ANC policy shifts from nationalisation to taxes

2012-12-09 10:00

Moves afoot for the industry to persuade the ANC against pursuing contentious recommendations

The battleground over South Africa’s future mining policy has moved from nationalisation to the implementation of sweeping new tax measures, aimed to not only bolster state coffers but also to ensure the availability of minerals for domestic needs at cheaper rates.

With only a week to go until the ANC’s elective conference in Mangaung, the mining industry is lobbying hard to persuade the ruling party against pursuing some contentious recommendations adopted at the ANC’s policy conference in June.

The recommendations rejected wholesale nationalisation, but suggested alternative measures earmarked to increase the country’s take from the proceeds of mining activities.

The recommendations are based on proposals contained in an ANC document titled State Intervention in the Minerals Sector (SIMS). It calls for the state to “capture an equitable share of mineral resource rents” (essentially taxes) and “deploy them in the interest of long-term economic growth, development and transformation”.

It also says the state should “develop strategies to identify and manage strategic minerals in the national interest”.

SIMS specifically earmarks coal in this regard, saying the commodity should be provided at competitive prices to rein in energy costs.

Eskom in recent years often complained its rising cost base was partly to blame because it has to compete with lucrative export markets for South Africa’s coal.

As a counter measure, the state could decide to levy export taxes on a quota of local coal production, rendering it uncompetitive for sales to international markets while placing Eskom in a favourable position as the biggest buyer of coal in South Africa.

The policy document further makes recommendations on working conditions, housing, investments in communities and training.

According to Enoch Godongwana, the head of the ANC’s economic transformation committee, discussions with the Chamber of Mines have largely led to consensus on “soft issues” such as housing and community investments.

He said: “Marikana has given a sense of urgency to these issues we are in agreement on.

“But on the major points, we’re still far apart.”

One of the major sticking points appears to be the levying of additional taxes over and above existing corporate taxes and royalties mining companies are paying at the moment.

Godongwana said: “The debate about (the use of) tax instruments to derive benefits is ongoing, but difficult. We’re far apart, but we’re still talking.”

He also confirmed that interventions on coal were all but a foregone conclusion, saying it would also be in the interest of mining companies if power costs were contained.

Vusi Mabena, the Chamber of Mines’ senior executive for transformation and stakeholder relations, said the industry supported the policy recommendations’ rejection of nationalisation, but that alternatives like increased taxes and export restrictions could

still render South Africa’s mines uncompetitive and impede economic growth.

He also doubted whether additional taxes would in any way help solve any of the country’s social problems. “If we’re going to have to contribute more to the fiscus, it will not address the issues we are facing,” he said.

He also said attempts to limit the cost of coal would disadvantage miners to a larger extent than it would contribute

to supply security for Eskom.

“Who is going to carry the costs of that (cheaper coal)?” he asked. “South Africa has a lot of coal. When you make it easier for people to mine, Eskom always will have the supply it needs.”

Anglo American’s outgoing chief executive, Cynthia Carroll, earlier this week also spoke out on the additional impediment more taxes would place on the industry’s future.

“The SIMS report contains ideas that are sensible, but also ideas that are not,” she said to an audience at the Gordon Institute of Business in Joburg.

“The proposal for a new resource rent tax is both unnecessary and unwise.

“A resource rent tax – added to all the other burdens on the industry – would make South Africa internationally uncompetitive.”

Frans Baleni, the general secretary of the National Union of Mineworkers, said the union supported the ANC’s policy recommendations in full.

“The current status is not sustainable. We have to look at how mineral activities should contribute more to solving the country’s issues,” he said.

Baleni said the union would be in favour of using additional taxes for specific purposes, for instance an education fund.

He also agreed with the view that the ANC and industry were still far apart in their stances on issues like taxes and limitations on the trading of strategic minerals.

“Naturally, if you have something that is yours, you’ll resist attempts from someone who wants to take it away from you. That is where we’re at,” he said.

- City Press

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