Smelters warn of sector jobs bloodbath if tax on exports is delayed
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SAVE SA Smelters has warned that 80 000 direct jobs would be on the line if the government continued to delay the implementation of the tax on raw chrome ore exports.
Save SA Smelters said as a result of the delay in the imposition of the export tax on raw chrome, South Africa was losing R15 billion of annual income.
Save SA Smelters convenor Powers Motsileng said that last year the Lydenburg and Meyerton smelters shut their doors, resulting in thousands of job losses.
Motsileng said even more smelters and even more retrenchments were likely should the government fail to act on the crisis in the sector.
“These two smelters closed in a short space of time last year, because people are just taking the minerals and building smelters in their own respective countries to produce ferrochrome which is really what is damaging our economy. We are in a situation where as South Africa we are not in control of our minerals, especially from a tax perspective, and we are effectively exporting the material without imposing any tax,” Motsileng said.
The Glencore-Merafe Chrome joint venture placed the Lydenburg smelter in indefinite care and maintenance, while South32 placed Meyerton, the metalloys smelter, on temporary care and maintenance to consider the future of metalloys.
Motsileng said South Africa needed to stop the export of raw materials “so they can benefit us here in the country, and close opportunities for exploiting countries from funnelling our minerals for free to their homes”.
Save SA Smelters has called on the government to impose an export tax of up to 80 percent on certain minerals.
Co-convener Lindelani Nyathikazi said Save SA Smelters wants UG2 and LG6 minerals to be taxed at 80 percent and 20 percent respectively.
“UG2 is a by-product in the platinum group metals mining and beneficiation process; it literally has no cost of production. The Chinese are using their technology to virtually replace LG2 in ferrochrome production,” Nyathikazi said.
Save SA Smelters said as a benchmark, Indonesia previously implemented a 100 percent tax on raw ore, and within three years the country overtook South Africa to be the world’s biggest ferrochrome producers, behind China. It said before 2012, South Africa was the biggest producer of ferrochrome and currently had 80 percent of the world’s chrome raw material.
Save SA Smelters said the absence of imposing tax on the export of chrome ore would likely cause smelters to close down.
Last October, the Cabinet proposed a tax on the exportation of primary chrome ore as part of measures to support the ferrochrome industry.
The Cabinet also proposed the use of energy efficient technologies for smelters, and the adoption of co-generation and self-generation technologies as part of measures to enhance the ferrochrome industry.
However, ChromeSA took exception to the proposal, saying the tax would be detrimental to South Africa’s primary and UG2 chrome ore producers given that they sold the bulk of their production for export. It also said that China’s buying power remained extremely strong and China would, in all likelihood, resist attempts to simply pass on the tax to Chinese producers.
“It is clear that insufficient thought has been given to the financial consequences of such a tax – and its inevitable impacts on direct employment, on associated industries, on the indirect jobs that will be affected, and on communities,” ChromeSA said.