Sapa
A REPORT claiming Lonmin was engaging in two transfer-pricing arrangements was misleading and false, the company said yesterday.
It was responding to a report titled The Bermuda connection: Profit shifting and unaffordability at Lonmin 1999-2012, released by the Alternative Information and Development Centre (AIDC) yesterday.
“Lonmin pays tax fully and properly in all jurisdictions in which it operates. Our financial statements and structures are audited by KPMG and SA Revenue Service [Sars],” the company said.
“The report is misleading and false and Lonmin reserves all its rights with regard to legal recourse.”
The report claimed Lonmin transferred more than R2.3 billion in fees to two of its subsidiaries, one called Western Metals Sales in Bermuda.
AIDC economist Dick Forslund told the Cape Town Press Club that between 2008 and 2012, $162 million (R1.8bn at the current exchange rate) in “commissions” was paid to Western Metals Sales.
He said the primary purpose of the report was to work out whether Lonmin could have met the R12 500 wage demand put forward by Marikana rock drillers in 2012.
The report, described as a case study, concluded that a wage agreement could have been reached that year had the one alleged profit-shifting arrangement been collapsed and the other drastically reformed.
“If you were to divide the average payment, the sales commission, to Bermuda over each individual rock drill operator at Lonmin in 2012, you would get an average wage increase of R3 800 a month,” Forslund said.
He said all the data used to compile the report was based on materials made public in the proceedings of the Farlam Commission of Inquiry up to September 29.
The commission is investigating the deaths of 44 people during a violent wage-related strike at Lonmin’s mining operations at Marikana, near Rustenburg in North West in August 2012.
Lonmin said it had chosen not to prevent AIDC from holding its press conference despite being of the view that the report undermined the working of the commission. It said commission evidence leaders had deemed it fit not to oppose the AIDC.
Asked whether Lonmin planned to take the centre to court, Forslund said he would be very surprised if it did. The firm’s legal team had apparently told him the report was defamatory.
Lonmin said that to sustain operations and save jobs, it had to raise about R8bn from its shareholders in the four years to 2012.
Last year, it again raised about R9bn from its shareholders to keep the mine operational. “The idea that Lonmin hid profits from shareholders while asking them for a total of R17bn is not credible,” the firm said.
Forslund conceded that he was not an expert on tax. He also said it was up to the Sars to investigate claims made in the report.
It is the centre’s belief political pressure needs to be put on companies engaging in such schemes because they disrupt the labour market.
The report stated it was not guided by any belief that Lonmin was more unequal, negligent or “ruthlessly profit maximising” than other mining firms.