Bloomberg News

Shabangu Calls S. Africa Mining Taxes Fair, Competitive

May 10, 2012

South Africa’s Mineral Resources Minister Susan Shabangu said she sees no need for a major overhaul of the country’s mining tax regime, as the ruling party contemplates changes to the current system.

“Our current tax system” is fair and “competitive and it is working well,” Shabangu told reporters in Cape Town today. “It’s very important to us to continue to create certainty and stability in the mining industry. There is always an opportunity for improvement.”

A study commissioned by the ruling African National Congress in 2010 proposed the introduction of a “resources rent tax” on all mining operations triggered once they are generating returns exceeding about 15 percent annually. Other recommendations included a 50 percent capital-gains tax on the transfer of mineral prospecting rights and a 30 percent “mineral foreign shareholding withholding tax” on companies based in foreign tax havens.

South Africa is the world’s biggest producer of platinum, chrome and manganese. Anglo American Plc (AAL), Xstrata Plc (XTA), Rio Tinto Group Plc (RIO) and BHP Billiton Ltd. (BHP) have operations in the country. The ANC’s youth wing has called for the nationalization of mines and banks, saying the country’s black majority has an inadequate stake in Africa’s largest economy.

ANC branches are discussing the study’s proposals, which will be considered at a party conference next month.

“One aspect that gives comfort is the endorsement of the current process that we have implemented,” Shabangu said. “One does not see major steering away from that particular process.”

Coal Project

Mining accounted for 9.6 percent of South Africa’s gross domestic product and more than 35 percent of export revenue last year, while the industry directly employs more than 500,000 workers, according to government data.

The state participates in mining through the African Exploration Mining & Finance Corp., whose Vlakfontein mine, about 80 kilometers (50 miles) east of Johannesburg, has produced 681,458 tons on coal, Shabangu told lawmakers in Cape Town today.

The state company will announce plans soon for a second coal project in the eastern Mpumalanga province that will supply 4.6 million metric tons of the fuel a year to power utility Eskom Holdings Ltd. and create 1,000 jobs, she said.

Environmental Considerations

South Africa’s Mineral and Petroleum Resources Development Act, which was adopted in 2002 and vested custodianship of all mineral rights in the state’s hands, is being reviewed and will be presented to the Cabinet by the end of July, Shabangu said.

The planned changes will ensure the law adequately addresses environmental considerations and is aligned with environmental and water laws and the government’s plans to encourage mineral processing, she said.

“The review of the act, however, does not seek to introduce any major policy shifts in respect of exploration and exploitation of South Africa’s mineral resources,” Shabangu said. It will “streamline the licensing process to avoid delays and inefficiencies.”

Shabangu urged mining companies, including Anglo American and AngloGold Ashanti Ltd. (ANG), which are being sued by former workers who contracted lung diseases while working underground, to reach an out-of-court settlement.

More than 700 former mineworkers suffering from silicosis and other illnesses have filed a lawsuit against Anglo American in U.K. courts, while lawyers have signed up more than 6,000 people to join a separate class-action lawsuit against gold- mining companies in South Africa. The companies have denied liability, saying they complied with the law.

“We hope the mining companies can still go that route of engaging the workers,” Shabangu said. “We are engaging the mining industry. The mining industry has not moved toward making sure that proper compensation happens.”

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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