Mining and municipal finance in Kathu, an open mining town in South Africa

Abstract

Worldwide, normalising mining towns or making them into open towns has become conventional wisdom. The local governments of these towns consequently have to take over the management of municipal finance from the mining companies and cope with decentralised planning. Kathu, in the Gamagara Local Municipality in South Africa, serves as one example of this. This municipality has found it difficult to plan for the risky economic conditions arising from China’s demand for iron ore. Local planning and municipal finance have been put under pressure and the mining companies continue to shoulder these responsibilities − albeit indirectly. The benefits associated with the “new natural resources agenda” do not accrue automatically, and often, as our case study shows, municipalities plan on the basis of inaccurately predicted municipal income. The mines actively support normalisation because it minimises their own long-term risks. We argue that the South African government does not do enough to assist mining towns.