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Shabangu says mining resource rent tax must be fair

Lynley Donnelly

South Africa's mining industry needs a tax regime that keeps it globally competitive, says Minister for Mineral Resources Susan Shabangu.

Mining Minister Susan Shabangu.

South Africa’s mining industry needs a tax regime that keeps it globally competitive and allows it to grow according to Minister for Mineral Resources Susan Shabangu.

Responding to questions regarding a proposed resource rent tax, outlined in the ANC’s policy documents, she said any proposed regime should not become a “tax burden” on the sector.

Shabangu was speaking at a media briefing in Cape Town ahead of her budget vote speech in Parliament. The ANC’s draft policy document on state intervention in the minerals sector (Sims) proposes a 50% tax on all mining profits triggered after a reasonable return on investments is achieved.

A version of a resource rent tax is currently being applied in mining jurisdictions such as Australia, but local mining houses are concerned the proposal will hurt the sector.

Shabangu believed that South Africa’s current tax system was working well and is competitive. Any new dispensation needed to take into account the specific challenges and needs of the country, she said.

But while the ANC deliberated further on the issue ahead of its policy conference midyear, the department was going ahead with its review of the Mineral and Petroleum Resources Development Act, according to Shabangu.

The review of the MPRDA has been over a year in the making. Ambiguities in the law have created fertile soil for the abuses in mineral rights adjudication. This has led to high profile court cases for the department, notably the battle for mineral rights over the Sishen Iron Ore Mine between Kumba Iron Ore and politically connected start-up Imperial Crown Trading. But Shabangu said that the reviewed Act is set to go to Cabinet by midyear, after which it will be referred to Parliament.

The department has also completed its long awaited report on the controversial question of hydraulic fracturing for shale gas reserves, in the Karoo, or fracking.

The final report, however, must still be submitted to Cabinet in July, after which a decision will be taken on whether fracking should go ahead. The report includes recommendations on the position the country should take regarding fracking, said Shabangu.

Shabangu also gave assurances that the department’s online mineral rights application system was now running smoothly. She said the department would no longer be taking manual applications and the process of uploading the backlog of manual applications had been completed. The introduction of the system last year had many glitches, resulting in a parallel system of both manual and electronic applications being processed.

In a bid to deal with mining rights that had been revoked or lapsed, Shabangu will issue a notice in the Government Gazette inviting inputs on a system for auctioning off these rights.

Shabangu stressed that the department would also be working to align its regulatory regime with those of other departments, notably the department of water and environmental affairs.

“The current timeframes for obtaining a mining right, water-use licence and an environmental authorisation are not aligned, which results in prolonged processes and unnecessary delay,” she said in her budget speech.

“It is envisaged that the streamlined licensing process will ensure compliance by right holders with the various pieces of legislation, create certainty in the regulatory framework, expedite the licensing process and ultimately strengthen the constitutional imperative of security of tenure.”

The department would also release the coal resources and reserves study in July, which reveals the wealth of remaining coal reserves in the Waterberg area. It is the first comprehensive assessment of reserves done since 1987.

The research coincides with government’s major infrastructure push and plans to develop the Waterberg region on the mining, transport and energy fronts.

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