http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.13Change: -0.02
R/$ = 12.07Change: -0.13
Au 1187.17 $/ozChange: -20.08
Pt 1125.50 $/ozChange: -23.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jun 25, 2012

ANC mining policy should focus on 'capturing rents' not nationalisation

Back
State Intervention in the Minerals Sector (Sims) co-author Dr Paul Jourdan on the global trend to capture resources rents without nationalisation and the five minerals-economy linkages proposed in Sims report. Camera Work: Nicholas Boyd. Editing: Darlene Creamer. Recorded: 25/6/2012.
 
 
 
Johannesburg|Africa|Building|Industrial|Mining|Petroleum|Platinum|Resources|Road|Africa|Australia|Brazil|Chile|South Africa|Bank|Investment-wary Mining Community|Services|Enoch Godongwana|Infrastructure|Mzukisi Qobo|Paul Jourdan
|Africa|Building|Industrial|Mining|Petroleum|Platinum|Resources|Road|Africa||Services|Infrastructure|
johannesburg|africa-company|building|industrial|mining|petroleum|platinum|resources|road|africa|australia-country|brazil|chile|south-africa|bank|investment-wary-mining-community|services|enoch-godongwana|infrastructure|mzukisi-qobo|paul-jourdan
© Reuse this



JOHANNESBURG (miningweekly.com) – Strengthening the fiscal linkages to South Africa's mining industry through a new resource rents tax (RRT), which would effectively target super profits earned by domestic miners, was preferable to ‘blanket nationalisation’, which could not be pursued in the absence of compensation, a co-author of the African National Congress’ (ANC’s) ‘State Intervention in the Minerals Sector’ (Sims) report has argued.

Speaking at a 'Mining for Change' event on the eve of the ANC policy conference, Dr Paul Jourdan again stressed that South Africa's bilateral investment agreements made nationalisation without compensation “impossible” and that paying compensation would “break the bank”.

The ANC’s Enoch Godongwana would present the 400-page report, which was released earlier this year, formally this week during a 45-minute plenary presentation to delegates that will converge on Midrand, Gauteng.

The rents-focused approach outlined in the Sims report, which has been drafted with reference to mining policies in 30 countries, is also said to be in line with moves by governments globally, which contrasted strongly with the tendency during the 1970s for governments to secure the equivalent of such rents through ownership.

Nevertheless, the report insists that a greater share of the potential rents should be ‘captured’ in the interests of the country’s growth, development and employment objectives – a point that had already sent jitters through an investment-wary mining community.

Proposed is a 50% RRT that the authors believe will enable government to “share” in earnings achieved over-and-above that which would have been possible through the ‘normal’ application of capital, labour and innovation. In other words, in instances where the terms of trade had improved through higher commodity prices, or where the geology itself offered superior yields. At the same time, Sims proposes a reduction in the royalty tax to one per cent.

Such abnormal profits are suggested to be anything above a “return of investment greater than the long bond rate, plus seven per cent”. When the report was drafted it was estimated that an RRT of 50% would yield about R40-billion a year, but Jourdan admitted that it would be far lower currently, owing to the recent softening of commodity prices and the current crisis in the platinum sector.

Critics suggest that such a move could further undermine the attractiveness of South Africa as a mining investment destination and argue that the focus should rather be on improving the competitiveness of a sector that is underperforming relative to other resources-heavy economies, such as Australia, Brazil and Chile.

Political risk analyst Mzukisi Qobo argues that the policy debates should rather be centred on building confidence in the mining sector and on the creation of a “clear road map”, outlining ways to place the sector on a strong competitive footing.

“The ambiguities in the Sims report around the RRT, the functions of the State mining company, the nature of strategic minerals and the slew of regulatory institutions, do not inspire confidence. Instead, they compound confusions,” Qobo says.

The Sims report, itself, acknowledges the failure of South Africa to take full advantage of the 2003 to 2008 minerals boom, owing to resource and infrastructure constraints.

However, it asserts that accelerating the development of the sector has to be tied to five ‘economic linkages’, including the fiscal linkage that has, to date, received the bulk of the attention.

In fact, Jourdan (in his personal capacity) even argues that unless these connections are made, it may be best to leave the minerals unexploited, as without such linkages the developmental objectives will not materialise – instead, they would form the basis for further deindustrialisation.

CRITICAL LINKAGES

Sims, thus envisages a strong association between mining and South Africa’s reindustrialisation aspirations, which its argues will form the foundation for 'inter-generational equity'.

