Commodity super-cycle will keep lid on resource nationalism says Anglo American

THE improvement in commodity prices would keep the lid on corporate tax rate increases and other fiscal measures – sometimes known as resource nationalism -, especially among developing economies, said Anglo American today.

“The strength in commodity prices actually bodes well for tax authorities because for mining companies increased earnings flow directly through to increased income tax very quickly,” said Stephen Pearce, the group’s CFO. “If anything, some of the more developed countries have moved quicker in increasing taxes,” he said.

This contrasts with the view of Glencore CEO, Ivan Glasenberg who said last week that whilst nationalisation of mining assets was unlikely, host country governments would start to demand higher rents as a result of increased commodity prices.

“We could see more people trying that,” Glasenberg said, referencing comments earlier that week by Ian Rudd, the former prime minister of Australia.

In 2018, the Democratic Republic of Congo overhauled its mining code to include increases in mineral royalties whilst a year later, Zambia hiked its tax rate only to partly row back on the changes. Similar measures were proposed by Madagascar in 2019 and Uganda this month issued a draft law enabling it to take a 15% stake in mining firms.

Anglo American CEO, Mark Cutifani, said that in the current macroeconomic environment, there was “… a Covid deficit that¬†all of us are going to have to shoulder” as individual and corporate taxpayers. However, the impact of potential tax increases was “some exposure” but not material, he said.

“Certainly from what we’ve seen so far, the South African government has been very responsible and quite reticent to burden business with increased taxes given their understanding of the importance of foreign direct investment,” said Cutifani.

In February, South Africa’s National Treasury announced the country’s corporate tax rate would fall to 27% from April 2022 from 28% currently.¬†South Africa accounted for 55% of Anglo’s EBITDA in its 2020 financial year.


Cutifani was responding to questions during a progress update of the group’s environmental, sustainability and governance (ESG) practices during which it stopped short of identifying Scope 3 emission reduction targets.

Asked why Anglo hadn’t joined Glencore in committing to Scope 3 emission reduction targets – where scopes 1 and 2 refer to own and supplier emissions and Scope 3 refers to the emissions of customers – Cutifani replied that it was nebulous to assume carbon emissions could be standardised.

“We don’t think any effective standard can be applied,” said Cutifani. “Different companies apply different methodologies.”

Scope 3 did not take into account the scale of impact Anglo had made in reducing its direct emissions through the demerger of its South African coal assets or the contribution to green steel manufacture catalysed by its metallurgical coal production, he said.

Anglo plans to provide an ESG update twice a year whereas previously the report has been issued annually each April.