About 4 000 members of the Richtersveld community in the northwest corner of South Africa sued for R2.5bn in damages last year after the Constitutional Court ruled in 2003 that state diamond group Alexkor was mining on their land.
"We have dedicated significant time and resources to engage the Richtersveld community on developing a comprehensive and beneficial resolution to their concerns," Public Enterprises Minister Alec Erwin told parliament.
"It is expected that a settlement will be concluded with the Richtersveld community shortly."
A memorandum of agreement was signed in February this year after lengthy negotiation, although a few outstanding concerns were still being dealt with, he said.
Members of the community - descendants of the Khoi-Khoi, the first inhabitants of the region - are demanding the return of 85 000ha taken from them by the government in the 1920s.
In papers filed in the Cape High Court in 2005, they said they wanted R1.5bn in compensation for the alluvial diamonds extracted from the rich coastal mine fields since then.
hey also wanted R1bn for damage done to the environment and R10m for their "pain and suffering".
Erwin said the settlement would allow the government to recapitalise Alexkor and start its turnaround plan and expansion programme.