World Economy

South Africa Miners’ Spate Over Charter Deepens

Sishen opencast mine, operated by Kumba Iron Ore, in Sishen, Northern Cape.Sishen opencast mine, operated by Kumba Iron Ore, in Sishen, Northern Cape.

South African mining companies warned of “dire consequences” for the industry if a revised mining charter is implemented next month as planned, deepening a long-running spat with the government.

Proposed new taxes on company revenue to fund a Mining Transformation and Development Agency would place additional burdens on producers that lost a combined R37 billion ($2.6 billion) last year, the Chamber of Mines said Thursday in an e-mailed statement, Bloomberg reported.

Anglo American and Glencore are among members of the lobby group, which said it was consulted only briefly and is concerned about what may be in the new charter.

Targets in the document may be ill-considered or unachievable, said Roger Baxter, the group’s chief executive officer. “Its implementation in its current form will have dire consequences for the mining industry and the entire South African economy at a time when both are facing significant challenges,” he said in the statement.

Mining accounted for about 8% of South Africa’s economy in 2015 and about half of the country’s exports, employing some 462,000 people, according to industry figures. The government wants to introduce policies that will speed a fairer distribution of benefits from the nation’s mineral wealth, skewed toward the white minority under apartheid, which ended 22 years ago.

The Department of Mineral Resources said Wednesday it plans to finalize the charter next month having made “substantive changes” since the draft it published in April and going through a “thorough consultation process.” The industry lobby group called for urgent discussions.

Among the department’s objectives is to increase black ownership of mining companies, and it proposed in April that mines must retain a minimum of 26% black ownership, even if that initial group of investors later sells out. Mining executives have said this will lead to existing investors’ shareholdings being continually diluted.

 Court Dispute

The chamber took the department to court earlier this year, arguing that previous so-called black economic empowerment deals should still apply even after shares had been sold. The parties are progressing toward an out-of-court settlement on this issue, the department said Wednesday. The chamber has said it will consider reviving the case if necessary.

The proposed taxes will be overseen by the transformation agency, which would use the funds for skills development and to assist local suppliers, the department said. Foreign suppliers would be charged a 1% levy on revenue.

The chamber said it’s concerned about the agency’s “purpose, cost, and oversight” and that its creation would divert funding from skills and education programs the companies have in place. The lobby group instead proposed a 2% tax on profits.


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