While the focus of the Investing in African Mining Indaba would remain firmly on resources sector development in Africa, the topic of conversation along the corridors of the conference centre would likely be the adoption of the mineral resources rent tax (MRRT) in Australia, and what this game-changing piece of legislation would mean for the mining industry in the rest of the world.

In November last year, the Australian federal government’s MRRT was passed through the lower house of Parliament, after Independent representatives put their weight behind the bill.

The proposed MRRT would impose a 30% tax on coal and iron-ore companies, which report resources profits above A$50-million.

Australian miners have to date been paying royalties to the state governments in which they operate, with the mining royalty dependent on the mineral being mined, as well as the state within which the mineral is being mined.

Under the proposed MRRT, the affected mining companies would be allowed to reclaim the royalties paid to the state governments from the federal government, in effect replacing the royalty system with a rent system.

The federal government has forecast that the MRRT would generate some A$10.5-billion in revenue over its first two years; however, this number has been highly disputed by industry representatives and economists alike. Global resource intelligence firm Intierra has estimated that the MRRT will face an A$8- billion shortfall, only raising around A$2.5-billion in the first two years.

Despite strident protests from the Australian mining sector, which included industry-funded advertising campaigns lamenting the negative impact the MRRT would have on the Australian economy, the resources tax has faced few political hurdles and, while not yet passed through the upper house of Parliament at the time of writing, it was fully expected to be implemented by July 1, 2012.

Fears that resources sector investment would suffer under the MRRT have also been laid to rest with the Bureau of Resources and Energy Economics confirming that investment in the sector had reached record highs at the end of November 2011, with more than A$231.8-billion committed in capital expenditure.

“The figures are further evi- dence that the government’s resource taxation reforms are the right policy, at the right time, and are not posing an impediment to continued record investment in our resources sector,” Resources and Energy Minister Martin Ferguson said at the time.

The Organisation of Economic Cooperation and Development (OECD) has also given its support to the MRRT, stating that it was justified on both equity and efficiency grounds.

“This resources rent tax is more efficient than the current royalties system as it raises taxation of finite and immobile resources. This will improve efficiency in the resources sector.”

The OECD has further stated that the switch would improve efficiency of the overall tax system and foster the development of the nonmining sector.

The organisation, however, suggested that the mining tax should be extended to include all commodities and all mining companies, irrespective of earnings, entirely replacing the current royalty system, in an effort to decrease the distortion between the iron-ore and coal industries compared with the other resources industries.

What It Means for Africa

With Australia acting as a benchmark economy for several other resources-based economies, it is likely that the successful introduction of the MRRT would tempt other governments to look at a similar solution for raising revenue.

In fact, research firm Deloitte’s head for the Africa-Australia services group, Jacques van Rhyn, speculated earlier this year that the MRRT would inspire African nations to implement a similar tax.

“I’ve spoken to Ministers who have said: Australia is a wealthy country; if it can bring in a windfall tax, then Africa, which needs it much more, surely should be imposing a similar tax on our nonrenewable resources,” Van Rhyn said in an interview with the Australian Financial Review.

A senior analyst for Control Risks, Thomas Wilson, also told Mining Weekly in 2011 that more African governments were likely to look at raising mining taxes and royalties amid historically high commodity prices.

“I think it’s inevitable. And it’s always been like that – it’s always followed the mineral cycle, he said on the sidelines of a MineAfrica seminar in Toronto.

“Governments look at commo- dity prices and say: ‘We should be getting more out of this’.”

At the end of November last year, Zambia allayed fears that it would reintroduce a mine windfall tax, which was initially abolished in 2009, stating that the measure could harm mining operations and negatively impact on the economy.

“It would be unwise for the government to introduce a windfall tax when metal prices are unstable and are usually trending downwards,” Finance Minister Alexander Chikwanda said at the time.

However, Africa’s largest copper producer would double copper royalties in the 2012 budget.

In August last year, the Namibian government withdrew its proposal to raise the corporate tax rate on mining companies from 37.5% to 44%, instead proposing a windfall tax when international prices for commodities were high.

The Southern African country, which is renowned as one of the world’s largest offshore diamond producers, would also defer removing the zero-rating for value-added tax on mineral exports, and cut a proposed levy on exports from 5% to between 0% and 2%, depending on the industry.

The Ghana government would meanwhile increase corporate tax on mining companies from 25% to 35% in its 2012 budget, introducing a separate 10% windfall tax on mining profits.

The country was also in talks with gold miners over additional taxes as part of its efforts to benefit from recent gains in the value of gold.

Despite the growing investment in the resources industry in Zimbabwe, the country would hike mining royalties in an effort to increase revenue from mining. Gold royalties would increase from 4.5% to 7%, while royalties on platinum would double to 10% during 2012.

The unity government was also pushing for 51% black ownership for mining companies operating in the country.

South Africa

The Mining Indaba host country has also been the subject of much speculation regarding the ownership of mining operations; however, the most recent speculation was that foreign-owned mining houses operating in Africa were safe – for the moment.

The ruling African National Congress (ANC) in December returned the long-awaited report on mine nationalisation and related policy recommendations, which considers how nationali- sation or similar policies have been carried out in several other countries, for redrafting to improve its presentation.

The report is expected to be complete early this year and raised at a major ANC policy conference in June.

There have been assurances from President Jacob Zuma and other Cabinet Ministers that nationalisation of the mines is not a policy of the ANC-led government.

Mineral Resources Minister Susan Shabangu previously said mine nationalisation was “a wrong and dangerous question to ask in searching for the answer to South Africa’s evil triplets of poverty, inequality and unemployment”.

Apart from the nationalisation debate, it has emerged that South Africa could also be considering an overhaul of its mine tax, with Reuters reporting in March last year that it could use the MRRT as a template.

Deputy Minister for Economic Development Enoch Godongwana said the implementation of a mine tax was one of several options being examined by the National Executive Committee of the ANC.

“I can’t rule that out. We are exploring different possibilities and what will suit our own circumstances,” he was quoted as saying.

“What is the best model we need to develop to ensure that South Africans share in mineral wealth? That is yet to be determined. We are not going to take something off the shelf and simply translate it to South Africa. We need to take a model and modify it to our own circumstances,” he added.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.