SA's policy choices will profoundly impact the mining industry and the country as a whole.
JOHANNESBURG (Mineweb) - CEO of Anglo American, Cynthia Carroll, has said that South Africa's policy choices over the coming weeks will profoundly impact not only the future of the mining industry but also the country.
"Those choices must be made wisely. We are at a crossroads. There is a clear path that will lead to prosperity and there are blind alleys that we must avoid" Carroll said to delegates at the Mining Lekgotla gala dinner last night.
Carroll has been clear in her opposition to one of these "blind alleys", nationalisation, on many occasions, along with its promise of a "miracle cure for all ills" said the CEO.
With voices waning on the nationalisation issue, Carroll moved on to address the ANC's State Intervention in Mining Sector report (SIMS) where proposals were put forward for a mineral resource rent tax.
"It [the SIMS report] argues that the proposed new tax is necessary to ensure that the state benefits appropriately from the profits the mining industry earns. Yet the existing royalty regime was introduced for exactly this purpose. Combined with the existing system of taxation, it already ensures a fair distribution of the benefits of mining" said Carroll.
Ernie Lai King, an executive in tax at Edward Nathan Sonnenbergs raised similar concerns around the SIMS tax proposals during the lekgotla.
"I can't think of one solitary example of an industry growing by the imposition of more taxes" said King.
"In my humble opinion, government should rather address the reasons why the sector is in decline and reverse the downward trend - then you will in any event get more tax. Government is looking in the wrong direction; they should remove obstacles to promote foreign direct investment and growth" said King.
Calling for stability and predictability in policy making, Carroll also said that South Africa's policies must take account of the reality of global competition.
"The SIMS report sometimes loses sight of this fact. Similarly, elements of the report are based on a false dichotomy between mining for export and mining for the domestic market".
With the country estimated to have the world's largest minerals endowment with resources worth an estimated $2.5 trillion dollars, the CEO was of the opinion that these could support both growing exports and local demand.
"Restrictions or taxes on exports would simply harm the mining industry without contributing to broader economic development" said Carroll.
In a similar vein, Carroll supported the local beneficiation strategy outlined by government but only as long as it made business sense.
"It is vital that the benefits of mining should help to create a broad-based and robust economy beyond mining itself. But this can only be done by allowing the market to focus on sectors in which South Africa has a genuine competitive advantage".
The call for policy stability and predictability was not a lone cry; it was heard many times over the two day lekgotla.
Carroll explained the rationale: "mining companies make huge capital investments for the long term. They simply will not make those investments if there is a fear of arbitrary and unpredictable regulatory change".
Referring to the upcoming ANC Policy Conference, Carroll said that the timing of the Mining Lekgotla could not have been better in order to bring stakeholders together in order to consult on the future of the industry.
Originally published in Moneyweb, 07 June 2012
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