Zuma flags mining in review of tax policies
PRESIDENT Jacob Zuma on Thursday night claimed substantial successes on promises made a year ago in his state of the nation speech, but presented few new ideas.
In a speech that reacted mainly to his annus horribilis last year, Mr Zuma did not set a new course for the government. He focused on issues that featured in his recent opening of Parliament speeches — education, health, the fight against crime, creating decent work, rural development and land reform.
He suggested, however, that there might be important changes in the works — Finance Minister Pravin Gordhan is to commission a study into the appropriateness of tax policies, including the mining royalties regime, later this year.
His comments will add to uncertainty over the regulatory regime for the mining sector, which has been rocked by shaft closures, threatened job cuts and declining profits.
Mr Zuma’s announcement is in line with the decision by the African National Congress at its December conference that the government needed to extract more revenue from mining.
Mr Zuma said the tax review would be to "make sure that we have an appropriate revenue base to support public spending".
"Part of this study will evaluate the current mining royalties regime, with regard to its ability to suitably serve our people.
"Ensuring that the public services we provide our people today can continue to be provided to our people tomorrow, requires that we have suitable tax policies to generate sufficient revenue to pay for these services," he said.
Mining companies paid R25.8bn in corporate tax in 2011 — nearly a fifth of South Africa’s corporate tax — and R5.5bn in royalties. A further R9bn reached the fiscus from income taxes from mineworkers.
Nomura International emerging-markets director Peter Attard Montalto said on Thursday night that Mr Zuma’s announcement hinted that a "step change in spending was about to occur".
He said it seemed that a greater tax burden may be pushed "till the other side of the election next year". "Such an increase in spending, in our view, would risk deficit financing and hence reinforce the deficit and debt risks."
Another announcement likely to prove controversial is that the land claims process will be reopened for those who did not lodge claims by the 1998 cut-off.
Mr Zuma acknowledged that the land reform targets would not be met and the government had to shorten the time it took to finalise claims. "In this regard, government will now pursue the ‘just and equitable’ principle for compensation, as set out in the constitution instead of the ‘willing buyer, willing seller’ principle, which forces the state to pay more for land than the actual value."
He said the state’s infrastructure programme, which started in 2009, will have spent R860bn by next month. The government has been criticised for its slowness in implementing the programme.
"We are cracking down on corruption, tender fraud and price-fixing in the infrastructure programme. The state has collected a substantial dossier … on improper conduct by large construction companies. This is now the subject of formal processes of the Competition Commission and other law enforcement authorities.
"The infrastructure development programme has been a valuable source of learning for government. In the year ahead, we will fast-track many of the projects that the Presidential Infrastructure Co-ordinating Committee has announced. The lessons are that we must co-ordinate, integrate and focus on implementation."
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