R/€ = 15.26Change: -0.01
R/$ = 14.41Change: -0.03
Au 1057.95 $/ozChange: 0.07
Pt 835.50 $/ozChange: 0.00
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

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 About Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Jun 25, 2012

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

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|Innovation|Mining|Petroleum|Platinum|Resources|Road|Africa|Australia|Brazil|Chile|South Africa|Bank|Investment-wary Mining Community|Services|Enoch Godongwana|Infrastructure|Mzukisi Qobo|Paul Jourdan
© Reuse this

JOHANNESBURG ( – 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.


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
The National Empowerment Fund (NEF) has, since its inception in 2005, approved funding of R6.6-billion in 688 transactions, supporting over 82 900 jobs. Nearly R4.6-billion had been disbursed to companies, while over R1-billion had been repaid by investees.
South African Reserve Bank governor Lesetja Kganyago
South African Reserve Bank governor Lesetja Kganyago believes the reaction of the rand to a possible hike in interest rates by the US Federal Reserve (Fed) in mid-December could be “exaggerated”, but says the bank has no plans intervene in support of the currency....
A slow and gradual normalisation of US monetary policy, on its own, does not need to be negative for South Africa, the South African Reserve Bank's deputy governor Francois Groepe said on Friday. In a speech posted on the central bank website, Groepe also said flows...
Latest News
French conglomerate Bollore may have to halt work on the Niger to Benin section of its giant West Africa rail project after a rival company won a court order to stop it going ahead. The dispute concerns rival rail schemes in the area.
A week ahead of the second annual gathering of the Forum on China–Africa Cooperation (Focac), in Johannesburg, the JSE is rolling out the proverbial red carpet for Chinese investors looking to Africa’s largest bourse for possible investment opportunities, calling...
The South African National Roads Agency Limited (Sanral) applied for leave to appeal on Friday against the Western Cape High Court judgment that set aside the approvals that would enable it to toll sections of the N1 and N2 freeways in Cape Town. This prompted the...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
NICK CHRISTODOULOU As about 58% of data stored by organisations is dark, they must identify this dark data to expose risks and valuable information
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
BRIAN VERWEY Effective management, review and administration of non-core elements can improve business operations and increase revenue and decrease unforeseen risks
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...
Alert Close
Embed Code Close
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
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