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Minister brushes off mine tax worries

15 May 2012   (0 Comments)
Posted by: SAIT Technical
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Reuters 14 May 2012

South Africa's mines minister brushed off worries over a "resource rent tax” on profit proposed in a study submitted to the country ruling ANC, saying any change would have to keep the country's vital mining sector competitive.

The study, submitted in February, rejected nationalisation - a spectre that has long haunted the mining sector - as an "unmitigated disaster” for Africa's largest economy.

It did propose a windfall levy of 50 percent that would kick in once investors have made a "reasonable return”.

Speaking on the sidelines of a diamond conference in the northern Italian city of Vicenza, mines minister Susan Shabangu said on Monday it was too early to discuss details of the tax proposal, which should not become an excessive burden.

"For me as a minister, we cannot come up with a process which will stifle and kill the industry,” Shabangu told Reuters. "We must come up with a regime which will allow us to compete in an advantageous way as South Africa.”

The ANC was expected to discuss proposals to reform the industry and extract more wealth from the country's mineral deposits, including the 50 percent tax on profit, at its major policy-setting meeting in June.

Lawyers and analysts have said the tax proposal was too complex, adding it would create more uncertainty around minerals policy for an industry battling steeply rising labour, power and safety costs in one of the world's largest precious metals producing nations.

Separately, as of April, South Africa's marginal tax rate applicable to gold mining companies dropped to 34 percent from 43 percent, helping to cushion the impact of production hit by a safety drive and a lower rand.

Shabangu said her ministry was not planning to extend tax breaks granted to the gold mining industry, which faces mine depletion, to other mining sectors. However, the ministry has been analysing the performance of other mining sectors.

"If there is a need for the extension (of tax breaks) we may do that. But we are not going to do it on the basis of (what we did with) gold,” she said.


Production from South Africa's gold and platinum sectors has been hit by a safety drive and subsequent stoppages following violations or deaths - stoppages that can be too wide-reaching, according to the industry.

Shabangu said South Africa would press ahead, regardless of concerns over the impact on production.

"There will always be pressure if people are still dying. My responsibility is to make sure that there is absolute safety,” Shabangu said.

South Africa's mines are the world's deepest and among the most dangerous, and Shabangu's ministry has been leading and effort that has prompted a surge in inspections and stoppages.

"We have to strive for zero fatality. It is possible,” she said. "I will be satisfied as a minister if I could report a year when there will be no fatality.”

Safety stoppages cost top gold producer AngloGold Ashanti 76,000 ounces lost production in the first three months of 2012, more than for the whole of last year.

Mining output fell sharply in volume terms in February, the latest month for which data is available, highlighting the impact of the safety push.

Shabangu also said the mining industry was still far from the black economic empowerment goals which should see 26 percent of mining firms black-owned by 2014.

But as more and more new mines are majority black-owned, the 2014 target would be achieved, she said.

Since the end of white-minority rule in 1994, South Africa has struggled to ensure its mineral wealth benefits all its 50 million people, and lavish spending on government job creation schemes has alarmed investors.


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