Not enough being done to attract investment in SA mining industry, says analyst
CITIZEN.CO.ZA / 06 FEBRUARY 2019 - 15.59 / ANA
The analyst claims there are far better mining opportunities elsewhere in the world.
Mining analyst René Hochreiter said on Wednesday that not enough was being done by the government to attract new investment to South Africa’s mining industry, adding that it was really hard to sell the country’s mining industry because of expensive, low-productivity labour.
Investing in African Mining Indaba Picture: Courtney Africa/African News Agency (ANA)
Speaking exclusively to African News Agency (ANA) on the sidelines of the Mining Indaba in Cape Town, Hochreiter – an analyst at Noah Capital Markets – said the South African mining industry was burdened by headcount costs and heavy taxes on companies.
“Everywhere else in the world, mining companies reduce costs year after year and become more efficient. Not in South Africa. Wages increase every year irrespective of whether productivity has improved,” Hochreiter said.
“Labour strikes are incessant and devastating for productivity. Local communities receive payments. This is like a third tax on South African mines like triple-dipping tax regime. And government always sides with labour, nowhere else in the world does this happen.”
President Cyril Ramaphosa and Mineral Resources Minister Gwede Mantashe both said at the Mining Indaba that the South African mining industry was a sunrise industry rather than a sunset industry, as many would like to believe.
Hochreiter said that government needed to outline tangible reasons to investors and not simply peddle the cliche that “South Africa is open for business”.
“The minister and government need to give South Africans who are selling South African mining to smart global investors much more than ‘we are open for business’ or ‘SA mining is not a sunset industry’. Returns are much better elsewhere in the world in hard currency terms,” he said.
“The only thing that Minister Mantashe has given us is security of tenure with ‘Once-empowered-always-empowered’ confirmed in Mining Charter Three, nothing else. This is not enough to attract foreign investment.
“What I have suggested to change foreigners views is to have a 10-year tax-free period for South African mining in general, abolition of state royalty, declining BEE over ten years to zero BEE requirement by 2030, and wage increases linked to productivity increases.”
Hochreiter said the inflow of capital investment, through the lax tax system for mining investment, would create many new jobs whose employees would pay income taxes far exceeding any mining taxes and royalties now received by the government.
“However, the mining minister and the CEO of South Africa will lose their jobs if they try and get that through parliament,” Hochreiter said.
“There is no reason to invest in South African mining as far better opportunities exist in Australia, South America, Canada, Botswana, America, and Eastern Europe, which are all BEE-free. Unless something drastic is done as I have suggested, nothing will change.”
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER