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07 Feb 2012 08:21
Mineral Resources Minister Susan Shabangu stood up at the Mining Indaba last year and declared: “There will be no nationalisation in my lifetime”. On Tuesday morning she told a packed hall of global delegates with certainty that nationalisation is off the agenda for government and the ruling ANC.
Instead, she highlighted the new approach of resource nationalism—a milder form of state intervention that will include a higher tax regime for the industry.
One of the proposals on the table is state control through rent share, and growth and development.
Some of the interventions include a 50% tax on the sale of mining rights, a windfall tax of up to 50% on super-profits (defined as a return on investment of 22%), a reduction in royalty tax from 4% to 1%, a super ministry merging five ministries to police minerals governance and a rent share of mining rights.
“Other plans touted in the mining sector revamp include the merger of various government agencies and departments in order to streamline efforts,” Shabangu told a press conference after her speech at the mining indaba.
Shabangu said the state would provide the necessary infrastructure and energy to grow the mining industry, but reminded mining houses of their responsibility in any proposed partnership.
“In many cases mining houses have not committed themselves to our plans.
Communities in which miners operate remained unsatisfied—this must change,” she said.
It is expected President Jacob Zuma will reveal more specifics of the planned overhaul in the mining industry during his State of the Nation address on Thursday.
Peter Leon, a mining expert at law firm Webber Wentzel, said it was good news that the government and the ruling party had decided to sing the same tune and end the debate of nationalisation but higher taxes were not reassuring for investors.
“Resource nationalism is still better than resource assets being nationalised but the proposed taxes are not a good idea if government wants to attract investment in the sector which is already battling to attract investment because of a restrictive regulatory regime,” said Leon.
“Resources rent tax in Australia brought down the government and there the tax was a lot lower at 22% and only affected coal and iron ore. All these fiscal measures being proposed could create problems with investment.”
On Monday, Minister in the Presidency Trevor Manuel acknowledged that the mining sector was in the doldrums and that investors needed more reassurance of policy certainty.
Speaking on the first day of the indaba, which organisers said attracted a record 7 500 delegates from around the world, Manuel said the mining sector’s contribution to the economy shrank from R103-billion in 1993 to R92-billion in 2009. This was despite a synchronised commodities boom for most of that period, which South had missed.
“The challenge before us is to reverse this trend, and in reversing this trend we have to plan to boost investment and employment in mining by taking account of five critical issues,” Manuel said.
These included policy and regulatory certainty, extraction of rents from the sector, investment in infrastructure, beneficiation and reducing mining’s impact on the environment.
“This is what’s going to drive the changes. We fervently believe that the country is capable of reaching much higher levels of output in mining,” said Manuel.
Although Manuel said it was critical that sensible taxation exists to extract rent from the industry and invest in South Africa’s development, he said South Africa would not hit mining companies with surprise new taxes—it may adjust existing codes on the industry.
“If there is to be change, I’m pretty sure that the finance minister and department of mineral resources will take a long-term view and not impose this one fine morning,” he added. “I don’t think that surprises are good for an industry like this and this is likely to be the trend taken by government in introducing change.”
He reiterated that “valuable taxation regimes can help achieve balance”, especially when faced with volatile commodity prices.—Additional reporting by Nickolaus Bauer.
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