No to nationalisation, but...

2012-02-04 16:47

A highly anticipated ANC report has given nationalisation the thumbs down because it will threaten South Africa’s “fiscal sovereignty”. But the explosive report, which City Press has seen, contains proposals to fundamentally alter the R1 trillion mining industry in South Africa. These include:

» A 50% tax on the sale of mining rights to prevent speculation;
» A windfall tax of up to 50% on superprofits, defined as a return on investment of 22%;
» A reduction in the royalty tax from 4% to 1%;
» A superministry, composed of the amalgamation of five ministries to oversee minerals governance;
» The nationalisation of platinum, now regarded as South Africa’s sovereign resource, via “targeted interventions”; and
» A rent share of mining rights, which is likely to include much greater state participation in the industry.

The report was likely to be adopted at a national executive committee meeting yesterday as part of a carefully synchronised plan by President Jacob Zuma to push back against his political foes and bolster his reputation.
He is likely to use the proposals to reassure investors on nationalisation when he delivers his state of the nation address on Thursday.

The report gives Minister of Mineral Resources Susan Shabangu a clear message to take to the Mining Indaba, a global meeting of mining bosses that opens in Cape Town on Tuesday morning.

And with nationalisation’s flag bearer, ANC Youth League president Julius Malema, wounded and fighting for his political life, her message will not be muddied as it has been for the past two years.

The report notes that if the state wants to own 100% of listed mining companies, it needs to raise about R1 trillion, which exceeds the entire government budget.

The study group’s report cautions: “Either complete nationalisation or (even) 51% would be totally unaffordable and could put our country into a situation where we lose fiscal sovereignty.”

Instead, it recommends that the ANC investigate the desired outcomes of state control “in terms of rent share, growth and development, and make targeted interventions to achieve such outcomes”.

Rent share could mean a deal between the state and mining companies for government to have a stake in the business.
“(It could mean) having shares in the operations and profits,” says Petrus de Kock, a senior researcher in the Governance of Africa’s Resources Programme of the SA Institute of International Relations.

The document proposes a windfall tax on superprofits in return for which the state will reduce royalty tax, make several multibillion-rand infrastructure investments, extend incentives (perhaps in the special economic zones) and lower the overall tax rate.

The ANC is set to consider nationalisation of “targeted minerals”, which party sources say is platinum. This will be done “particularly for strategic monopoly-priced mineral feedstocks if other instruments do not suffice”, the report said.

De Kock said it was a good idea to focus on platinum.

“There are a lot of future benefits to platinum. New technology fuel cells, for example, will require platinum. Between us and Zimbabwe, we can control the world’s platinum.”

South Africa holds 90% of the world’s platinum, with deep reserves available for exploitation for decades.
The ANC may also ask government to tax mining houses half of their income when they sell mining rights without requisite development if proposals by its study group on nationalisation are adopted and lead to policy formulation.

A mining executive explained: “People form a company and apply for mineral rights even though they have no intention of mining. After getting the licence, they sell the rights for big money. The proposal is meant to end the practice of squatting.”

The proposed tax will be used to “discourage mineral right speculators”, according to the report. “We must introduce an exploration rights transfer capital gains tax of 50% payable if the right is on-sold or the company changes hands before mining commences. This will encourage genuine mineral property developers rather
than speculators.”

Any mining rights transfer will need the approval of a proposed minerals commission.

The study group moots the formation of a “superministry” in the economic cluster to improve coordination and strategy alignment among departments.

“Minerals resources governance in South Africa is compromised by the lack of coordination and strategy alignment between the departments of mineral resources and trade and industry.

“To maximise resource linkage with the rest of the economy, greater alignment could be attained if we merged the ministries of trade and industry, mineral resources, public enterprises, economic development, and science and technology,” reads the document.

“The creation of this superministry would be a vital step in tackling South Africa’s unemployment challenge.

“It would do this through ensuring that the developmental inputs of our resources are maximised into upstream and downstream industries into energy, knowledge and economic development.”

The study group also proposed the elimination of fronting, used by some foreign companies to acquire black empowerment stakes.
“This can be done by basing the BEE purchase requirements in the Mining Charter on the BEE proportion of local value added in the goods or services supplied rather than the total value of goods or services.”

This is to make sure that proceeds meant for empowerment stay in the country.

The ANC’s study group visited 13 countries to look at best practices and models that would suit South Africa.

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.