ABSTRACT

In this chapter, we assess the effects of mining development on the municipal finance. International studies point out that mining towns benefit from royalties they receive from the national government. This chapter, based on an assessment of audited financial statements from 2005 to 2015, concludes that a mine has a major influence on the finances of local municipalities. We find that though mining-induced growth in Postmasburg has generated local revenues and intergovernmental transfers are indeed responding to local concerns, the resultant increase in total revenues has obliged the municipality to increase its expenditure. It has not only had to purchase more bulk water and electricity but also had to finance the infrastructural reticulation of new plots of land. We found the 10-year period to have been characterised by a close correlation between revenue and expenditure. Our findings, however, suggest that the municipality’s increased income from rates and taxes might have been particularly detrimental to low-income, non-mining households. Other mining-town municipalities in South Africa and elsewhere in the world may experience similar effects as a result of mining developments.