Picture: THINKSTOCK
Picture: THINKSTOCK

THE ANC's 53rd national conference in Manguang could see the adoption of potentially game-changing policies for South Africa's mining industry.

The State Intervention in the Mining Sector (SIMS) report, for instance, proposes windfall taxes and the creation of a state mining corporation.

The ANC may also declare certain commodities "strategic", which could see a big change in the way SA's $2.5-trillion (around R21.63-trillion) mineral wealth is mined.

Chamber of Mines CEO Bheki Sibiya said the SIMS document proposes greater interference to control prices.

Vusi Mabena, head of transformation and stakeholder relations at the Chamber of Mines, said "investors are sitting on the fence, watching what proposals are approved. The ANC has the opportunity to create the policy certainty and stability we need."

ANC policy head Jeff Radebe said the outcome of the conference would affect society as a whole. The party agreed in June that it should "re-assert the objective of transforming the racial character of South African capital" given the problems of broad-based black economic empowerment.

State-owned Eskom announced this week that it would establish a fund to support new coal mining operations owned and operated by black or emerging miners.

Webber Wentzel partner Peter Leon said several SIMS proposals were likely to be adopted as a palliative to nationalisation and to give effect to a more "statist" economic policy.

Sibiya said nearly 60% of platinum production was at break-even or loss-making levels even before the Marikana troubles, which led to increased wages across the industry.

"Any additional taxes may be the final straw that breaks the camel's back," he said.

At the heart of the SIMS report is a resource-rent tax, also known as a "windfall tax".

Currently, mining operations are taxed through a royalties tax on production (turnover, revenue or sales) - which raked in R5.8-billion in 2012.

"Mining companies already pay corporate taxes and mining royalties. It's the only sector where spending on social and labour plans is required, in terms of the Mining Charter," said Sibiya.

He said mining is a cyclical industry, and that mining companies use profits from the "fat years" to retain employment and production during the lean years.

"The introduction of windfall taxes would therefore be anti-employment and will probably lead to casualising labour," said Sibiya.

Joe Mathebula, director of Vibrant Veterans Mineral Resources, who led the rebranding of the Northern Province to Limpopo, said more strategic partnerships between the state and the private sector are needed to unlock the development potential of the mining sector.

* This article was first published in Sunday Times: Business Times