To my mind

Finweek English Edition - - Letters - BY RIKUS DEL­PORT rikusd@fin­week.co.za

WHEN THE NEWS about the min­ing char­ter leaked out a few years ago, it sent shock waves through the in­ter­na­tional in­vestor com­mu­nity and led to bil­lions of rand of value in SA com­pa­nies be­ing de­stroyed vir­tu­ally overnight. So you’d think that Gov­ern­ment had learnt from this and would be more cau­tious when deal­ing with im­por­tant is­sues, es­pe­cially ones that could af­fect in­vestor sen­ti­ment.

How­ever, last week the De­part­ment of Fi­nance again put its foot in it with the an­nounce­ment of a re­port hint­ing at a pos­si­ble wind­fall tax for the min­ing sec­tor, sim­i­lar to the one un­der con­sid­er­a­tion for the syn­fu­els in­dus­try.

Soon af­ter that, ner­vous in­vestors – who are al­ready on edge for other rea­sons – started pack­ing their bags and leav­ing. Once again this was a se­ri­ous blow for the value of com­pa­nies, es­pe­cially those in the re­sources sec­tor.

Trea­sury was forced to is­sue a spe­cial state­ment ex­plain­ing its po­si­tion, in the hope that this would pla­cate the mar­kets.

The re­ac­tion shows that the re­port – the ill-con­sid­ered prod­uct of a task team ap­pointed by Fi­nance Min­is­ter Trevor Manuel – wasn’t han­dled with the nec­es­sary cir­cum­spec­tion.

Surely the de­part­ment should have known that the mar­kets would re­act like this. Granted, no def­i­nite pro­pos­als were made about a tax sim­i­lar to the one for the syn­fu­els in­dus­try, and this wasn’t the in­ten­tion of the re­port, but even a whiff of such a pos­si­bil­ity is enough to un­set­tle in­vestors. The ear­lier min­ing char­ter made this clear.

As we all know, the mar­kets hate un­cer­tainty.

A sim­i­lar point could be made about the men­tion in the Bud­get of a so­cial se­cu­rity tax. It’s a laud­able idea and was wel­comed from sev­eral quar­ters.

How­ever, was it wise to re­veal it be­fore the finer de­tails were de­cided? Manuel said lit­tle about the tax in his Bud­get speech, and the Bud­get doc­u­men­ta­tion was sim­i­larly de­fi­cient.

More than a week af­ter the Bud­get, we still don’t have enough in­for­ma­tion to as­sess the pros and cons of this pro­posal.

It’s un­der­stand­able that the private pen­sion fund in­dus­try is fairly ner­vous about the im­pli­ca­tions.

It would have been bet­ter to wait un­til all the in­for­ma­tion was avail­able and the re­search done be­fore it was thrown open for pub­lic dis­cus­sion.

Wide- rang­ing and trans­par­ent con­sul­ta­tions about pro­pos­als of this na­ture are ex­tremely im­por­tant.

But it’s just as im­por­tant that of­fi­cials should do their home­work prop­erly be­fore po­ten­tially ex­plo­sive pro­pos­als be­come pub­lic do­main, while the com­pil­ers sit back to see what chaos they’ve caused. It only leads to wild spec­u­la­tions and fur­ther un­cer­tainty and con­fu­sion. It would’ve been much more pro­duc­tive to lay a care­fully con­sid­ered draft on the ta­ble, con­tain­ing all the de­tails, with all the strengths and weak­nesses clearly out­lined.

Then all the stake­hold­ers would’ve been far bet­ter equipped to make mean­ing­ful com­ments. It wouldn’t only have ac­cel­er­ated the process, but the end prod­uct would have been of far bet­ter qual­ity.

At the same time, the well-in­tended, promis­ing pro­posal wouldn’t have at­tracted neg­a­tive pub­lic­ity.

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