REUTERS

A study commissioned by South Africa's ruling ANC to maximise benefits for the state from the mining sector flatly rejects nationalisation, while proposing higher mineral taxes.

Below are details of some of the key proposals in the study, a copy of which was obtained by Reuters on Wednesday:

RESOURCE RENT TAX

A resource rent tax (RRT) of 50 percent should kick in once an investor has made a “reasonable return.” It should therefore not hit marginal or low-grade deposits.

“Resource rent” is defined as “surplus value” or “the difference between the price at which a resource can be sold and its extraction costs, including normal returns.”

MINERAL ROYALTIES

In light of the resource rent tax, mineral royalties should be reduced to 1 percent of revenue, provided the government is compensated equally through income from the tax.

The current mineral royalties system operates a sliding scale, with levies capped at a maximum of 7 percent.

SUPER MINISTRY

A “super ministry” should be set up to oversee the sector, as well as the development of other, related parts of the economy, including mining services and downstream industries such as ore processing and smelting.

The new entity would be made up of units from the Departments of Trade and Industry, Mineral Resources, Energy, Public Enterprises, Economic Development and Science and Technology.

TAX HAVENS

If a foreign mining company is registered in a tax haven, a mineral foreign shareholding withholding tax of 30 percent should be introduced. Otherwise the normal rate of 10 percent should apply.

STATE MINERALS COMPANY

A state-owned miner should be created to develop minerals deemed “strategic.” It should supply them for the domestic market at competitive prices.

STRATEGIC MINERALS

Minerals used for manufacturing, power production, agriculture and infrastructure should be declared strategic and supplied to the economy at prices allowing for a reasonable return or at export parity.

MINERAL RIGHTS COMMISSION

A body should be established to audit existing rights and to regulate the granting and administration of future rights. The commission would also be responsible for deciding which minerals are strategic.

CARBON TAX

A putative carbon tax would be extremely damaging and should be put on hold. The tax could be reconfigured by having a higher resource rent tax than the proposed 50 percent linked to carbon emissions.

SOVEREIGN WEALTH FUND

A sovereign wealth fund could be set up to invest in long-term projects that will ensure economic prosperity beyond the depletion of mineral resources. The fund could be funded through income from the resource rent tax. - Reuters