JOHANNESBURG (miningweekly.com) – The Chamber of Mines of South Africa has described Finance Minister Pravin Gordhan as having done an effective job of maintaining fiscal discipline with a budget deficit of 3.1% in these most trying of times.

The chamber comments that the 2017/18 Budget demonstrates the truism that sustaining and enhancing social good is dependent on the extent of economic growth that is enjoyed.
 
In particular, the Minister added flesh to the discourse on transformation in South Africa, the chamber noted.

Most importantly, he highlighted the mutual interdependence between the drive for competitive growth and greater social equity, something the mining industry was said to be highly conscious of in its own efforts to contribute to transformation in South Africa.
 
The chamber said that the Minister’s recognition of the private sector’s key role in driving growth was significant and committed itself to continuing to work with government, including through the CEO Initiative with the Minister and President Jacob Zuma on maintaining South Africa’s sovereign investment grade credit rating.
 
The speech and the Budget Review made repeated references to the critical importance of achieving policy and regulatory certainty as a condition for encouraging greater investment in mining, and in the economy more broadly.

“We would add that the policy and regulatory environment must, in addition to being certain, encourage competitiveness too. We agree on the critical need for finalising amendments to the Minerals and Petroleum Resources Development Act and the finalisation of the Mining Charter which, equally, promote competitiveness and transformation,” the chamber said.
 
In recognising the impact of difficult economic conditions on the mining industry, Gordhan also referred to the impacts on production of Section 54 operational stoppages.

The contributions by mining companies to the fiscus through company taxes and royalties were, the Minister said, clearly an important feature of fiscal planning.

Appropriate application of Section 54s would contribute to both improved safety and enhanced contributions to the fiscus.
 
One potentially worrisome feature of the Budget’s revenue-enhancing measures pointed out by the chamber is the increase in the dividend withholding tax rate from 15% to 20%.

The combination of company tax and the dividend withholding tax raised the overall tax rate to above the Organisation for Economic Co-operation and Development average, with potential negative impacts on investment.
 
The chamber also noted the intention to take steps on the issue of a carbon tax.

As it had done before, the chamber urged great caution about imposing additional costs on trade-exposed carbon intensive companies, which had little scope for reducing their carbon emissions based on their input mix or their production processes in the short to medium term.

“We look forward to engaging with the National Treasury on offset and rebate measures,” it said.
 
On talk of an acid mine drainage tax, the chamber invited the Minister and his tax staff to engage with it to hear mining’s ideas and plans to address the issue in a manner that would not require additional taxes and would simultaneously ease water scarcity in many mining regions and potentially generate revenue to make them self-sustaining.
 
The chamber noted the Minister’s comments on governance at State-owned enterprises. Again, he was dealing with an issue critical to economic growth and transformation. 

Along with the rest of the country, mining was pleased at the improved certainty of electricity supply in recent times, but supported the continued diversification of the supply base, including through contributions from independent power producers, as advocated in the speech.
 
The industry acknowledged the Minister’s urging employers to protect employees from the ravages of irregular emolument attachment orders against their earnings and assured him of the continued commitment to eliminating this burden on South Africa’s workers.
 
“And finally, we are committed to working with the Minister to strengthen further the already strong globally-aligned systems that manage transfer mispricing and base erosion and profit shifting,” the chamber added.