ANC rejects nationalisation

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Bloemfontein - The ANC has rejected calls to nationalise the country's mines, but supports a windfall "resource rent" tax on mining firms, according to a draft policy document seen by Reuters on Wednesday.

"The state must capture an equitable share of mineral resource rents and deploy them in the interests of long-term economic growth, development and transformation," the draft of party's economic policies said.

The "resource rental tax" is effectively a windfall levy of 50% that will kick in after investors have made a "reasonable return". As such, it is meant to leave marginal or junior operations unaffected.

The ANC also recommended increasing "the supply of coal at competitive prices with the aim of containing energy costs" but did not provide any details of how to achieve that end.

At a five-yearly conference in Bloemfontein, the party has been at pains to strike a business-friendly note after strident calls this year for radical policy shifts to help solve South Africa's myriad social problems.

The election of millionaire businessman Cyril Ramaphosa as ANC deputy president has been interpreted as favourable to investment and the economy, particularly if Ramaphosa is able to push through plans to boost long-term growth.

The ANC also said monetary policy should stick to its current inflation-targeting regime, squashing calls from the party's union and communist party allies to broaden the central bank's mandate to include jobs and growth.

The party also said the government should consider tax breaks for employers to hire young job-seekers to tackle the chronic unemployment that is fuelling unrest among the millions of blacks who have seen little improvement in their lives since the end of apartheid in 1994.
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http://www.fin24.com/Economy/ANC-rejects-nationalisation-20121219
 
Ahhh,

So you won't nationalise, but you'll make mining so investor unfriendly they'll just leave anyway.
 
So... extra tax on mines that are profitable? That better than letting government owning the mines.

Only concern is "to what end" are those taxes? If that tax is just there to enrich officials, it will do more harm than anything else.
 
The "resource rental tax" is effectively a windfall levy of 50% that will kick in after investors have made a "reasonable return". As such, it is meant to leave marginal or junior operations unaffected.
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Who detirmines "reasonable returns" though?

EDIT: Having googled the Australiant equivalent of this tax, I swear the delegates copied it word for word! But decided to go for 50% instead of 30%!

I wonder if they will copy the $75m threshold for the tax as well...
 
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milomak said:
It seems to be not too dissimilar to what Australia operates.
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Except the "super tax" is at 50%... thats a stupid level to tax over and above normal tax.

I know I wouldn't invest money in an industry that has that kind of punishment attached to it.
 
A mine tax? Excellent idea. Botswana and Australia should be good models to investigate for this. If people dont wanna pay the tax and leave thats no problem, someone else who will pay the tax and is more efficient will get the non-renewable resources.
 
ToxicBunny said:
Except the "super tax" is at 50%... thats a stupid level to tax over and above normal tax.

I know I wouldn't invest money in an industry that has that kind of punishment attached to it.
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well of course this is just an opening gambit. just because something gets adopted as policy doesn't mean it will be passed into legislation exactly as how the anc policy envisages it. this will still go through nedlac, there'll be draft green papers follwed by white papers before it comes close to being law.
 
I trust all of you are aware that most members of the ANC's NEC have interests (shareholding etc) in mines. No-brainer why nationalisation was rejected.
 
The rate of 50% has been thumb-sucked because they copied the Aussie mining tax policy word-for-word, and that policy has raised a pittance since its inception (zero AUD in its first quarter), and they therefore want to maximise what they get when the odd opportunity comes around to tax the mining houses.

What they fail to realise is that increasing the tax won't result in any more payments, as the companies will simply divert pre-tax profits into infrastructure projects. These projects don't need to be profitable. They are in fact better off not profitable, so they're simply encouraging that the industry as a whole becomes less competitive or waste cash. Take into account forex risk and lower export demand and you have a recipe for failure.

Australia has shown that this sort of tax is a ludicrous proposal and only serves to hamper investor confidence, not only in the sector but in the country as a whole. Investor confidence fell considerably after its approval.

While we punish our miners for success, the rest of Africa, particularly West and East Africa are trying to butter-up investors to mine in their country. While Billies and Tinto pull out of South Africa because of the higher costs of doing business here, the rest of the continent are doing what they can to poach them away from us. They're winning. Recently the IMF told Tanzania that they had to start taxing mining companies at a higher rate because they were trying to increase investment in this space and lowered the rate for mining houses.

In 7 years, 21 new gold mines began operating in West Africa. That is a staggering number. In the same period, we lost mines at a staggering rate and this year saw a pullout from Billies in all future projects. In other words, they are no longer investing in SA, effectively.

But go ahead, ANC. Tax, tax, tax away, you bunch of communist pricks. Eventually you will get your wish and will have control of the mines, but it will be so bloody expensive to mine them and demand for SA gold will be next to nothing - you'll be begging the rest of the world to come back and help! And they won't!
 
milomak said:
It seems to be not too dissimilar to what Australia operates.
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Don't kid yourself. Looking at the number of foreign investments in mining over the last few years, only a fool will compare South Africa to Australia.
Either way, it is not important anymore. With the just elected, brand new ANC, what is said today it will be changed tomorrow, depending on the audience. WTF
 
ToxicBunny said:
Ahhh,

So you won't nationalise, but you'll make mining so investor unfriendly they'll just leave anyway.
Click to expand...

