To my mind
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.