South Africa’s ruling African National Congress has been responsible in its relationship with investors and doesn’t have immediate plans to boost taxes in mining, Finance Minister Pravin Gordhan said.
“Taxing a particular industry is not within our radar at the moment,” Gordhan, 63, said in an interview with Bloomberg TV in Pretoria yesterday. “The assurance we want to give investors, mining houses, others, is that the ANC, in 18 years, has demonstrated immense responsibility in the way it has managed its relationship with business and investors.”
Gordhan is trying to shore up confidence as the ANC’s push for “radical” measures to combat a 25 percent unemployment rate unsettles investors and after Moody’s Investors Service and Standard & Poor’s downgraded South Africa for the first time since the end of apartheid. ANC members are set rule on proposals to nationalize mining assets and raise taxes when they meet at a party leadership conference in December.
Taxes are “part of our discussion in broad policy terms,” Gordhan said. “When and how and if we exercise it, it’s a matter that we will have to decide within the context of what is happening at that particular point in time.”
South Africa’s mining industry is already facing the worst labor unrest since the end of apartheid in 1994. Strikes that began at Lonmin Plc (LMI) in August spread to shafts owned by Anglo American Platinum Ltd. (AMS) and Gold Fields Ltd. (GFI), cutting output by 10.1 billion rand ($1.2 billion) this year, according to the National Treasury. At least 44 protesters died in violence at Lonmin’s Marikana mine, 34 of them killed by police on Aug. 16.
Violence “is not what we want to be known for around the world,” Gordhan said. The strikes have cut exports and reduced government revenue, he said.
Investors’ risk perceptions have increased since the strikes began on Aug. 10. The cost of insuring South African debt using credit-default swaps increased 23 basis points in the period to 153 yesterday, according to data compiled by Bloomberg. That compares with a 62 basis point decline for the Markit iTraxx SovX index of emerging-market nations. The rand weakened 0.2 percent to 8.6564 a dollar at 8:30 a.m. in Johannesburg.
South Africa produces about 75 percent of the world’s platinum and is Africa’s largest gold producer. Mining accounts for about two-thirds of exports.
The ANC Youth League and its former leader, Julius Malema, have led a campaign for the government to nationalize mines, forcing the ANC to agree to investigate its viability. The study, released at the party’s June policy conference, found that mine seizures would result in a near collapse of foreign investment and be an “unmitigated economic disaster.” The policy is still favored by some provincial ANC branches and a final decision is expected in December.
“We hope that finally at the ANC conference in December we will resolve that,” Gordhan said. “Many of us have expressed our view that that is no panacea for the problems we have.”
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