Where are they going to go? It's not like they can just move to a more tax friendly environment. If it's a choice of making money and paying high tax or not not making money at all, they will pay the tax.
 
DJ... said:
The rate of 50% has been thumb-sucked because they copied the Aussie mining tax policy word-for-word, and that policy has raised a pittance since its inception (zero AUD in its first quarter), and they therefore want to maximise what they get when the odd opportunity comes around to tax the mining houses.

What they fail to realise is that increasing the tax won't result in any more payments, as the companies will simply divert pre-tax profits into infrastructure projects. These projects don't need to be profitable. They are in fact better off not profitable, so they're simply encouraging that the industry as a whole becomes less competitive or waste cash. Take into account forex risk and lower export demand and you have a recipe for failure.

Australia has shown that this sort of tax is a ludicrous proposal and only serves to hamper investor confidence, not only in the sector but in the country as a whole. Investor confidence fell considerably after its approval.

While we punish our miners for success, the rest of Africa, particularly West and East Africa are trying to butter-up investors to mine in their country. While Billies and Tinto pull out of South Africa because of the higher costs of doing business here, the rest of the continent are doing what they can to poach them away from us. They're winning. Recently the IMF told Tanzania that they had to start taxing mining companies at a higher rate because they were trying to increase investment in this space and lowered the rate for mining houses.

In 7 years, 21 new gold mines began operating in West Africa. That is a staggering number. In the same period, we lost mines at a staggering rate and this year saw a pullout from Billies in all future projects. In other words, they are no longer investing in SA, effectively.

But go ahead, ANC. Tax, tax, tax away, you bunch of communist pricks. Eventually you will get your wish and will have control of the mines, but it will be so bloody expensive to mine them and demand for SA gold will be next to nothing - you'll be begging the rest of the world to come back and help! And they won't!
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Nice post, I think you should factor in that Gold does not renew. Mines close all the time. When the Gold runs out or is too deep, thats its. So when I hear people getting upset about closing gold mines I always wonder if those people know that Gold doesnt magically renew itself. They act as all these mine closures are because of policies. Most of them are because gold mines quickly eat through the gold veins. Also, dont forget, a lot of these companies think long term, and if they can make a quick buck raping another country while closing a mine here (that still has gold in it), then eventually they will come back for that gold when they country they just raped no longer has easy gold.

What are South Africans left with? The acid mine water and no gold. So lets make sure South Africans profit as much as possible from non-renewable resources.
 
joelus said:
Where are they going to go? It's not like they can just move to a more tax friendly environment. If it's a choice of making money and paying high tax or not not making money at all, they will pay the tax.
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True, if they can make money greedy corporates will operate almost anywhere in the world (there are companies operating in places like Zim hostile as it). And what is being proposed here is windfall tax, which as an analyst pointed out this morning happens about twice in every 10 year cycle. So, it will be mainly business as usual with the added benefit that the ANC have stopped dicking about with the uncertainty of nationalisation. Now, nationalisation was what was likely to chase off investors as they could sink money into projects only to have the state confiscate those assets under Malema style nationalisation.
 
joelus said:
Where are they going to go? It's not like they can just move to a more tax friendly environment. If it's a choice of making money and paying high tax or not not making money at all, they will pay the tax.
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They will go to places where they can make more money, as can be evidenced by BHP Billiton effectively ceasing investment in this country, Rio Tinto pulling out etc etc...
 
ToxicBunny said:
They will go to places where they can make more money, as can be evidenced by BHP Billiton effectively ceasing investment in this country, Rio Tinto pulling out etc etc...
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Money is to be made where the minerals are, not where the government is friendly. Wherever there are minerals there will be governments wanting a piece of the pie - there's no getting away from it. South Africa is the world's largest producer of chrome, manganese, platinum, vanadium and vermiculite. It is the second largest producer of gold, ilmenite, palladium, rutile and zirconium. It is also the world's third largest coal exporter. No mines will be closing down because of this tax.
BHP has not ceased investment here - they exited the titanium minerals industry in South Africa, selling its 37% stake in mineral sands producer Richards Bay Minerals to... Rio Tinto! BHP Billiton continues operating in Southern African coal, aluminium and manganese.
 
joelus said:
Money is to be made where the minerals are, not where the government is friendly. Wherever there are minerals there will be governments wanting a piece of the pie - there's no getting away from it. South Africa is the world's largest producer of chrome, manganese, platinum, vanadium and vermiculite. It is the second largest producer of gold, ilmenite, palladium, rutile and zirconium. It is also the world's third largest coal exporter. No mines will be closing down because of this tax.
BHP has not ceased investment here - they exited the titanium minerals industry in South Africa, selling its 37% stake in mineral sands producer Richards Bay Minerals to... Rio Tinto! BHP Billiton continues operating in Southern African coal, aluminium and manganese.
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South Africa is not the 2nd largest gold producer! Not anymore. You have the wrong stats. I believe China, Australia and Russia are the top 3. South Africa did not even reach 200T in 2011 and in 2012 it will be even less. I won't be taken by surprise if Peru will snatch the fourth place from South Africa if the situation does not improve. Only a fool will reason the way you do. Government stability is one of the pillars of foreign investment. Sure, even Zimbabwe attracts some foreign investment but really . . . WTF
 
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