ANC proposes mining Super Tax

The ANC has proposed a change in the Constitution to separate mineral and land rights, and a use-it-or-lose-it rule for licencees “squatting” on mining land.

This emerged in a set of policy papers released by the African National Congress in Johannesburg on Monday.

In a paper entitled “State Intervention in the Minerals Sector”, the ANC wants the minerals sector to become the centre of the ruling party’s national development strategy, as this was the country’s strongest advantage.

“This must be harnessed in order to build our economic potential domestically and realise our competitive strengths globally in order to overcome our massive unemployment time-bomb,” the ANC says in the document.

Nationalisation of mineral wealth, as lobbied for by the ANC Youth League, would be unaffordable, as it would cost over R1 trillion to compensate mining companies, it said.

Even if the Constitution were changed to allow nationalisaton of mines without compensation, there would be a near collapse of foreign investment and access to finance, and litigation by foreign investors.

“This route would clearly be an unmitigated economic disaster for our country and our people.”

The government had already converted “old order” private mineral rights to “new order” state mineral rights, in line with the Freedom Charter. It states that “the mineral wealth beneath the soil shall be transferred to the ownership of the people as a whole”.

For clarity, the ANC proposes amending section 25 of the Constitution to make it absolutely clear that mineral rights are not included in property rights.

South Africa’s State Mineral Company (SMC) should be strengthened by transferring to it the appropriate capacity and state holdings from the Industrial Development Corporation (IDC), from companies such as Sasol, Impala, Merafe, Wesiswe, Hillside Aluminium and others, and the Central Energy Fund.

This should be resourced and run by the IDC as a subsidiary until legislation to establish it as a free-standing, state-owned enterprise was in place.

Once free standing, it should come under a proposed super-ministry of the economy, or the ministry of mineral resources.

The SMC should develop strategic minerals such as copper and supply these to the domestic market at competitive prices. The SMC should hold the exploration rights to these minerals through first sight of all new state-financed geological data through the Council for Geoscience.

Regarding SMC ownership, the ANC proposes in the document that unions pool their mineral holdings with the state in a special purpose vehicle. This could have a major influence on job creation, and improving skills and knowledge.

The ANC further proposes a merger of the ministries of trade and industry, mineral resources, energy, public enterprises, economic development, and science and technology into a “super economic ministry” for greater alignment.

A “minerals commission” would evaluate, grant and monitor mineral concessions to increase development and job creation so that mineral wealth benefited all the country’s people. For unexploited deposits, the state should get first option for development.

A presidential mineral rights audit commission should be established to carry out a forensic audit on the granting of all new order mining rights and, if improperly awarded, these should be suspended.

The ANC proposes a capital gains tax of 50 percent if a right was on-sold, or if a company changed hands before mining commenced, to discourage speculators and encourage genuine investors.

To prevent “asset squatting” a use-it-or-lose-it rule could be introduced by making licence holders undertake genuine exploration, with a minimum amount of work and expenditure required per hectare.

A resource rent — a tax on exceptional profits — of 50 percent on all mining was proposed to make sure all profits were shared with “the people”. This money would go towards investing in skills in the mining sector, such as financial support for engineering faculties.

Regarding foreign-owned mines which invested via a subsidiary registered in a tax haven, the ANC proposed introducing a mineral foreign shareholding withholding tax of 30 percent.

It also suggested putting a carbon tax on hold, because it would add to costs for companies, and banning the export of scrap metals.

The document would be sent to ANC branches, and would be discussed at a policy conference in June, and then finalised at the party’s elective conference in December.