SA mining loses out despite tax regime
Johannesburg - Despite having one of the more attractive tax regimes for mining companies among developing economies, SA's mining sector has declined in the last 10 years, a panel of mining experts said on Wednesday.
Carel Smit, head of energy and natural resources at KPMG, said investors want certainty around what taxes they would pay, that their mineral rights would be secure, and that there is law and order so there is a system they could count on if things went wrong.
While infrastructure remains a challenge, it is improving, though one issue brought up by the panel as a concern is security of tenure - security of mineral rights - recently knocked by a lengthy court battle between ArcelorMittal, Sishen, Kumba and the department of mineral resources over a licence.
But KPMG said South Africa's mining tax regime is attractive, including accelerated 100% capital deductions, while the royalty regime only applies to profits. What also helps is that the administration of the tax system - voted the best among emerging markets - provides the certainty investors are after.
And SA's total all-inclusive tax rates for a mining company of about 38% plus 2% to 3% for royalties stacked up well against popular resource destinations, like Zambia at 60% and Mozambique not far off that when its new tax on production is included.
But in the last 10 years SA mining has declined as a contribution to gross domestic product, and the sector has seen 0% growth in the past eight years versus 14% for a country like Chile.