PwC warns against overtaxation in Africa's resources sector
PERTH (miningweekly.com) – Advisory firm PwC has warned African nations against overtaxing investments in the resources sector.
Launching a new report on the second day of the Africa Downunder conference, PwC African practice leader and resource sector partner Ben Gargett said taxation and fiscal settings had been a contentious issue across the globe for a number of years, with emerging markets at the forefront of the debate.
“There are only so many profits and so much cash flow generated by a mining project. If the costs are too high, the project is uneconomic. The same applies to government taxes. If they are too great for the project, there is insufficient [room] left for the miner to generate a commercial return, Gargett said.
He pointed out that it was the miner who was bearing the full capital and operating risk of a mining project and added that the miner’s capital was mobile and decisions were made in the allocation of this capital on a regular basis.
“But further than that, in this tough market, where funding is scarce and hard to get, the decision may well be out of the hands of the miner and in the hands of those who finance such projects. The financiers are a further step removed and typically don’t have the same connection with the project or country and act on a pure commercial basis.
“Therefore, I would put it to you – that a smaller share of the pie is a better outcome for the government than no pie at all,” Gargett said.
The new PwC report studied the taxation regime of four African nations, Tanzania, Burkina Faso, Namibia and Ghana, and analysed the impact of the tax setting in each of the four countries and on decisions to develop a new mine in the region.
Key assumptions covered an openpit gold mine with exploration costs of $30-million, a two-year approval process, development capital expenditure of $150-million for 150 000 oz/y in output and all-in sustaining costs of $957/oz, driven by a workforce of 1 100 local employees.
The study found that, based on that modelling, Namibia would be the only country where a new gold mine would be developed, with a “maybe” assigned to Tanzania and Ghana.
On the upside, the PwC study found that every direct mining job generated three to five jobs elsewhere in Africa and every mining dollar generated drove an additional $3 into local economies.
Jobs were the real beneficiary, with the modelled gold project generating 3 300 to 5 500 additional jobs.
Comments
The
functionality
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation