The mining industry is relieved the African National Congress (ANC) has firmly rejected nationalisation of mines, talk of which had caused policy uncertainty, cast a pall over their shares and dominated their interactions with international investors.
But there will be intense negotiations between the sector and the Treasury on a new tax regime for mining companies, which argue that they are the most heavily taxed in South Africa.
The Chamber of Mines said on Thursday in a statement that the finalisation of the ANC’s stance on nationalisation removed a key point of uncertainty for investors. "The chamber welcomes the ANC resolution that wholesale nationalisation is not a reasonable or sustainable option and that it has now firmly ruled out nationalisation of the mining industry.
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"We are hopeful that this will create some certainty amongst investors and once again encourage investment in the country’s mining sector."
Cadiz Corporate Solutions analyst Peter Major said there had been heightened fears of what could have come from the ANC against the backdrop of unprecedented strikes this year that cut billions of rand in revenue for platinum and gold companies. The outcome of the policy debate was good. "It’s come out a whole lot better than any of us thought it would," Mr Major said. " It has defused the Malema-type guys in the party ."
The ANC has for years been dithering on calls for nationalisation from the party’s youth league and its since-expelled president, Julius Malema. But there remains uncertainty in the market about the quantum of taxes that may be imposed on the mining sector.
The JSE index, housing the top 20 resources shares, closed 0.2% down on Thursday.
"The real issue is that there is still no certainty on what will happen, so investors will remain cautious until there is some clarity," said Des Kilalea, a mining analyst with Royal Bank of Canada in Europe.
"Merely taking nationalisation off the table is not sufficient. There has to be a detailed and firm policy if investment dollars are to be attracted."
The mining sector paid R25.8bn in direct corporate taxes and R5.5bn in royalties last year. It is further obliged to spend money on social and labour plans necessary to secure mining rights.
Chamber of Mines CEO Bheki Sibiya said last week that higher taxes could force the closure of marginal shafts and the potential loss of tens of thousands of jobs.
A senior figure in the ANC said the appointment of businessman Cyril Ramaphosa as deputy president of the party augured well for the mining sector. "One of the functions of the position taken here (at Mangaung) was to manage the expectations of people frustrated by what they perceive as an insignificant contribution made by the mining industry.
"It’s important to manage those expectations and it’s even more important that this matter be resolved as soon as possible to thwart those who want wholesale nationalisation."
The source said the nationalisation debate had engendered uncertainty that was higher than that emanating from discussions about the level of taxation. "Assets are not under threat of being taken anymore.
"It now means profits will be less, but the extent of that is up for discussion," the source said. "There was a price to pay to deal with nationalisation and that is higher taxes that will be imposed in a responsible manner."