South Africa not expected to add new taxes on mines

February 8, 2012

South Africa’s National Planning minister, Trevor Manuel, told a mining conference in Cape Town, South Africa that he was confident the government of South Africa would not surprise mining companies with sudden new taxes, but it may adjust the existing tax codes.

Reuters reported that the minister told the conference, “If there is to be change, I’m pretty sure that the finance minister and department of mineral resources will take a long-term view and not impose this one fine morning.

“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,” Manuel said.

A study submitted to South Africa's ruling ANC to reform its vital mining sector proposes a 50 percent tax on profits and rejects nationalisation as an "unmitigated disaster" for Africa's largest economy.

Although it delivers a hammer blow to calls for nationalisation by radical elements in the African National Congress (ANC), mining houses will be wary of the tax proposals as they grapple with steeply rising labour, power and safety costs in the world's largest platinum producer.

Manuel said it was critical that sensible taxation exists to extract rent from the industry and invest in South Africa’s development, Reuters reported.

The Mineral and Petroleum Resources Development Act has a royalties component that already adds to the country’s tax regime.

"That it can be improved on is in little doubt. Whether the levels are correct or not is also open to debate, but the basic elements are there and is sufficient a platform to build on," he said.

Manuel said the country’s Bill of Rights recognized property rights and that if these were removed, the state would need to pay for it and then would not have money to invest in health or education.

“Nationalization, apart from everything else, will also require significant investment to advance in the industry. The country doesn't have the resources; it clearly is not a smart strategy,” he said.

ANC Secretary-General Gwede Mantashe said on Monday the 600-page research document would look at how best to use the country’s mineral wealth to benefit the public.

 

 

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