South Africa Plans New Mining Tax
South Africa’s ruling African National Congress announced Thursday plans to impose new taxes on its mining industry, in an effort to “share the wealth” with the country’s poor.
“The state must capture an equitable share of mineral resources through the tax system and deploy them toward long-term growth and economic transformation,” Enoch Godongwana, a top ANC economic policy maker, said at the end of the party’s annual conference.
The ANC plan includes the classification of certain mineral as “strategic,” reports Bloomberg News. These include iron ore, coal, copper, copper, zinc and nickel. The exporting of these minerals will be managed to ensure South Africa has enough of them in reserves.
Deputy Finance Minister Nhlanhla Nene said at the ANC conference on December 17 that all sides should be heard before the taxes set. However, a policy paper published in February called for a 50 percent “resources rent tax,” triggered once companies earn returns in excess of about 15 percent annually.
The announcement follows several months of tension surrounding South Africa’s mining industry. A strike at a platinum mine northwest of Johannesburg last August turned bloody after strikers killed several security guards and workers who refused to take part in the protest. Police were call in to quell the violence, and wound up opening fire on the strikers, killing 34 of them.
A move to nationalize South Africa’s mining industry, which is the world’s largest producer of platinum and chrome, has been led by the ANC Youth League. Its disgraced leader, Julius Malema, called for the expropriation of mines back in April 2010 during a rally speech in Zimbabwe.
“We hear you are going straight for the mines, that is what we are going to do in South Africa,” Malema said. “They have exploited our minerals for a very long time. We want the mines, now it’s our turn.”
Investors expecting a nationalization of mines breathed a sigh of relief at the news of higher taxes, reports the Wall Street Journal.
“There shouldn’t be from here any expectation that the ANC will move out of here and start deciding who and where we are going to nationalize,” said Malusi Gigaba, another economic policy maker in the party and South Africa’s public enterprise minister. “The issue of nationalization as we’ve discussed it over the last few months is off the table.”