Oct 26, 2012
Sasol a target for nationalisation, windfall taxBack
Sasol|South Africans|Australia|South Africa|Coal-to-liquids Technology|Petrochemicals|Petrochemicals Giant|Angel Gurr|Trevor Manuel|Xavier Prevost|Subsidy|Coal-to-liquids Technology
© Reuse this
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.
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.
Edited by: Chanel de Bruyn© Reuse this Comment Guidelines
Other Energy News
Updated 3 hours ago African independent upstream oil and gas company SacOil on Friday received authorisation from its shareholders to proceed with the rights offer and conversion of the Gairloch debt to equity. SacOil intended to raise a maximum of R570-million by way of a...
Updated 6 hours ago State-owned power utility Eskom’s eta Awards this week showcased the exceptional efforts by South Africa’s individuals, students, companies and other institutions in energy efficiency initiatives to reduce strain on the national grid. The eta Awards, initially...
Updated 2 hours 10 minutes ago Canadian clean energy fuel cell specialist Ballard Power Systems on Thursday announced that it had signed a nonbinding memorandum of understanding (MoU) with European bus manufacturer Van Hool, in support of the manufacturing and further deployment of zero-emission...
Updated 2 hours 24 minutes ago Following Cabinet approval this week, the Department of Communications (DoC) on Friday published South Africa’s long-awaited broadband plan to close the nation’s broadband gap. The much-revised National Broadband Policy, Strategy and Plan, also known as ‘South...
Updated 2 hours 53 minutes ago Consulting engineering firm GIBB on Thursday announced its proposed acquisition of a major interest in architectural firm Stauch Vorster International to create a multidisciplinary firm that would have the ability operate in a range of public, commercial and...
Recent Research Reports
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,...
Projects in Progress - Second Edition (PDF Report)
Creamer Media’s second Projects in Progress supplement considers some of the major project developments under way, including high-profile energy and transport projects, as well as a few of the lower-profile public and private developments. What remains apparent is...
Water 2013: A review of South Africa’s water sector (PDF Report)
Creamer Media’s Water 2013 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.
Canadian Mining Roundup for June 2013 (PDF Report)
The June 2013 roundup includes details of the development of TSX-V-listed Aldridge Minerals’ flagship Yenipazar polymetallic project, in Turkey; the Canadian Nuclear Safety Commission’s renewal of Cameco’s uranium mining licence pertaining to the Cigar Lake...
This Week's Magazine
Mitsubishi Motors South Africa (MMSA) has introduced a 4x2 derivative of its Pajero Sport sports-utility vehicle (SUV), which will give it access to a substantial slice of the full-size SUV market, where it will compete with the likes of the Ford Everest, Chevrolet...
South African Energy Minister Ben Martins has affirmed that the government wants the country to be globally competitive in the nuclear sector. "Our responsibility has always been ... to ensure that, in nuclear energy, South Africa can compete with the rest of the...
Mercedes-Benz South Africa (MBSA) president and CEO Dr Martin Zimmermann describes the new S-Class as “a special place to be”, with the car creating a sense of “wellness” once you are seated inside the German brand’s flagship model. It is difficult to argue...
Water scarcity and water-quality issues are broadly recognised and understood in most political, business and civil organisations in South Africa, but solving water issues will require wide and continuous action in catchments and municipalities by organisations and...
Work is well under way on the R212-million Imvutshane dam, 30 km north-west of Stanger, in KwaZulu-Natal, which is a key link in supplying people in rural Maphumulo with a reliable source of safe drinking water.