The four other linkages outlined identified are:

• A knowledge linkage, which relates to developing the human resources and technological capacity to maximise the spinoffs from mining.
• Backward linkages, which relate to the development, commercialisation and manufacture of the capital goods, services and consumables used by the minerals sector.
• Forward linkages, or beneficiation, of minerals where commercially viable.
• And spatial linkages, through which the infrastructure is developed to ensure ‘life beyond the mine’ and to open up regional opportunities for South African firms engaged in backward linkages.

To achieve this, the Sims reports proposes greater coordination of the government departments overseeing minerals development and trade and industry, possibly through a ‘Super Ministry”, or through the newly created Presidential Infrastructure Coordinating Committee.

It also argues for the RRT receipts to be ring-fenced for use in three sovereign wealth funds, designed to support fiscal stabilisation, regional development and minerals development.

Amendments to the Mineral and Petroleum Resources Development Act would also be required, particularly to ensure that the contribution to backward and forward linkages are made a licence condition, as well as to cater for a category of ‘strategic minerals’ that could be associated with extraction and pricing conditions.

Lastly, it also calls for the expansion and upgrading of minerals-related infrastructure to support the expansion of the minerals sector. Part of the process should involve an upscaled investment in geological surveying “so that we have more deposits in 20 years time”.

“But primarily, it is up to our generation to ensure that the current depletion of our finite mineral assets establishes a competitive industrial platform for the economic prosperity of future generations,” Jourdan concludes.
 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Economy News
David Lewis
Updated 15 minutes ago David Lewis‚ head of the country's leading non-governmental anti-graft agency‚ Corruption Watch‚ has criticised Police Minister Nathi Nhleko's report exonerating President Jacob Zuma of having to pay anything for the upgrades to his Nkandla home. Nhleko yesterday...
Outgoing AfDB president Donald Kaberuka
Updated 3 hours ago Nigeria's Agriculture Minister Akinwumi Adesina won an election on Thursday to be the new president of the African Development Bank (AfDB), the lender said. After six rounds of voting that saw seven rivals from across the continent defeated, Adesina secured around...
Updated 4 hours ago Revelations that two South Africans allegedly bribed Fifa with $10-million for the country to host the 2010 Soccer World Cup may have tarnished the country’s image, economist Mike Schussler said on Thursday. “The scandal has taken some of the shine off. If we’re seen...
More
 
 
Latest News
David Lewis
Updated 15 minutes ago David Lewis‚ head of the country's leading non-governmental anti-graft agency‚ Corruption Watch‚ has criticised Police Minister Nathi Nhleko's report exonerating President Jacob Zuma of having to pay anything for the upgrades to his Nkandla home. Nhleko yesterday...
Updated 1 hour 26 minutes ago While transformational efforts have succeeded in boosting black representation at a managerial level in the metals and engineering sector, these individuals appear to stagnate in middle management positions rather than progressing to senior or top management...
Updated 1 hour 45 minutes ago JSE-listed Afrox has appointed Dorian Devers CFO and Bernd Eulitz chairperson. Devers, who was also Linde Group Africa and UK region FD, took up the position of CFO and executive director on May 28.
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
While strongly welcoming the promulgation of the new Part 101 of South Africa’s civil aviation regulations, governing the commercial operation of civil remotely piloted aircraft (RPAs) in South Africa, the Commercial Unmanned Aircraft Association of Southern Africa...
LSM Distributors has contracted engineering consultancy WSP | Parsons Brinckerhoff Africa to undertake the R100-million restoration of the 54-year-old Kyalami racetrack, situated in Midrand. The restoration will assist in re-establishing it as a venue for...
South African Defence Minister Nosiviwe Mapisa-Nqakula has expressed the hope that the defence budget will be significantly increased over the next five years. She did so while addressing the media in her recent budget vote media briefing. The 2015/2016 defence...
The African Development Bank (AfDB) has been an implementing agency for the Global Environment Facility (GEF) since 2008. The relatively young portfolio has 28 projects over 30 countries on the continent according to the 2014 AfDB and GEF annual report released...
PAUL SPEAR Training and development should be an integral and proportionate part of the long-term strategy of all companies, regardless of their size
Investment in South African youth through apprenticeships and learnerships will not only create direct benefits for businesses but will also contribute significantly to job creation and socioeconomic transformation in the country.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96