Godongwana dismisses “scarecrow” tax critics

[miningmx.com] – MINES will be taxed – whether it’s in the form of higher royalties or a rent resource tax – where companies pay additional tax on the profits they make.

The ANC’s commission on economic transformation earlier today gave feedback on the discussions held on policy issues at the ANC’s 53rd national elective conference in Mangaung where it reaffirmed its previous position of stronger state intervention in the mining industry.

Pressed by journalists on whether the ANC resolved to impose a resource rent tax on mining companies, Enoch Godongwana said: “We’ll want a reasonable share on the profits of mining companies. So, yes, there will be a tax, but we don’t know what yet.’

Godongwana said the ANC intends to push the beneficiation of strategic minerals, such as steel, iron ore coal, gas and natural gas. “However, if industry doesn’t cooperate we’ll have to use a stick if we can’t reach the objective we’re talking about. We reserve the right to impose an export tax as a last resort.’

Asked if he believed the ANC-led government is sending positive signals to the mining industry regarding policy clarity and if an additional mining tax is fair, he said: “Yes, there is policy certainty. No decision taken at a policy conference can be overruled.

“There may be some confusion over whether taxing the mining industry is fair. It might not be fair for a particular commodity, but I definitely think it is fair for iron ore – and I’m using that as an example.’

Godongwana had a stab at critics of a resource rent tax, which he said has been implemented in Australia, yet that country is still the leader in mining. “I don’t buy it – it’s scarecrow stuff.’

The ANC’s new NEC will consider and discuss the mining tax matter at its lekgotla in January next year.

Earlier this week, deputy finance minister Nhlanhla Nene told a group of business people that any change in a tax regime requires extensive deliberations with all stakeholders involved – not only government.

State intervention in the mining industry will also involve a stronger impetus on the state mining company. The company is focusing on the mining and processing of thermal coal for Eskom and could expand its operations to mine minerals, such as iron ore, manganese and uranium.

Political analyst Nic Borain warned in a report to BNP Paribas Cadiz Securities that private investors in the mining may find it difficult to compete with a state-owned mining company which will “undoubtedly be given preference in certain licences’.