RECOMMENDATIONS from a study commissioned by the African National Congress (ANC) into the state's role in the minerals sector are out of step with the government's economic policies and would damage the mining industry, said key industry stakeholders in submissions to the ANC.

The Department of Mineral Resources, the Chamber of Mines and Anglo American have all found the State Intervention in the Minerals Sector (Sims) document to be faulty.

They also said through exaggerated assumptions of what gains the mining sector can bring to the economy, the document could result in more taxes, uncertainty and regulations that the industry could ill afford.

The three parties have made submissions for the ANC to consider in its policy discussions this week.

However, submissions from the department and the chamber in the possession of Business Day both addressed particular points raised in the Sims document, with little to offer in the way of alternatives.

Anglo made suggestions in three core commodities - iron ore, platinum and coal. According to Anglo, the Chamber of Mines, in a submission to the Sims committee, said SA is losing between R5bn and R10bn a year in mining investments because of regulatory constraints.

Anglo pointed out a number of factual faults in the Sims document in which the authors blamed Anglo's subsidiaries in SA for charging import parity prices for commodities rather than export parity prices, which are lower. "The design of far-reaching interventions based on factual errors is extremely concerning to Anglo American.

"Anglo submits that the implementation of the Sims proposals in concert would be extremely harmful to the mining industry," it said.

Anglo warned that the focus on the mining industry to solve SA's social and economic ills was misplaced and the heavier tax burden on mining companies, especially related to a proposed mineral resource rent tax of 50% on profits over about 15% of "normal returns", would curtail investment inflows as would the restrictions on exports of strategic minerals and changes to mining regulations.

"While critically important to SA, and while Anglo commits to leveraging mining for greater development, mining should not be seen as a silver bullet for all SA's socioeconomic ills."

The Department of Mineral Resources rejected the Sims proposal for a super ministry encompassing those related to the economy, noting there was already a high level of engagement between departments. The department also blamed a lack of funding to it for the lack of progress made in establishing upstream and downstream industries related to the sector.

The department said since the Mineral and Petroleum Resources Development Act was implemented in 2004 it had not been allocated funding to implement the beneficiation strategy laid out in the act.

The constraints meant it had a staff of less than 20 to deploy to regulate, monitor and enforce compliance at about 1500 mines.

seccombea@bdfm.co.za

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