SA mining needs a proper boost, says analyst
MINING analyst Rene Hochreiter said yesterday that the government needed to do more to attract new investment into the industry, adding that attention needed to be given to expensive and low productivity labour.
Speaking on the sidelines of the Mining Indaba in Cape Town, Hochreiter, who works for Noah Capital Markets, said the 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 a triple-dipping tax regime. And the government always sides with labour; nowhere else in the world does this happen.”
President Cyril Ramaphosa and Mineral Resources Minister Gwede Mantashe told the indaba that the sun wasn’t setting on the mining industry, as many thought.
Hochreiter said the government had to outline tangible reasons to investors and not simply peddle the cliché that “South Africa is open for business”.
“The minister and the 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’,” he said.
“The only thing that Minister Mantashe has given us is security of tenure with ‘once-empoweredalways-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 10 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 chief executive of South Africa would 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.”