South Africa: The State Intervention In The Minerals Sector Report - Mining Tax And Nationalisation

Last Updated: 15 October 2012
Article by Ernie Lai King

Most Read Contributor in South Africa, September 2018


On 3 February 2012, the State Intervention in the Minerals Sector report  (“the Report”), prepared by the ANC Policy Institute was submitted to the African National Congress for consideration and will become the subject for wider debate in June 2012. This article provides a brief preview.

The Report sets down the following primary principles:

  • The Minerals Energy Complex (“MEC”) is a prime job creation sector and the maximisation of growth and employment depends upon co-ordinating the mineral economic linkages and integrating mining into the rest of the economy.

  • “Efficient taxation” is preferred to  nationalisation, as a means of raising revenue. As the resource owner, South Africa should ensure that its people are getting a fair share of taxation from the mining companies. 

The Report states that under the current fiscal regime, South Africa is not getting a fair share of such taxation and tables the following tax proposals:

  • A Resource Rent Tax (“RRT”) of 50% to be imposed on all mining - after a normal return on investment (defined as the Treasury Long Bond Rate + 7%) has been achieved.  This would set a normal return at about 15%. In other words, the government will share in 50% of any profits generated over and above a 15% return on investment. According to the Report it should not deter investors, as investors would still enjoy a reasonable return. The RRT is expected to yield about R40 billion.

  • Upon the introduction of RRT -

    • the current gold mining formula tax should be replaced with corporate income tax;

    • royalty rates should reduce to 1% of revenue;

    • a mineral foreign shareholding withholding tax of 30% should replace the 15% dividend withholding tax where the shareholder is located in a tax haven, to encourage direct investment from the primary listing country;

    • carbon tax should be put on hold as it may be potentially damaging to the economy.

Furthermore,  2 or 3 pilot special economic zones / beneficiation hubs should be established to catalyse resources value-addition and labour absorption, critical mineral feedstock (iron ore, coal and copper) should be classified as “strategic minerals” and supplied into our economy at cost plus prices (reasonable return) or export parity (competitive) prices. The sale of platinum should be subject to approval from the South African Reserve Bank (“SARB”).

Although not permitted in terms of SA-EU trade agreements, export tariffs should be levied in respect of the bulk of unbeneficiated minerals exported to the East (to encourage local beneficiation.)


The tax proposals have significant implications for the minerals industry and the long-term development prospects of the economy. The Report is a complex document and some assertions require careful interrogation, for example, how was the estimated R40 billion from the introduction of the RRT arrived at?

We already have a category of mining rent tax, in the form of royalties but the report proposes the implementation of yet another tax. The introduction of a resource tax is not necessarily a bad proposal but a radical change in the mining tax regime is. A complex and ever-changing tax system creates uncertainty and confusion, which is adverse to investment.

The Report blames SA’s poor mining performance on energy and transport but ignores the calls for nationalisation, mineral rights uncertainty, restrictive labour costs and regulations, Government Department inefficiency and incompetence, corruption and crime, demands on mining companies to provide social infrastructure like schools, hospitals and roads - all these factors have contributed. From the graph below it is clear that mining and manufacturing have both declined as a percentage of GDP despite very favourable commodity prices. Foreign direct investment is looking elsewhere.

The stated objective of the Report’s proposals is the maximisation of growth, development and employment.  Proposed reforms should therefore encourage that and deal with the reasons why the industry is in decline. Government is looking in the wrong direction - if it wants the sector to contribute more, it should be allowed to do so by Government removing the current obstacles to growth and development. As a general economic principle, one cannot "maximise the growth, development and employment potential" of an industry by imposing more taxes on it. There is not a solitary example of an industry maximising its growth as a result of the State taxing it more. In fact the exact opposite is true. The MEC should be incentivised to expand. Higher taxation on the MEC will have the opposite effect. In the face of regulatory uncertainty, which is already high in SA if many of the Report’s proposals are adopted, the uncertainty will increase. That is highly detrimental to investment.

The Report recognises that the MEC has dominated our economy and is by far the largest contributor to GDP.  Continued foreign investment is crucial to the SA economy.  If SA makes it too costly to do business in SA, this foreign investment will find other investment destinations.

The Report’s proposal for "efficient" taxation appears to be a trade-off against the proposal of nationalisation. Efficient taxation should incorporate the principles of neutrality, equality, simplicity and certainty.  The current debate is not contributing to simplicity or certainty and a rapid outcome and conclusion should be sought.

We need to compare the SA tax regime with other developing countries.  The introduction of RRT may be premature.  For example, Australia has only just introduced RRT and the effects on the Australian economy and mining industry must still be evaluated. The question is how competitive will SA be, post the introduction of the tax proposals.

The situation in Australia is very different and much more conducive to change.  The mining industry is booming, country risks and costs are under control, and the regulatory framework is well-regarded internationally.  Introducing a new tax into this environment is much less likely to do harm to the local industry.  Even then, the Australian Government has been very careful in designing a system which encourages investment and exploration without imposing undue costs on the mining.       

South Africa is confronted by a unique set of challenges.  The country has abundant mineral reserves, but mining companies have been reluctant or unable to invest in their extraction. Uncertainly in the domestic regulatory environment, or adverse perceptions thereof, appears to be an important contributing cause.   In this environment, the introduction of additional and more restrictive regulations would further undermine the competitiveness of the local industry.

In taking this discussion forward, government, business and labour must work together in a systematic, cooperative and transparent way to assess the regulatory costs and benefits of each of the proposals. The Report should serve as a basis for a more extensive and inclusive process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions