The draft mining royalties bill, as proposed by the National Treasury, could cost South Africa jobs, according to the Chamber of Mines.
The organisation said in a statement the measure was not good for the mining industry, nor the economy in general.
”Introduction of a revenue-based royalty adds a fixed cost to every mining operation. This has a disproportionate toll on less profitable mines.
”The unintended consequences of this system are increased cost of mining and possible job losses. The chamber’s view is that royalties should only be charged on profit,” it said.
The government has proposed a new mining royalty regime, with companies expected to pay the state between one and eight percent of gross sales, depending on the mineral mined.
Finance Minister Trevor Manuel said the rates, proposed in the draft Minerals and Petroleum Royalty Bill, were reasonable compared to other mineral-producing economies.
It suggests the diamond industry be charged the highest royalty rate of eight percent, while gold and platinum companies will be expected to pay three and four percent of sales respectively.
Deep-water oil and gas miners are to be charged a rate of one percent.
The chamber said the rationale for establishing a royalty tax was incomprehensible.
”The arbitrary categorisation of commodity royalty quanta implies an illogical application suggesting that diamond mining is twice as profitable as platinum mining, and that gold mining is three times more profitable than the mining of granite.”
The government’s review of international practise had not factored in South Africa’s ”effective taxes”, such as treating HIV and Aids, black economic empowerment provisions, and long lead times before an economic return from a project.
The bill would raise the cost of capital and increase project risk, making it more difficult for empowerment companies to raise debt finance.
The measure made provision for the preservation of existing royalties payable by mines to communities or natural persons in addition to the royalty at the rate stipulated in the bill.
”This amounts to a double royalty threat,” it said.
The royalty bill — a money bill that gives effect to the Minerals and Petroleum Resources Development Act, approved last year — was released on March 20 for public comment. – Sapa