http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.14Change: -0.15
R/$ = 12.05Change: -0.20
Au 1200.03 $/ozChange: -6.12
Pt 1139.50 $/ozChange: -16.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
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 Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Oct 26, 2012

Sasol a target for nationalisation, windfall tax

Back
Africa|CoAL|Consulting|Mining|Petrochemicals|Resources|Sasol|South Africans|Sustainable|Africa|Australia|South Africa|Coal-to-liquids Technology|Petrochemicals|Petrochemicals Giant|Service|Angel Gurr|Indaba|Trevor Manuel|Xavier Prevost|Operations|Subsidy|Coal-to-liquids Technology
Africa|CoAL|Consulting|Mining|Petrochemicals|Resources|Sustainable|Africa||Petrochemicals|Service|Indaba||Operations||
africa-company|coal|consulting-company|mining|petrochemicals-company|resources|sasol|south-africans|sustainable|africa|australia-country|south-africa|coaltoliquids-technology-industry-term|petrochemicals|petrochemicals-giant|service|angel-gurr|indaba|trevor-manuel|xavier-prevost|operations|subsidy|coaltoliquids-technology
© Reuse this



In the minds of many South Africans, petrochemicals group Sasol must give back to the country through extra taxation or nationalisation because government established the group, says XMP consulting owner Xavier Prevost, reflecting on a comment made by the South African Communist Party in July that government should either tax Sasol, by imposing a windfall tax on extra profits, or nationalise it.

He believes, however, that this view is biased, as the Sasol of today is not the same company that operated during the apartheid years. Instead, it is an independent, profitable organisation that provides many opportunities for South Africa, despite the perception held by some that it is exploiting South Africa’s mineral resources.

Sasol was established by the South African government in 1950 to commercialise coal-to-liquids technology.

“South Africa was in danger of running out of fuel, owing to economic blockades and sanctions because of its apartheid policy,” Prevost explains.

It was an emergency measure to ensure South Africa would become sustainable as a fuel-producing country. To ensure this, all other fuel producers were obliged to buy a certain percentage of Sasol’s fuel and mix it with their own.

When Sasol became profitable, government withdrew its subsidy and allowed Sasol to freely compete and produce, resulting in the company becoming the successful petrochemicals giant it is today.

Prevost states that, as a result of its history, size and profitability, the petrochemicals group is continuously singled out by factions in the African National Congress (ANC) and other political parties and organisations that are in favour of Sasol being nationalised or subjected to a windfall tax.

Windfall Taxes and Nationalisation

Starting four years ago, and mirroring similar dynamics in many other minerals-hosting countries, a faction of the ANC has been vociferously calling for the nationalisation of South Africa’s mines. Government, however, did not approve the idea as it would cause an outcry from mining companies and investors and result in an economic debacle, Prevost explains.

However, amid continuous calls for the nationalisation of mines, government believes it should be reaping more benefits from the mining industry, which is extracting South Africa’s mineral wealth and profit- ing from it.

Government has, therefore, mooted the implementation of windfall and royalty taxes on mining firms.

“Mining is a source of wealth for many millions of South Africans. Mines benefit workers and their families, service providers and the communities surrounding their operations.

The mining industry is the main contributor to South Africa’s economic growth,” Prevost emphasises.

The idea of a windfall tax was first mooted by Australia and, while it has been discussed and investigated by many countries, it has never been implemented, he notes.

“Currently, this is only a proposal that has been presented by the Department of Mineral Resources but it could become a reality in future,” he states.

In February, a study commissioned by the ANC rejected mine nationalisation but favoured higher taxes and royalties.

The report is expected to be adopted as policy by the ANC in December, after it was tabled at the organisation’s five-yearly policy indaba in late June. This followed its raising in early February at a meeting of the party’s national executive committee, Business Day reported, without revealing its source.

The ‘State Intervention in the Minerals Sector’ report warns against “asset grabs” by the State because such a policy would be unconstitutional and contravene bilateral trade agreements, and government could also not afford to buy mining stakes.

Sasol Targeted

Meanwhile, a task team appointed by the South African National Treasury to investigate the possibility of levying a windfall tax on Sasol, concluded in 2007 that the company should not bear additional taxes against its windfall gains.

The outcome of the study was followed by a statement from former Finance Minister Trevor Manuel in that same year, declaring that, regrettably, a windfall tax on Sasol should have been imposed when it had announced an 86% increase in first-half attributable earnings from the previous year, 2006.

However, in July 2008, the spectre of the possible imposition of windfall taxes on South African resource companies was brought to the fore again in a new economic assessment of the country by the Organisation for Economic Cooperation and Development (OECD).

The 140-page study, which was jointly released by OECD secretary general Angel Gurría and Manuel at a function in Johannes- burg in July 2008, indicated that a case could be made for the tightening of fiscal policy to sustain a budget surplus as a safeguard against macroeconomic instability.

“Over the longer term, there may be a case for introducing a fiscal rule, or a more systematic way of capturing commodity price windfalls,” the study concluded.

However, Prevost states that, if Sasol is subjected to a windfall tax, its profits will be severely curtailed.

“On the one hand, this will give more money to government, but at the same time it will cut down on its tax revenue as mines pay tax on profits.”

He emphasises that, while government feels it should receive more revenue from the mining sector, extra taxation is likely to destroy the opportunity to create more wealth from this sector for South Africans.
The windfall tax is also likely to dissuade potential investors in the South African mining industry.

Edited by: Chanel de Bruyn
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Energy News
JSE-listed Camac Energy is about two weeks away from its first oil output from the now completed Oyo-8 well in the oil and gas explorer’s prospective Oyo offshore oil- and gasfield, off the coast of Nigeria. Camac on Tuesday announced that it had completed the...
Sapia chairperson Nobuzwe Mbuyisa
The South African Petroleum Industry Association (Sapia) says it is becoming increasingly urgent for government to address the current policy uncertainty surrounding the introduction of cleaner fuels and reports that it is pinning its hopes on a newly announced...
French energy company Total is seeking international arbitration over a tax disagreement with Uganda which could further delay crude oil production in the east African country. "Total E&P Uganda confirms that it has filed a request for arbitration before the...
Article contains comments
More
 
 
Latest News
Updated 25 minutes ago Paper and packaging group Mpact has concluded a broad-based black-economic empowerment (BBBEE) deal that will see a purpose-formed trust subscribing for 10% of the ordinary issued shares in group subsidiary Mpact Operations, which holds its South African businesses....
Updated 30 minutes ago With South African business and consumer confidence being negatively affected by the unfavourable exchange rates and ongoing power cuts, JSE-listed Nampak said the performance of its local businesses, particularly its home business division, was under pressure. The...
Barbara Creecy
Updated 32 minutes ago Throwing open a process often criticised for its lack of transparency and frequent irregularities, the Gauteng Provincial Government (GPG) for the first time on Wednesday opened the adjudication of a tender to the public, describing it as an effort to improve...
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in 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...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
RESOURCEFUL The raw material for the pilot plant would be supplied from the dissolving wood pulp plants at Sappi’s Saiccor and Ngodwana mills, in South Africa, and the Cloquet mill, in the US
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
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
 
 
Close
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