Minister of Mineral Resources and Energy Gwede Mantashe has said that royalties the state receives from mining could be used to start up the sovereign wealth fund that President Cyril Ramaphosa announced in his State of the Nation Address.
The minister was on Wednesday addressing Parliament during debates on the president's speech.
Last week Ramaphosa said that South Africa would be creating both a sovereign wealth fund and a state bank. The details would be unpacked by Finance Minister Tito Mboweni in his Budget next week.
"The president spoke to the sovereign wealth fund and specialised units to fight crime. Many people asked the question, 'where will money come from?'. I can tell you that all the mines pay a royalty to the state [that] can be used to start the royalty fund," Mantashe said as he was rushed off the podium as his time ran out.
According to Mantashe's written speech, the Draft Upstream Petroleum Resource Development Bill, which was released for public comments in 2019, also proposed that the sovereign wealth fund be financed with mining royalties.
In supporting the idea of using mining royalties for the fund, Mantashe appears to be walking back his previous objections. In October 2018 he told mining companies at the Joburg Indaba that he had objected to a proposal to use the mining industry to help establish such a fund. At the time he said the proposal had been raised within ANC circles in the later stages of the drafting of the Mining Charter. "I said to them 'you cannot milk the industry which is already on its knees'".
The minister has in the past also suggested using oil and gas finds to set up a sovereign wealth fund.
Questions still unanswered
In an opinion piece published on Fin24 earlier this week, Dr. Malan Rietveld, an economist who has advised sovereign wealth funds, said there was not yet enough information about the scope, size, mandate of the fund announced by Ramaphosa to analyse its chances of success.
"While President Cyril Ramaphosa apparently wants to move ahead with creating a new fund, practically every question that matters in this process remains unanswered," he said.