March 5 (Bloomberg) -- South Africa’s ruling African National Congress is studying proposals to impose a resource-rent tax on mining operations, reduce royalties and gear policies toward creating jobs.
The ANC unveiled eight draft policy documents aimed at tackling one of the highest levels of income inequality and reducing a 24 percent unemployment rate that will be discussed at party conferences in June and December.
“Having concluded our first transition with its focus in the main on political democratization, we need a vision that must focus on the social and economic transformation of South Africa over the next 30 to 50 years,” Jeff Radebe, the ANC’s policy head, told reporters in Johannesburg today.
The ANC led the struggle against white-minority rule and has governed Africa’s biggest economy since all-race elections in 1994. South Africa is the world’s biggest producer of platinum, chrome and manganese. Anglo American Plc, Xstrata Plc, Rio Tinto Group Plc and BHP Billiton Ltd. have operations in the country.
The ANC adopted an independent study which proposed the resource-rent tax and will discuss a modified version of it at its June policy conference.
The 50 percent tax, which would be triggered by a set return on investment, would be put into a sovereign wealth fund to pay for development of mining and infrastructure as well as ease the strengthening of the rand during commodity booms, according to the ANC’s policy document on state intervention in mining. This would generate about 40 billion rand ($5.3 billion) in annual state revenue at current prices, it said.
The ANC proposed measures such as reducing mining royalties to 1 percent and putting a proposed carbon tax on hold to protect mining operations and ensure jobs aren’t lost. A newly created minerals commission would also ensure that mining rights are awarded to operations that would create the most jobs, it said.
South Africa’s Constitution may have to be amended to make the necessary policy changes, the ANC said. While the party controls just less than two-thirds of seats in Parliament needed to alter the constitution, it may be able to secure the required backing from small opposition parties.
‘Involve The Majority’
“This economy must involve and embrace the majority of the people of this country,” Tony Yengeni, head of the ANC’s political committee, told reporters.
The push for a policy shift has been led by the ANC’s Youth League, which wants the government to seize mines, banks and land. Several senior government ministers have rejected nationalization, and on Feb. 29 the ANC expelled the league’s leader, Julius Malema, from its ranks.
The independent study rejected the idea of nationalizing South Africa’s mines, saying it would cost almost 1 trillion rand, more than the national government’s annual budget.
A state mining company should consolidate all state-owned mining assets and pool them with those owned by unions to boost their voting power within private mining companies, the ANC said. The paper suggested forcing companies to ensure that the state or black South Africans hold 30 percent of their shares.
Steel should be classified as a “strategic mineral,” ensuring that local sales are priced at “cost plus,” making it cheaper for manufacturers, the ANC said.
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