Jun 25, 2012
ANC mining policy should focus on 'capturing rents' not nationalisationBack
Johannesburg|Australia|Brazil|Chile|South Africa|Bank|Investment-wary Mining Community|Enoch Godongwana|Mzukisi Qobo|Paul Jourdan
© Reuse this
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.
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
Other Construction News
As part of Goscor Group, Goscor Lift Truck Company (GLTC) has been providing best practice in industrial warehousing equipment solutions for the past 30 years. The company provides a range of market-leading products, including Crown, Doosan, Bendi and Hubtex. This...
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of 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 steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...