Oct 26, 2012
Sasol a target for nationalisation, windfall taxBack
Africa|CoAL|Consulting|Indaba|Mining|Petrochemicals|Resources|Sasol|South Africans|Sustainable|Technology|Africa|Australia|South Africa|Coal-to-liquids Technology|Petrochemicals Giant|Service|Angel Gurr|Trevor Manuel|Xavier Prevost|Operations|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
Creamer Media Senior Deputy Editor Online
To subscribe email email@example.com or click here
To advertise email firstname.lastname@example.org or click here
Other Energy News
Most infrastructure investments on the African continent are in the energy sector, but power plants and transmission lines across Africa presently operate at a fraction of installed capacity due to insufficient maintenance and lack of modernisation.
The narrow focus on cost may be leading to misconceptions about the real value of energy storage, according to a new report by the World Energy Council (WEC) called ‘E-storage – shifting from cost to value’.
Updated 12 minutes ago Africa was entering a phase of becoming the factory of the world requiring the building of facilitating infrastructure, Credit Suisse Securities chairperson Rick Menell. Speaking during a panel discussion at the 2016 Investing in African Mining Indaba, Menell...
Updated 45 minutes ago If the latest mosquito-borne Zika virus breaks out in Africa the continent would be less prepared than any other to deal with the outbreak. Zika fever is a mosquito-borne viral disease caused by the Zika virus which is suspected of leading to the birth of deformed...
Updated 1 hour 22 minutes ago The Gupta brothers on Tuesday obtained an urgent interdict to stop the EFF from threatening them. Judge Johan Louw granted an order in the High Court in Pretoria, interdicting the party, its leader Julius Malema and its Gauteng spokesperson Ntobeng Ntobeng from...
Recent Research Reports
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
Energy Roundup – February 2016 (PDF Report)
The February 2016 roundup covers activities across South Africa for December 2015 and January 2016 and includes details of a Government Gazette notice that confirms Cabinet’s decision to move ahead with the 9 600 MW nuclear procurement programme; State-owned power...
Energy Roundup - December 2015 (PDF Report)
The December 2015 roundup includes details of State-owned utility Eskom’s application to claw back R22.8-billion; South Africa’s ranking as an investment destination for renewable energy; and a nuclear expert’s thoughts on reactor designs for South Africa’s nuclear...
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
This Week's Magazine
Power and automation company ABB is in the launch phase of its highest payload, multipurpose industrial robot, the IRB 8700. The robot has a reach of 3.5 m and can handle a payload of up to 800 kg. “When designing the IRB 8700, we emphasised reach and payload, as...
Identity and Access Management (IAM) is a critical facet of a connected security ecosystem, as controlling the confidentiality, integrity and authorisation of data access and use is key to securing new digital business channels. However, companies face several...
Data underpins digital business models, the digital economy, the Internet of Things and the fundamental changes in the ways people interact and protecting data is crucial to securing new ways of doing business, says T-Systems South Africa information and...
The City of Cape Town will issue a tender for the procurement of electric buses for its MyCiTi service, in line with the council’s commitment to lower its carbon footprint, says executive mayor Patricia de Lille. The tender, to be advertised early in February, will...
The iSimangaliso Wetland Park Authority signed a R10-million contract last month with local tailings storage facility specialists Cyclone Engineering Projects to remove about 100 000 m3 of dredge spoil obstructing the natural course of the uMfolozi river, in...