[miningmx.com] — 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 on
Saturday 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 Affairs.
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.
“Mineral-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.
– City Press
