The African National Congress (ANC) discussion paper, State Intervention in the Minerals Sector, suggests a raft of measures, including a 50% resource rent tax on super-profits in mining that would create ways for the state to reap greater benefits from the mining industry.
Although the ANC’s investigation into the mining sector began as an investigation of the feasibility of nationalisation, the paper does not recommend nationalisation for two reasons.
First, it is not affordable. It would cost the state R1-trillion - the size of the entire national budget - to acquire 100% of listed mining companies.
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Second, if private mining assets were grabbed without compensation, the result would be "a near collapse of foreign investment and access to finance" as well as widespread litigation by foreign investors.
The alternative is to leverage SA’s mineral wealth to encourage industrialisation, economic development and job creation. The key to the thinking in the document is the notion of using mining and the beneficiation of minerals to create linkages in the economy.
New tax proposals include a 50% resource rent tax on higher than normal returns on investment - defined in the document as "the Treasury long bond rate plus 7%", which would amount to returns higher than 15%; the lowering of mineral royalty rates to 1%, to lessen the burden on marginal mines; a capital gains tax on the flipping of rights; and tariffs to be imposed on the export of unbeneficiated minerals.
A sovereign wealth fund would be created for resource rent taxes, and the fund would invest offshore to avoid currency appreciation.
Proposals on mineral rights include the designation of certain minerals as "strategic minerals", which would "have to be exploited in an orderly and optimal manner to satisfy national requirements, demand and pricing".
The proposals on ownership include the creation of a state-owned mining company by putting together existing state holdings in mining and holdings in mining shares by state-owned financier the Industrial Development Corporation.
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