A rich seam to be mined

There is a global debate at present about the role of the state in managing natural resource endowments and ensuring that the broadest possible benefits flow from extractive industries. Local engagement with this issue, unfortunately, has been dominated by the confused and polarising nationalisation proposals of the ANC Youth League.

But the league’s parent body, the ANC, has now injected a suitably grown-up dimension to the discussion with the help of a three-member task team that has been travelling the world looking at how other countries manage their mineral wealth. Part of the team’s report has now been leaked, with the word “draft” writ large on every page. There are also instructions on each page that the report should not be disseminated in any form to anyone. Clearly its content is sensitive — and very much up for discussion.

The report envisages a dramatic shake-up of the mining sector with the creation of a super-ministry to oversee mining and a much more active role for the state. A range of export taxes is envisaged to encourage beneficiation and to try to ensure that South Africa maximises its gains from its near-monopoly position as a supplier of platinum to world markets.

Getting a mining right with the sole objective of flipping it for profit will become more expensive, to keep chancers out of the game and, where rights revert to the state the asset will be auctioned to the highest bidder.

The headline-grabbing measure is a proposed resources-rent tax that will render unto Caesar 50% of mining “super-profits”, which are defined as returns over a threshold calculated by adding 7% to the interest rate on long dated government bonds. The draft document suggests that as much as R40-billion a year can be raised for the fiscus from the super-tax. That is more than a quarter of the current budget deficit.


In our eyes, the plan places too much faith in the ability of the state to co-ordinate activity, particularly via direct interventions in the platinum, steel, and polymers value chain. The government is already hitting funding constraints as it seeks to rebuild the country’s power and transport infrastructure and the risks of corruption, even in our current regulatory regime, are immense.

Creating super-ministries will not change the fact that much growth at ­present appears to be in spite of the government rather than because of it. Ordinary people are getting on with the job of creating incomes for themselves, while bureaucrats and politicians fight turf wars over who gets to implement economic development plans.

On the other hand, taxes designed to target massive windfall profits and discourage speculation in mining rights have clear merits, as does a sovereign wealth fund, which would accumulate savings to be spent in lean times and to invest in long-term growth.

There is much that reasonable people can argue over in the ANC proposals and that is exactly why they are welcome. A reasonable national debate is exactly what we need after a pointless and damaging shouting match about nationalisation. We now need to get from the uncertainty of the draft to the predictability of policy.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Advertising

Subscribers only

Ithala fails to act against board chairperson over PPE scandal

Morar asked to settle with the state and pay back the profit he made on an irregular tender

Vodacom swindled out of more than R24m worth of iPhones

A former employee allegedly ran an intricate scam to steal 8700 phones from the cellular giant

More top stories

ArcelorMittal is ‘slowly becoming a burial site’

After the deaths of three employees who got trapped in a control room, workers allege that management frequently coerces them to bypass health and safety procedures

Jacob Zuma misses court deadline to respond to contempt application

Recalcitrant former president holds virtual meeting with ANC top six

No money to fund first-time university students, Nzimande says

Higher education minister says NSFAS is experiencing a funding shortfall and has requested that universities extend their registration period

Tackling the Western Cape’s housing problem, shack by shack

Youths can learn new skills and earn money at The Shackbuilder training institute, where how to build a shack is on the curriculum
Advertising

press releases

Loading latest Press Releases…