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The mining sector should be offered cash and tax incentives, in a similar format to the manufacturing industry, if government wants to improve investment levels and employment, says director of Tax at Deloitte, Alex Gwala.
Mining production reached a record low in 2016 in South Africa, due to global conditions but since then almost all resource rich countries have enjoyed growth, while the domestic mining industry shrinks, Gwala told Fin24.
"Which tells you that the problems that exist in the industry are no longer global, it’s no longer commodity prices, it’s internal issues [such as] the relationship between labour and government and the inability to attract investments … mining is a very capital intensive industry," Gwala added.
As shafts become increasingly old, the hey days of the mining industry have slipped from a 21% contribution to gross domestic product (GDP) in the 1980s to 8% in 2017. Mass retrenchments followed and just over two in every three gold mining jobs in 1995 no longer exist.
However it remains an important earner of foreign exchange for the country and employs one in every 40 working people (or 2.5% of SA’s entire workforce), according to Statistics SA.
Cut export costs
Gwala believes government should also focus on improving mining exports as these account for 60% of SA’s total shipments.
He maintains this can be done by improving the costs related to exports such as port tariffs and railway costs by state owned entity Transnet as most mines are inland.
Gwala said the revised Mining Charter gazetted in September and the scrapping of the Mineral and Petroleum Resources Development Act (MPRDA) in August are important efforts to stabilise the regulatory environment but cautioned that potential investors remained cautious.
"The most important thing, it [legislation] must not shift every time there’s a new minister coming in…because that’s what we’ve been experiencing, legislation just does not stay constant, with regards to the mining sector," Gwala said,
He explained that mining is a long-term, capital intensive game and investors are concerned about mining policy changes every few years.
