The SA Chamber of Mines has expressed deep concern that the draft Reviewed Mining Charter contains ill-considered and unachievable targets, and that its implementation in its current form will have dire consequences.
The Chamber of Mines said the Department of Mineral Resources (DMR) has not taken on board its recommendations, objections and a host of issues it has raised in the DMR’s recent submission of the revised version of the Draft Reviewed Mining Charter to parliament.
“The DMR has pursued the proposal that mining companies must contribute a proportion of revenues to a Mining Transformation and Development Agency. Simply stated, this proposal is yet another ‘royalty’ tax-equivalent that the DMR intends to impose on an already struggling industry, which made a loss of R37 billion in 2015.
“This is the most regressive form of taxation. For this reason, Treasury elected an EBIT-based royalty rather than a revenue-based one. The Chamber proposed a 2% of net profit after tax contribution to community expenditure and the need for government to use the existing royalties paid by mining companies to government to supplement community development initiatives,” said the Chamber of Mines.
The Chamber of Mines is also concerned about the establishment of a Mining Transformation and Development Agency (MTDA) as proposed by the DMR. The Chamber is concerned about its purpose, cost and oversight.
Further, the draft Reviewed Mining Charter requires that a portion of the industry’s skills development commitments should be paid to the MTDA. This will take away much-needed funding for skills programmes and tertiary education currently undertaken by the companies and will place these funds directly with another government agency which mandate is unknown, added the Chamber of Mines.
“The DMR continues to insist that multi-national companies supplying goods and services to the mining industry should pay 1% of turnover generated from local mining companies to the new MTDA. This doubles the target set in the 2010 Charter,” the Chamber stated.
The Chamber of Mines is of the view that this is simply an additional tax which the multi-national companies will pass on to local mining companies in the form of higher prices, rendering the South African mining industry less competitive than it already is.
In addition, the DMR has substantially increased the targets relating to the appointment of Historically Disadvantaged South Africans (HDSAs) in companies, and has at the same time changed the definition. The Chamber said that the new targets may be desirable, but some aspects are currently unachievable.
Chamber of Mines CEO Roger Baxter noted: “The cumulative effect of all DMR’s proposals, combined with existing corporate taxes and royalties, skills development levies and more, would materially affect the viability of an industry already in crisis.”
The Chamber of Mines also noted with concern that the DMR indicated that consultation with the industry in respect of the ownership element of the Charter has been fruitful, and that a withdrawal of the Chamber’s application for a declaratory order in respect of the ‘continuing consequences’ component is likely.
“Regrettably, while the high-level meetings between the industry and the DMR, including the Minister, appeared to have been able to reach a common understanding on the way forward, the outcomes have not progressed beyond verbal agreements, and the last meeting between the DMR and the Chamber’s principals took place in July 2016,” said Baxter.
The Chamber of Mines added that despite the serious viability crisis currently being faced by the South African mining sector, the DMR has not offered or displayed any interest in assisting the industry through this crisis.
“Given that the mining companies are mandated with the implementation of the Mining Charter, the Chamber cannot willingly accede to an outcome based on a flawed process, which does not take into account the substantive issues raised by the industry,” said Baxter.
The Chamber and its members urged the Minister and the DMR to seriously engage with the industry on these matters prior to the publication of the reviewed Mining Charter in the form that has been described.