ANC delegates will this week debate proposals for a mining windfall tax of 50% as an alternative to nationalising mines in the world’s largest producer of platinum, chrome and manganese.
(BLOOMBERG) – South Africa’s ruling African National Congress may endorse plans to raise mining taxes and increase state control over the economy as President Jacob Zuma shores up grassroots support ahead of a party election.
ANC delegates will this week debate proposals for a mining windfall tax of 50 percent as an alternative to nationalizing mines in the world’s largest producer of platinum, chrome and manganese. The plans are contained in draft policy documents to be discussed at a four-day conference in Johannesburg from today. The ANC controls 66 percent of the seats in Parliament.
Zuma, 70, who is seeking a second five-year term at a party election in December, is under pressure from his labor union allies and a growing number of jobless young people to do more to combat poverty and unemployment in Africa’s largest economy. Any attempt to extract more revenue from mining companies such as Impala Platinum Holdings Ltd. and Lonmin Plc risks undermining an industry battered by rising labor costs, electricity shortages and a global economic slowdown.
“You’re adding more to the camel and pretty soon you’ll break the camel’s back,” Patrick Mathidi, a fund manager at Momentum Asset Management in Johannesburg, said in a telephone interview. “We’re unlikely to get any good news out of the policy conference.”
The 100-year-old ANC was pushed by its Youth League in 2010 to investigate the viability of nationalizing mines to help distribute more wealth to the black majority. While an ANC- appointed panel ruled out nationalization as an economic “disaster,” it recommends a 50 percent tax on profits of mining companies that earn returns of more than 15 percent.
Gold, coal and other mining products accounted for 38 percent of export earnings last year, according to government data. Output contracted 16.8 percent in the first quarter because of mine closures and strikes, the statistics office said on May 29. The FTSE/JSE Africa Mining Index of 21 stocks has dropped 8.2 percent this year, compared with a 5.7 percent gain in the FTSE/JSE Africa All Share Index.
Perth-based Aquarius Platinum Ltd., the world’s fourth- largest producer of the metal, shut mines in South Africa this month because of strikes and falling platinum prices. In February, Johannesburg-based Anglo American Platinum Ltd. put a freeze on employment and cut its 2012 output target.
The ANC’s policy documents include recommendations for an export levy on coal and iron ore to ensure “security of supply” as the government tries to boost power generation and steel production. The ruling party is also considering forcing pension funds and insurers to buy the bonds of state-owned companies. The ANC will take a final decision on the policies at its December conference.
“There is clearly going to be a lot of rhetoric around the conference and people are going to position themselves around populist agendas,” Mike Davies, southern Africa analyst at risk-advisory company Maplecroft, said in a June 21 interview from London. “We see higher levels of state involvement in the mining industry.”
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