‘Rationality’ needed regarding state intervention in mining

Chamber of Mines chief executive Bheki Sibiya has called for “logic and rationality” to prevail in discussions regarding the ANC proposal for state intervention in the mining industry.

Although nationalisation appears to be off the cards, the leaked report by the ANC task team looking into the issue has revealed that extensive changes could be in line for the sector.

The proposed changes come as the state is battling to address the infrastructure backlogs that have plagued the economy and resulted in the local mining sector struggling to compete with its international counterparts.

Private-public partnerships to address long-standing problems were preferable to ever-increasing state involvement in the economy, said Sibiya. A resource-rent tax of 50% of superprofits, a capital gains tax of 50% imposed on groups flipping mineral rights and a cut in the royalty tax regime from 4% to 1% are among the proposals on the cards.

“We are relieved that the issue of pure nationalisation seems not to have found favour,” said Sibiya. “But we note the various types of taxes proposed and we hope that the department of mineral resources and the treasury are going to consult the mining industry to get its views on the implications of the policy positions they are exploring.”

The quantum of the supertax was “worrisome”. As a matter of principle, Sibiya said, the industry supported measures to prevent individuals from acquiring mining rights with no intention of using them other than selling them on, a process known as flipping. The level of tax proposed, however, was very high.

“There is a thought that this is just an opening salvo, with the appropriate officials being ready to negotiate a lower number.”

Meanwhile, what would be lost through a reduced royalties tax would be gained only through the proposed supertax.

There was little evidence in other parts of the world of how supertaxes worked to the benefit of all stakeholders, Sibiya said.

A win-win result for everyone would be the outcome of further negotiation, he said.

The ANC may aim to retain more of the nation’s wealth currently exploited by the mining majors, but ailing infrastructure has eroded the local industry’s competitiveness in recent years. Jacob Zuma’s presidential infrastructure co-ordinating committee was established last year in a bid to address infrastructure backlogs and speed up the implementation of new projects.

“Infrastructure is the python suffocating any significant economic growth, especially for those industries that are dependent on it,” Sibiya said. The railways, electricity and water were critical areas.

The mining industry accounts for half of all traffic on state logistics company Transnet’s freight network.

Although the state’s intention to become more involved in the economy might be “noble and good”, Sibiya said, public-private partnerships should be looked at because of the challenges the state faced. Other mining jurisdictions such as Australia and Canada had implemented such partnerships successfully.

The government could keep the railway network but allow private access to railway lines in a similar manner to the way in which the country allowed private access to national airspace, Sibiya said.

The state could also be far more diligent in promoting the entrance of independent power producers to top up Eskom’s limited capacity.

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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