Bloomberg News

South African Government May Reject ANC Study’s Mine-Tax Plans

February 07, 2012

Feb. 7 (Bloomberg) -- South African Mineral Resources Minister Susan Shabangu said the government may reject higher mining taxes proposed in a study commissioned by the ruling African National Congress.

“That’s a study,” Shabangu said in an interview in Cape Town today. “We have got our own internal process. We have to have a tax which would be competitive, especially in relation to other mining jurisdictions.”

The ANC agreed to investigate the viability of nationalization under pressure from its youth wing, which says the country’s black majority isn’t benefiting enough from the country’s mineral wealth. While the study argued against nationalization it proposed a resource rent tax on profit once an agreed rate of return had been met, a party official who read the document said last week, declining to be identified because it hasn’t been made public.

We need “a tax that will make us grow the industry,” she said. “For the past decade we talk about having missed the previous mining boom.”

South Africa is the world’s biggest producer of platinum, chrome and manganese. Anglo American Plc, Xstrata Plc, Rio Tinto Group and BHP Billiton have operations in the country.

“Nationalization would not allow us to grow the mining industry,” Shabangu said. “That cannot be an option for South Africa.”

Among the study’s recommendations are that the government and labor unions pool mining stakes held by their pension funds and that the government create a sovereign wealth fund funded by a 50 percent tax on “super-profits” earned by mines, Business Day reported today. The report also recommends the merger of six existing government departments, the Johannesburg-based newspaper said.

Anglo Wants Certainty

The proposals will be discussed at party conferences in June and December.

The debate over nationalization has deterred investment, mining company chief executive officers have said.

“It is clearly important this year to resolve once and for all, in the right way, the lingering uncertainty created by the nationalization debate,” Godfrey Gomwe, the executive director of Anglo American’s South African unit, said in a speech at the Mining Indaba conference in Cape Town today. today. “Nationalization does not work.”

While the government has no intention of forcing companies to process their output in South Africa, it does want to ensure local manufacturers have access to raw materials, Shabangu said.

--Editors: Antony Sguazzin, Ana Monteiro

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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