The house Winnie Madikizela-Mandela was banished to by the apartheid authorities is to become a museum.
Winnie Mandela - controversial but still hugely popular
Some $250,000 (R1.6m) is to be set aside to renovate the tiny rural home in Brandfort, Free State.
Former President Nelson Mandela's ex-wife was sent there from Soweto in 1976. During her stay, she organised a clinic, but her house was twice burnt.
Mr Mandela's first home has become a popular tourist attraction in Soweto.
Local officials hope the Winnie Mandela Museum will generate income and jobs in the area, when it opens in a year's time.
District Mayor Mathabo Mokapo told the BBC News website that they planned to purchase the house next door as well "because the place is so small".
"We have lost lots of mining jobs in recent years, so we hope this will be a real boost for the local economy," she said.
The current occupants are to be given alternative accommodation.
During her nine-year exile in Brandfort, Ms Madikizela-Mandela was not allowed a telephone or to visit her husband regularly in jail and was kept away from the media, friends, colleagues.
However, she still came to be seen abroad as a symbol of the fight against apartheid and was dubbed the "Mother of the nation" by many black South Africans.
She remains a divisive and controversial political figure in South Africa, following her divorce from Nelson Mandela and convictions for kidnapping and fraud.
But she is extremely popular among grass-roots supporters of the ruling ANC party, and has even been tipped as a possible successor to President Thabo Mbeki when his second term ends.