South Africa pushes for greater tax revenues from miners
South Africa seeks to extract greater tax revenues from its mining companies as they struggle to deal with the double burden of rising costs and declining commodities prices.
Bloomberg reports that while the incumbent African National Congress seeks to derive greater fiscal benefit from its mining companies, any measures to raise tax revenues will also risk further hampering a sector already burdened by ballooning costs and weak spot prices for key commodities.
The ANC announced at a conference in December that it would pursue a tax review for the mining sector in lieu of radical proposals to nationalize mines. Talk of a “resource-rent” tax has since sent jitters throughout the industry.
Nick Holland, CEO of Gold Fields Ltd. (NYSE:GFI), Africa’s second biggest gold producer, said at Investing in African Mining Indaba that he is “quite worried” about the prospect of increased royalties.
“We can ill afford to accept any taxes beyond what we have,” said Holland. “It’s just going to increase the speed of decline of the mining industry.”
South Africa’s mining industry, which employs around half a million workers directly, and comprises 9% of GDP as well as two-thirds of exports, weathered trouble times in 2012. Widespread industrial unrest paralyzed gold and platinum producers, while surging operating costs further impeded competitiveness and plunging commodities prices eroded profits.