Jul 03, 2012
Proposed ANC mines policy ‘wrong approach’ to meet 'laudable goals' – AngloBack
Johannesburg|London|SECURITY|Africa|Anglo American Thermal Coal|CoAL|Eskom|Industrial|Platinum|Projects|Resources|Security|Systems|Africa|South Africa|USD|Security|Energy|Equipment|Less Energy Security|Less Mining|Manufacturing|Mining|Products|Security|Services|Solutions|Steel|Systems|Infrastructure|Iron Ore|Iron-ore|Power|Security|Fuel Cells|Nascent Steel Mill Technologies
© Reuse this
In a 70-page response to the Sims document – the themes of which were broadly accepted by ANC delegates at a party policy conference in late June, but which are still to be debated and adapted ahead of the ANC's upcoming National Conference in December – Anglo welcomes the rejection of blanket nationalisation.
However, it also argues that the Sims proposals, if adopted, will harm the industry without securing the envisaged benefits.
Sims is premised on capturing a greater share of the ‘rents’ associated with mining in the interests of the country’s growth, development and employment objectives.
On the fiscal front, it proposes a 50% resource rent tax, targeting earnings achieved over and above that which would have been possible through the ‘normal’ application of capital, labour and innovation.
A consolidation of the ‘knowledge linkage’ to develop the human resources and technological capacity required to maximise mining’s spinoffs are also proposed, along with ‘backward linkages’ (which relate to the upscaled development of indigenous capital goods, services and consumables sectors associated with mining), as well as the ‘forward’, or beneficiation, linkages. The proposal is also keen to foster spatial linkages that encourage the creation of infrastructure that offers ‘life beyond the mine’ and opens up regional integration opportunities.
But Anglo submits that a number of the proposals would be harmful to the mining industry and would undermine investment in the sector.
“The imposition on private miners of mandatory supply arrangements, regulated price caps, higher taxes, export taxes, export restrictions and local content quotas will reduce competitiveness and increase uncertainty,” the London- and Johannesburg-listed miner avers.
“Less investment means less mining; less mining means fewer minerals, less revenues for the State, less jobs in supply industries, less energy security, and paradoxically, higher prices of minerals for downstream industries,” it cautions.
Anglo also strongly opposes what it describes as the pursuance of a “coercive” industrial policy, underpinned by the institution of constraints on the sale of ‘strategic’ commodities, such as iron-ore, coal and platinum. Sims proposes the insertion of pricing and supply conditions into the licensing of mines producing such strategic minerals so as to guarantee a cost-plus, or export parity pricing (EPP), domestic sales arrangement.
Anglo says a 10% blanket discount to EPP would compromise the viability of about 90% of its planned iron-ore expansion projects in South Africa, while forcing noncompetitive platinum beneficiation would be counter-productive.
Any move to curtail coal exports, meanwhile, could threaten domestic supply, as there would be little incentive to invest. The report notes that about $400-million of Anglo American Thermal Coal’s yearly profits of around $500-million are derived from exports.
The focus should instead be on “a growing mining industry”, Anglo states. “Anglo American, thus, respectfully requests that the ANC proceed with caution . . . Any gains from the Sims approach must be netted against the damage to the mining industry,” it warns.
The response also describes as “incorrect” the assumption that much of the value from private mining is lost to South Africa. It quotes a 2008 report, commissioned by Anglo, which shows that between 71% and 89% of the value from minerals mined by the group is captured within South Africa.
The miner’s “alternative path” is premised on policies that would focus on the growth of the mining industry and the simultaneous expansion of value-add and upstream manufacturing. “We believe there is no conflict between expanding mining production for export and simultaneously channelling mining feedstocks for local beneficiation, while also expanding other linkages from mining to the rest of the economy.”
Such a policy intervention would be premised on turning South Africa “into the number-one mining country in the world” by incentivising investment and growth in the mining industry – in other words, avoiding policies that might persuade miners to favour other mining jurisdictions over South Africa.
“Anglo American’s favoured route is to grow mining in order to grow the rest of the economy, and not to grow the rest of the economy at mining’s expense.”
To achieve the objective, South Africa should deal with its policy uncertainty, regulatory inefficiencies and infrastructure bottlenecks, as well as its skills deficiencies.
However, the miner adds that it is willing to enter into partnerships with government and others to explore linkages to other parts of the economy, including minerals beneficiation where a sound “business case” exists.
It would also support research and development initiatives to develop fuel cells and other platinum-group-metals-linked technologies, as well as “nascent steel mill technologies”.
Leveraging its procurement systems in support of the expansion of the domestic capital equipment sector is also highlighted, as is Anglo’s in-principle support for a sovereign wealth fund.
The miner is also prepared to support the State mining company in the context of a “level playing field” and assist in finding solutions to the country’s prevailing power shortages.
Anglo also commits itself to cooperating with Eskom to “safeguard national power security” and ensuring that “multigrade products from new coal mines are spilt between Eskom and the export market”.
The report concludes by calling for a “structured dialogue”, while emphasising Anglo’s commitment to finding solutions that “sensibly harness the power of the mining sector for maximum benefit of the nation”.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Macro and Micro News
The Department of Energy (DoE) confirmed on Wednesday that the second nuclear vendor parade workshop, which took place at a venue in the Drakensberg, had been concluded with delegations from China, France, South Korea and the US. The first such workshop, which was...
Sub-Saharan Africa faced downside risks because of its links to China's economy, ratings agency Moody's Investor Service said on Tuesday. Countries demonstrating strong regional trade links faced lower risk than those that relied on commodity exports, said Matt...
Electricity utility Eskom has confirmed a likely further, albeit modest, slippage in the schedule for first synchronisation of Medupi Unit 6, which was scheduled for December 24, 2014. The delay is the latest in several to afflict the project, which has faced...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 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 network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.