THE government allegedly lost M119, 5 million revenue which could have been collected in royalties from Letšeng Diamonds from 2009 to 2012, the Public Accounts Committee (PAC) recently heard.
According to the Auditor General’s report of 2014, Letšeng has been paying royalties at the rate of eight percent instead of the 10 percent stipulated by the Mines and Minerals Act of 2005.
This, according to the auditor’s report, has led to a shortfall of M119, 5 million in revenue that could have been collected by the government.
“Notwithstanding the provisions of this act, diamond mining companies have been undercharged royalties at the percentages ranging between four percent and eight percent on precious stones. From a sample of royalties received for four years from 2009 to 2012, it was revealed that Letšeng Diamonds had underpaid by a total of M 119 544 694 resulting from application of eight percent royalties instead of 10 percent.
“Management was advised to investigate the matter and review the mining leases for application of correct rates,” the audit report says.
Commenting on the issue, the Commissioner of Mines, Pheello Tjatja, said that “Letšeng Diamonds was awarded a mining lease in 1999 and the agreement stated that Letšeng will pay diamond sales tax at a rate of seven percent. There is also a clause saving it (Letšeng) from the implications of future laws,” Mr Tjatja said.
PAC chairperson Selibe Mochoboroane said the Mines and Minerals Act appeared to be contradictory in that while it fixed the royalties at 10 percent for precious stones, it also allowed the Mining minister to make an arbitrary decision to lower that rate.
“While Section 59 (2) of the said Act stipulates that royalties payable should be 10 percent for precious stones and three percent for other minerals or mineral products, Section 60 (1) of the same Act goes on to say that “the Minister may, in the public interest, remit all or part of any royalty payable on any mineral or mineral product for such a period he may determine”.
“This law seems awkward to me if it gives the minister permission to break the provisions given by the same law arbitrarily. I have never seen such a thing,” Mr Mochoboroane said.
The chief legal officer in the Mining ministry, Mathalea Lerotholi, said the minister had been given the authority to waive the 10 percent and settle for lower royalties in the public interest.
Meanwhile, the PAC also took the ministry to task over the records of mining companies which showed that royalties amounting to M27 million had been transferred to the Commissioner of Mines yet there was no evidence of the receipt of funds in the ministry’s records.
The audit report indicated that the ministry did not furnish auditors with records to confirm the receipt of the money from mining companies.
Section 801 (2) of the Financial Regulations 1973 states that: “It is the duty of the chief accounting officers and other revenue collectors to ensure that revenue which is payable to them is collected promptly and that all collections of revenue or other receipts are properly brought to account.”
“Records of mining companies showed that royalties amounting to M 27 472 971, 48 have been transferred to the Commissioner of Mines and there was no evidence of transfer of funds. The records of the commissioner did not show evidence of receipt of such funds.
“It was recommended that management should ensure that royalties due were collected and properly recorded in the appropriate books and all overdue royalties were followed up and collected accordingly.”
Mr Tjatja replied by saying he did not have the correct information regarding the transactions as they were made before he assumed office.