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South Africa Promises To Consult On Mining Taxes

by Lorys Charalambous,, Cyprus

09 February 2012

Despite rumblings within South Africa’s ruling party, the African National Congress (ANC), Trevor Manuel, the National Planning Minister, confirmed at the African Mining Conference that no sudden new taxes would be levied on the country’s mining sector.

At the same conference, in response to a public debate on the possible nationalization of South African mines, which had been aroused by an ANC report on the subject, the Mineral Resources Minister, Susan Shabangu, had already reiterated strongly that it was neither an ANC nor a government policy.

However, while Shabangu welcomed the report of the ANC's task team on nationalization, which reinforced the party's earlier decisions that, given the constitutional implications and the compensation costs involved, "nationalization is not a viable policy for South Africa," it has still been widely suggested that the report would recommend higher taxes, such as a resource rent tax.

In reply, Manuel has said that, should any additional mining taxes be considered necessary, nothing would happen in the short-term and the industry would be consulted, with changes implemented slowly so as not to discourage investment. He added that he was certain that the Finance and Mineral Resources Ministers would take a long-term view on mining taxation.

While he was also sure that South Africa’s mining tax code could be improved, he felt that the existing Mineral and Petroleum Resources Royalty Act, which requires all mining companies extracting minerals in South Africa to pay royalties based on gross sales, less allowable deductions, should remain its basis.

He stressed that any long-term adjustments to mining sector taxation should be predicated on putting additional funds into South Africa’s economic development.

TAGS: South Africa | tax | business | mining | royalties | law | tax reform | Africa

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