[miningmx.com] – PAUL Jourdan, a co-author of the State Intervention
in Mining (Sims) report, which has recommended introducing a resource rent tax for
South African mining companies, said the country’s minerals should be left unmined
if they can’t lead to industrialisation. “We don’t want companies with a core
competence of dirt digging; they need to make the linkages,’ Jourdan said.
Jourdan was speaking at a Mining for Change seminar. He urged mining companies
to focus their attention on Australia where they could “dig dirt’ for the next 100
years.
Recommendations of Sims, which include declaring certain minerals strategic
resources, the creation of a sovereign wealth fund and putting resources availability
on an open-tender basis, may be discussed at the ANC’s policy-making conference,
due to kick off tomorrow (June 26). The question is whether Sims will make an
impact on the thinking of the ANC?
In May, mines minister Susan Shabangu indicated that South Africa’s tax regime
was already competitive. “We won’t create tax burdens that will make our mining
industry uncompetitive. No country is ever happy with its own tax systems, but ours
compare well and seem to be competitive,’ she said. Three months earlier, National
Planning minister, Trevor Manuel, said the markets didn’t like suprises: they weren’t
“. good for an industry like this,’ he said, adding, “[T]his is likely to be the trend
taken by government in introducing change.’
Asked if he thought Sims would be adopted in any way, especially given it may force
a re-write of the Minerals and Petroleum Resources Development Act (MPRDA),
legislation on mining transformation promulgated in 2004, Jourdan was non-
committal. He said interested parties ought to attend the policy-making conference
and see for themselves. The MPRDA already made allowance for the industrialisation
– the forward and backward linkages involving education, beneficiation and the like
– of the mining sector, he said. Changes to legislation were more tweaks, he added.
As for a resource rent tax, Jourdan said it would only apply where there was “luck’ in
mineral discoveries; which is to say, the prospect of windfall profits. “All countries
are changing their tax regimes,’ he said, adding, however, that imposing a royalty
was not the preferred route. Gold companies, for instance, “would never have to pay
a resource rent,’ he said, given the mature nature of the industry. The margin
pressure in the platinum group metal industry would also exempt them.
Fundamental to Jourdan’s view, which he says tracks ANC policy-making, is the time
lens being applied to the minerals sector. The minerals boom would continue until at
least 2025 when China’s economic growth matured with the baton being taken up by
India economic growth to 2040. “One billion people out of seven [billion] are in the
rich club and the other six [billion people] want to get in,’ he said of global
ambitions economically.
Earlier in the seminar, Mzukisi Qobo, a political risk analyst and strategic advisor on
government policy and regulation, said the mining industry was defensive regarding
transformation. A charter would not have been necessary if the sector had acted in
enlightened self-interest. But he was equally critical of government’s approach to
implementing change, as well as the content in Sims.
The ambiguities around the implementation of the resource rent tax did not inspire
confidence, while the time taken to review fiscal changes in the mining industry,
from the ANC’s National Executive Committee through to the policy-making
conference, were too lengthy. “Had South African mining economy tracked the top
20 economies from the last mining boom it would have generated $8bn more and
created 45,000 jobs,’ he said.
Interestingly, Qobo also said that nationalisation of the mining sector would continue
to rumble on in the background given its usefulness for populist nationalists or those
with political ambitions who wanted to paint themselves with a leftist view point. “It
[nationalisation] won’t be killed off entirely. It is a rallying point to cast the mining
sector as the real problem,’ said Qobo.
