportune time in our history when there is much public debate about our mineral resources, the mining industry and its ownership, as well as the role of the state. The difficulties relating to the system of issuing mineral rights licences experienced by our government is that these rights are open to abuse for a quick profit in the private sector. This is a fact close to logical necessity, but also at the centre of this topical issue is the enormous wealth that can be accrued from such royalties.
Our taxation system classifies royalty as indirect tax. Currently, in addition to our taxation laws, royalty payments are governed by the Minerals and Petroleum Resources Royalty Act of 2008. The state holds the custodianship of our natural resources, including minerals, through the Mineral and Petroleum Resources Development Act of 2002. This is important in the context of royalty because the owners of natural resources are usually sovereign states.
The policy of the people's movement, the African National Congress, articulates that the use of natural resources, including the minerals, must be undertaken in the interest of sustainable economic development. This policy has informed one of the priorities of the ANC government, which is the promotion of industrialisation through, among others, beneficiation. The ANC policy states:
Our programme must also deepen the linkages of the mineral sector to the national economy through beneficiation of these resources and creating supplier service industries around the mineral sector.
The essence of this Bill is to remove any impediments embedded in the current rules and regulations which act as obstructions to minerals beneficiation. Royalties are often governed by agreements which may specify the determination of royalties in relation to the amounts per unit extracted, or as a percentage of revenue.
Included in the Taxation Laws Amendment Bill are a number of proposals to refine some of the mineral resources royalty provisions. During the tabling of the Budget in February this year, the Budget Review indicated that the Royalty Act has a number of technical anomalies that need correction. These included, inter alia, issues on how unincorporated joint ventures are to be treated, how information is to be stored between Sars and the Department of Mineral Resources, co-ordination with the Income Tax Act as applied within the context of the Royalty Act, and clarifying the specified conditions of determination for certain minerals where there is a range of specified conditions.
Most of the proposals mentioned were further outlined in detail in the draft Bill submitted to the Standing Committee on Finance in May to facilitate public hearings. The process of public hearings brought very important contributions which have enriched the final draft of the Bill. Most of the comments from the public and experts in the field were accepted and resulted in changes being made. For this, we must give credit to all those who gave inputs and to the Ministry for its consideration of the positive comments that were received.
Credit should also be given to the Standing Committee for the robust interrogation of the Bill and all the submissions, which was done despite the existence of the Budget Office. Hon Oriani-Ambrosini, I hope that you will join the committee in deliberations because it sometimes becomes difficult for us to follow on your submissions when you make them from this podium. We have more time in our committee engagements to listen to you attentively. [Applause.] In conclusion, I wish to reiterate my initial emphasis on the importance of mineral resources to our economy. We must accept that this Bill takes us a step further towards the goal of embarking on a new economic growth path that we have debated in this House, the growth path that is sustainable and focused on growth and job creation through industrialisation. An important element of this, as defined in the Industrial Policy Plan, is the beneficiation of our minerals.
We must therefore welcome the proposals contained in this Bill as they are specifically meant to eradicate any rules that have historically acted as impediments to minerals beneficiation. The changes that are being introduced will assist in the promotion of beneficiation and, thereby, propel us to greater heights of industrialisation, economic growth and employment creation. Hence, the tried and tested, glorious movement of the ANC supports the Taxation Laws Amendment Bill. Ke a leboha. [Thank you.] [Applause.]