South Africa is looking at mining super-tax, ‘targeted intervention’ in platinum sector
South Africa’s ruling party, the African National Congress, appears to be moving away from nationalization of the mining industry to reassure foreign investors but is considering other plans to increase state involvement in the sector, particularly with regard to platinum.
According to the New Age paper the ANC report stressed that nationalization would be unaffordable, as the government would need to raise R1 trillion ($125 billion), more than its entire budget, to buy out listed mining companies:
The proposals included a 50% tax on the sale of mining rights to prevent speculation. A windfall tax of up to 50% on super-profits, defined as a return on investment of 22%, was also included. However, the royalty tax would be reduced from four to one percent.
Platinum, a strategic mineral, would be nationalised via “targeted interventions”, while the government would participate in the industry to a much greater extent, the weekly reported.
However, the royalty tax would be reduced from four to 1%.
Firebrand Julius Malema (pictured), the leader of the youth wing of the ANC which often acts as kingmaker in the country’s politics, spearheaded the campaign to seize mines, farms and banks last year.
Malema is never far from headlines in the country with racially charged comments but an anti-corruption police unit is probing his business dealings and last week his suspension from the ANC for “bringing the organization into disrepute” over an unrelated matter was upheld.
A closely watched survey by the Fraser Institute shows South Africa’s appeal for mining investment has declined dramatically since 2006.
In 2006 South Africa was ranked 37th out of 64 countries and territories. The country’s position has declined since then and its 2010 ranking was 67th in an expanded survey of 79 countries and territories.
The mining sector in South Africa contributes 9.6% to GDP and employs 3.1% of the country’s labour force. In 2010 the sector contributed 15.3% of country’s exports.
A Citigroup report in 2010 states of South Africa’s $2,500 billion worth of reserves, $2,300 billion resides in the platinum group metals. In dollar value Guinea, South Africa, India, the Ukraine and Kazakhstan are the countries that under-produce the most in terms of their reserves: