Jul 03, 2012
Proposed ANC mines policy ‘wrong approach’ to meet 'laudable goals' – AngloBack
Johannesburg|London|Anglo American Thermal Coal|Eskom|South Africa|USD|Less Energy Security|Less Mining|Mining|Steel|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
Other Construction News
Updated 17 minutes ago The load-shedding website operated by State-owned power utility Eskom was indicating that “no load shedding” was taking place on Friday morning, having shown ongoing rotational shedding throughout the day and night on Thursday. Eskom also formally lifted, at...
Updated 1 hour 12 minutes ago There can be little doubt that the unmanned air vehicle (UAV) sector is one of the most dynamic in today’s global aerospace industry. Over the last decade, a growing number of countries and companies have seen UAVs as a means to break into the aerospace sector and...
Recent Research Reports
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...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 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...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...
Three Memorandums of Understanding (MoUs) were signed between South African and Malaysian companies at the Malaysian High Commission in Pretoria on Friday. These MoUs are part of the indirect offsets programme South Africa is providing in return for Malaysia’s...
The South African new vehicle market may well dip to 640 000 units in 2014, says Toyota South Africa Motors (TSAM) sales and marketing senior VP Calvyn Hamman. This is the first prediction that anticipates a drop in the market. To date economists and industry bodies...
Nissan will re-enter the South African minibus taxi industry in March, when the new NV350 Impendulo goes on sale. The 16-seater has been specifically tailored to meet the terms of government’s Taxi Recapitalisation Programme, which aims to replace South Africa’s...