By now the mining industry and individual mining companies will have submitted their objections to the potentially crippling recommendations of the Davis Committee on Tax and now the industry must also go all out to lobby for the committee’s misguided recommendations to be expunged from the next round of the tax formulation process.
The first round has exposed overemphasis on revenue collection and underemphasis on the terms of reference of the committee on investment, economic growth, job creation and improved mineworker living conditions.
It has also put new gold mine development at huge risk.
Proposed by a subcommittee with no links to mining at all, the recommendations kill the goose that lays the golden eggs of foreign exchange generation, investment and the sustenance of linked service industries.
The subcommittee on mining has recommended a scrapping of the upfront capital investment (capex) deduction and a ditching of the gold mining formula, prompting a loud call to action from KPMG corporate tax head Muhammad Saloojee, who urges the mining industry to garner support for a collective voice that is heard along the corridors of power.
The Davis Committee on Tax needs to understand that the mining industry plays the role of flywheel to the South African economy and needs to be made aware of the make-or-break phase in which mining finds itself.
Is the subcommittee aware that, even after 100 years of gold mining, South Africa still has 30 000 t to 40 000 t of gold in the ground and that, instead of scrapping the gold formula, it would do the economy the world of good to expand it to platinum mining?
There is also a refusal to understand that the National Treasury’s venture capital has not worked.
In fact, it is an abject failure as a stimulator of the exploration investment that is so vital to this economy’s future.
There is a blank refusal to admit that the Canadian flow- through scheme is a huge success in this regard and should be adopted by us.
Mineral Resources Ministers step in to stop retrenchments at struggling mining companies but they have nothing to ensure that this country’s existing employment tax incentive is made applicable to mineworkers.
If the industry fails to win the ear of the tax committee, its unacceptable recommendations are likely to shrink this industry to a negligible size and result in much of this country’s $2.5-trillion worth of metals and minerals being left in the ground.
That should not be allowed to happen.