South Africa‘s Government will not bring in new mining taxes, and has vetoed a policy of nationalisation of the mining industry.
The announcement comes ahead of the country’s Mining Indaba amid fears of a nationalisation push from some in the ruling ANC and growing nationalisation moves on the continent, the AFP reports.
"As we speak, nationalisation is not a policy of the government or ANC," Godfrey Oliphant, deputy minister for mineral resources, stated.
"I can’t put my head on the block about nationalisation but we are definitely going ahead with the beneficiation policy. We want a model where everyone works together, the private sector, state-owned enterprises and government, that benefits all South Africans," he said.
Rio Tinto has already ceded majority control of its Murowa Diamonds operation in the country.
Zimbabwe has also increased mining and licence fees by between 500% and 5000%.
Following this, Rio chief Tom Albanese has warned of increasing nationalisaton on the continent, stating that royalties are better for countries than direct ownership.
Albanese said the debate varies on whether it is best for governments to achieve returns via taxation and royalties, through partial ownership, or a combination.
In countries such as Tanzania, the IMF has actually told the government to tax mining operations to meet its spending commitments, according to Grant Thornton.
Its National Assembly will consider proposals for a super profits tax on mining as part of the nation’s five year development plan.
"One size doesn’t fit all, but I would add … if you speak with a finance minister, someone from the treasury side of the country, they will recognise that the appropriate taxation royalty regime actually pays economic rent to the country in good times and bad," Albanese said at the Commonwealth Business forum in Perth.
"We’re not saying how to run a country – obviously we can’t – but again, we do recognise that it’s a constructive debate to have."
According to South African national planning minister Trevor Manuel, nationalisation "is not a smart strategy", Reuters reported.
While South Africa has vetoed greater government control of mines and new mining taxes in a similar vein to Australia’s Mineral Resources Rent Tax right now, the government has not ruled out changing the existing tax codes and the possibility of targeted super profits taxes on the platinum industry.
One proposal is a 50% tax on the sale of mining rights, as well as 50% on super profits (which is defined as an ROI of 22%), the New Age reported.
In line with these proposals the royalty tax would be reduced from 4% to 1%.
Platinum may also slowly be nationalised via ‘targeted interventions’ which would see greater governmental control of the metals.
However "if there is to be change, I’m pretty sure that the finance minister and the department of mineral resources will take a long term view and not impose one this fine morning," Manuel said.
"I don’t think that surprises are good for an industry like this, and this is likely to be the trend taken by government in introducing change."
However Oliphant did state that miners need to be taxed more heavily.
"We’re still not realising the considerable potential presented by our comparative advantage in minerals," he said.
"Investors need to realise that they can’t just come here and grab and go. The industry has not been committed to beneficiation over the years. That is going to change. There will be new rules."
South Africa‘s opposition party, the Democratic Alliance, warned that increasing taxes could damage investment in the sector and cause job losses.
Image: Chika For Africa