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SA’s ANC may increase mining taxes

Enoch Godongwana 
Johannesburg, South Africa — 06 December 2012 – South Africa’s ruling African National Congress (ANC) intends to ignore advice from the leading ratings companies and call for an increase in mining taxes, says Enoch Godongwana, the party’s economic policy head.

The ANC must ensure that the lives of poor black South Africans improve, or risk giving an opportunity for populist leaders to stir up social unrest and erode the party’s dominance, Godongwana, who heads the ANC’s Economic Transformation Committee, said in an interview here.  “Unless we do some radical transformation, we’ll create fertile ground for an uncontrollable revolution,” he added.

Bloomberg News reports that Moody’s Investors Service and Standard & Poor’s have downgraded the nation’s debt, citing slower economic growth after the worst mining strikes since the end of apartheid and political pressure to raise spending. The ANC holds its five- yearly electoral conference this month, with nominations showing that President Jacob Zuma may face a challenge from his deputy, Kgalema Motlanthe, amid calls for radical policy changes to tackle a 25.5% unemployment rate.

Workers at Anglo American Platinum Limited, Impala Platinum Holdings Limited, and Lonmin plc “’ the world’s three biggest platinum producers “’ defied unions by striking for higher pay. The demonstrations spread after police had killed 34 protesters at Lonmin’s Marikana platinum mine on 16 August. 16.

Moody’s lowered South Africa’s credit rating by one level to Baa1 and kept it on a negative outlook on 27 September, saying the government was unable to “handle the current political and economic situation.” Standard & Poor’s cut its rating by one level to BBB two weeks later, citing concern that the strikes would stoke social unrest.

“We’re kind of in a Catch-22 situation because there are people who listen to Moody’s and when we go out there and raise money, it becomes expensive,” Godongwana said. “We may take a hit. We’ve got to make a choice, do we please Standard and Poor’s and Moody’s or do we deal with the kind of constituencies we’re facing. We’re walking that tightrope.”

While Godongwana ruled out the ANC conference agreeing to any form of mine nationalisation, he said increased taxes on mining was possible. The party hasn’t identified which minerals would need higher tax as delegates need to consider the effect on the mines, he said.

“It may well be that we will not increase tax on gold because most of the gold mines are marginal,” Godongwana said, referring to their profit margins in comparison to miners of other metals.

South Africa is the world’s biggest producer of platinum and chrome and the fifth-largest miner of gold. The country has an estimated US$3.3 trillion of mineral wealth, including coal, gold, copper, platinum and palladium, according to the Department of Mineral Resources last month.

Source: Bloomberg News. For more information, click here.