Gordhan Says No Plans on Mining Taxes in South Africa

South African Finance Minister Pravin Gordhan said he has no immediate plans to raise mining taxes after the ruling party directed the government to ensure the industry contributes an “equitable” amount of revenue.

“There is no question of any taxes at this time,” Gordhan said in an interview on Bloomberg TV at the World Economic Forum in Davos, Switzerland. “We will keep the matter under review and when we think it’s appropriate we’ll see how the regime needs to change.”

At its national conference in December, the ruling African National Congress rejected proposals to nationalize mines in favor of a tax review in the world’s largest producer of platinum and chrome. The party is considering a “resource-rent” tax or higher royalties, details of which must be worked out by the government, Enoch Godongwana, head of the ANC’s economic transformation committee, said at the time.

Higher taxes are “part of a policy dialogue process,” Gordhan said. “Many countries, including South Africa, are asking the question whether the mining royalties are at the right levels, whether the owners of minerals, which are the people of South Africa, are getting the right levels of return.”

Producers in Africa’s largest economy are battling to contain production costs after a series of strikes led to above-inflation wage increases. Nine platinum-mine shafts were shut in the second half of last year, according to the Department of Mineral Resources, while on Jan. 15 Anglo Platinum Ltd., the world’s largest producer of the metal, announced plans to idle four shafts.

Revenue Cost

Mining makes up about 9 percent of gross domestic product and accounts for two-thirds of exports.

Anglo Platinum’s decision may “cost us a bit on the revenue side, probably 4 or 5 billion rand ($557 million), but that’s still open to adjustments,” Gordhan said. “We must be careful not to take a dispute in one or two mines in the platinum sector and generalize it to mining, because coal is working fairly well, oil is working fairly well, gold is working fairly well.”

The mining industry has been wracked by violent labor unrest since August when thousands of workers at Lonmin Plc’s Marikana platinum mine went on an unprotected strike. At least 44 people died at the mine in 10 days of clashes between mineworkers and police, including 34 protesters killed when police opened fire on them.

Policy Uncertainty

“We’ve seen the worst” of the mining labor unrest, President Jacob Zuma said in a panel discussion in Davos today. “We’re dealing with the matters, all of us, organized labor, business, the government. We’re dealing with it to correct it because we can’t go back to a situation which creates an impression that there’s no governance of this matter.”

Gordhan said the ANC conference helped to ease any uncertainty about policy in the mining industry by pronouncing that wholesale nationalization was “completely off the agenda.”

“There is absolute clarity on the policies within which the mining sector must work,” he said. “There would be an interest that government might express from time to time, as governments in Chile or Norway or anywhere else express, in mineral resources that their countries have control over. We have a very good record of fiscal management which we intend to continue.”

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