Defiant Baxter warns Govt miners will not take charter “lying down”

Roger Baxter, in-coming chair, Southern Palladium Pic: Martin Rhodes

SOUTH Africa’s mining industry faces additional levies and taxes of between an estimated R2bn to R3bn a year whilst R2bn already contributed by it for human resource development will be diverted into a new tax collection entity.

Roger Baxter, CEO of the country’s Chamber of Mines delivered his most spirited and defiant demonstration yet of industry concern over the contents of a new mining charter saying “we will not take this lying down”.

This follows a presentation by Moza Mabuza, deputy director-general of the Department of Mineral Resources (DMR) to South Africa’s parliament on November 16 in which he outlined elements of the proposed charter.

Baxter said many of the proposals were new and had not been discussed in previous meetings between the chamber and the DMR, the last being in October.

To date, the chamber has not seen the fine print of the new charter even though Mabuza promised it would be gazetted in the government gazette in December.

This would give the new charter currency and, were amendments to its over-arching legislation, the Minerals & Petroleum Resources Development Act (MPRDA) promulgated, elevate it to law.

James Lorimer, shadow mines minister and a DA member of parliament, confirmed mines minister Mosebenzi Zwane could with a swish of his pen give life to the new charter, but he said the chamber had recourse in law.

Peter Leon, an attorney with Herbert Smith Freehills, agreed: were there anything ultra vires in the charter – in other words unlawful – the chamber could apply to the court to have it set aside.

Baxter said the chamber was considering its rights in respect of the charter although he remained hopeful a meeting with the DMR would take place before the year-end, not least so that the issue of ownership targets could be settled.

“The chamber also has its declaratory order with the High Court that it can trigger so it has means; it is not the end of the road for the mining industry. But it is very unfortunate what’s happened,” said Leon.

Baxter put more meat on the bones of the chamber’s objections to the mining charter which fall generally on the issue of the once-empowered, always-empowered debate with the DMR believing mining companies must always keep current empowerment at the 26% ownership level.

The other issue is to do with the formation of the Mining Transformation and Development Agency (MTDA), the provenance of which is unknown. “The chamber is concerned about its purpose, cost and oversight,” said Baxter on November 17.

In terms of a charter proposal, the MTDA will receive 40% of the R5bn the mining sector annually contributes towards human resources development which it will then deploy as it sees fit.

In terms of new levies the charter seeks to impose, there will a 1% tax on the revenue of foreign suppliers which will also end in the coffers of the MTDA. Foreign suppliers would merely increase supply costs to defray the expense – a turn of events that would lower the competitiveness of the South African mining industry, Baxter said.

Further imposts are a 0.15% levy on revenue for research and development – applied irrespective of the size of the company or whether that company normally allocates such monies.

There are also highly refined and specific rules on how the mining industry should procure capital goods and consumables. For instance, a minimum of 30% of the total goods and services element threshold must be spent on sourcing South African manufactured goods and services from a minimum of 50% plus one share black-owned and controlled SMMEs.

A minimum of five percentage points of the total goods and services spend must be allocated to companies with a minimum of 50% plus a share black woman ownership and control and/or 50% plus one share youth ownership and control.

“The targets so definitive that it’s as if the mining sector is being made responsible for developing South Africa’s manufacturing base,” said Baxter.

“We don’t control who sets up shop here. We are concerned that were are being set up to fail. There was never a proper conversation about how this would be achieved. There is a strong sense of a straight-jacketing,” he said.

Leon said, however, that the creation of the MTDA – if proved to be a tax collection entity – would not be the DMR’s to create as this right belongs to the National Treasury.