No surprises for mining – analysts

BLOOMBERG NEWS

Mines drill underground at Anglo Gold Ashanti's Mponeng gold mine near Carltonville, South Africa, Thursday, May 25, 2006. Photographer: Naashon Zalk / Bloomberg News

Dineo Faku

There were no surprises in Finance Minister Pravin Gordhan’s Budget speech yesterday, as he reiterated the need for a review of South Africa’s mining tax framework, analysts said yesterday.

“We have committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability,” the finance minister said.

Alex Gwala, a mining tax expert at Deloitte & Touche in Johannesburg, said nothing new had come from the 2013/14 Budget speech.

“With regard to mining, the Budget speech was based on what President Jacob Zuma said in his State of the Nation address earlier this month. There was no new information,” Gwala added.

Ben-Schoeman Geldenhuys, a partner for energy and natural resources tax at KPMG, agreed that the announcement had no major surprises.

“I believe they are going to look at mining tax and royalties, which is in line with what was said earlier,” he said.

However, the focus on affordable housing would bring relief to mining communities, Geldenhuys said.

The minister said the government would allocate R1.1 billion towards the informal settlement programme in mining towns.

The Treasury also said it had concerns with current legislation, which needed to be “refined”, but did not offer details on its review.

“The broader review of the tax system will consider whether this approach is sufficiently robust and assess what the most appropriate mining tax regime is to ensure that South Africa remains a competitive investment destination,” the Treasury said in documents presented to Parliament along with the Budget.

The ANC has been looking to impose a windfall “resource rent” tax on mining firms to help finance increased welfare spending in a country where millions live in abject poverty.

The ANC has talked for years about getting more value out of the nation’s vast mineral wealth, but very little of this talk has resulted in action.

The mining industry paid about R26bn in direct corporate tax in the 2011/12 tax year.

The industry paid an additional R5.5bn in royalties in 2012/13, down from the R5.6bn collected in 2011/12 due to the wave of violent strikes that crimped the sector.

The tax review should balance the interests of the state and the industry, the Chamber of Mines said in a statement yesterday.

“It is, therefore, crucial to approach the taxation review with a focus on balancing the interests of the taxation take of the state with the commensurate requirements of competitiveness, predictability and stability of the mining taxation system, which are crucial to encouraging further investment in the mining sector,” the chamber said in its statement. – With additional reporting by Reuters