Cost of rehab to taxpayer? Featured

Sunday, 26 January 2014 08:46
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The provisional winding up of the Blyvooruitzicht Gold Mining Company is of concern to the Federation for a Sustainable Environment for a number of reasons. Central to our concerns is the funds that have been made available for environmental rehabilitation in terms of s41 of the Mineral and Petroleum Resources Development Act 28 of 2002.

We understand that these are in a trust fund containing about R35 million. Contributions to these funds have tax implications in terms of s 37A of the Income Tax Act 58 of 1962, being allowed as a pre-tax deduction. However if the funds in the trust are distributed for a purpose other than environmental rehabilitation, the company should lose the benefit of the tax deduction.

The FSE has called for a meeting with the Departments of Mineral Resources, Environmental Affairs and Water Affairs, the Far West Rand Dolomitic Water Association, Blyvoor Mine, SARS, the liquidator and other key stakeholders, since we seek assurance that the R35 million will indeed be applied to environmental rehabilitation, and is not disbursed as part of the winding-up process to other creditors.

There is nothing in the Court papers submitted to obtain the provisional winding-up order that inspires our confidence in this regard since the trust fund amount is included in the total amount of the company's assets.

Secondly, however, it is indicated in the papers granting the provisional winding-up order for the BGMC, that the company has a non-current liability environmental liability of about R108 million.

It has current liabilities in the order of about R700 million and its assets amount to just over R241 million. Our point of departure is that the R108 million represents the top-up funding for environmental rehabilitation required after the Mineral and Petroleum Resources Development Act came into effect. The winding-up process of the BGMC however makes no provision for this call on the remaining assets of the company to be represented in the creditors' meetings.

Our fear is that the assets of the company will be used to defray the claims of the creditors having current claims. The result will be that environmental rehabilitation is under-funded and the financial burden will fall on the state, adding to a bill of already more than R30 billion for abandoned, ownerless and derelict mines.

We are also concerned more generally that the winding-up of the BGMC will frustrate compliance with the MPRDA, and a host of environmental laws, including the NEMA, National Water Act and Air Quality Act, amongst others.

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