Govt to consult on rent resource tax

David McKay | Mon, 06 Feb 2012 18:09

[miningmx.com] – TREVOR Manuel, Minister in the Presidency for the National Planning Commission (NPC), said the prospect of a resource rent tax in South Africa would be subjected to a period of exhaustive consultation with the industry, and would not be implemented “one fine morning”.

He also echoed the leaked contents of a government-backed study into mines nationalisation, saying the model was unconstitutional and too expensive.

“The mining sector is so fundamentally important that we can’t take nationalisation forward,” he told delegates at the Investing in African Mining Indaba, a conference held annually in Cape Town. “There is a constitution,” said Manuel, adding that changing the constitution to account for nationalisation would require 75% in the National Assembly and the support of the country’s nine provinces. “You’re not going to get that in the current milieu,” he said.

Additionally, South Africa’s Bill of Rights prevents expropriation without compensation, therefore the cost of nationalising the mineral sector in South Africa was prohibitively expensive. “It's clearly not a smart strategy,” he said.

A study into state intervention in the mining sector was commissioned by government in 2011. The study was completed in December, and then redrafted and discussed at the ANC’s National Executive Committee last week.

Details of the study have been leaked to the media, with City Press and Business Day reporting that government will be asked to consider a rent resource tax – as much as 50% – rather than outright ownership of mineral assets and mines in South Africa. This speculation has not been confirmed by the government.

Manuel, who heads the NPC – which is primarily tasked with creating jobs and improving training in South Africa – expressed his unease with aspects of the study's findings. “There are proposals in there that worry me, but it’s important not to confuse proposals with policy,” he said in response to a question from the audience.

Instead, he pointed to government’s role in the creation of the Royalty Act, which imposes a levy on mining company pretax profits, and accounts for certain marginal mining companies. “Government was exceedingly consultative [in the formation of the Royalties Act],” said Manuel.

“If there is a change [to the eventual tax take from the mining sector], government will take long consultations and not change it one fine morning,” he added.

FAILURES

Manuel conceded that South Africa’s government could have supported the mining industry better by providing more infrastructure and providing a clear, regulatory path. Government was “duty-bound” given the long lead times in mining projects to provide issues such as a clear licensing system by a credible administration.

“We are under-invested in infrastructure to deliver mining water, rail, ports and electricity,” he said. If infrastructure could be beefed up there was “no reason why South Africa could not double its [GDP] growth.”

South Africa’s mining industry was worth R103bn in 1993 and only R92bn in 2009 despite a synchronous bull run in commodity prices globally.

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