SA warned against Aussie-style mine tax

South Africa should not replicate Australia's controversial resource tax, which is likely to hurt investment and push capital elsewhere, the head of AngloGold Ashanti said yesterday.

Enoch Godongwana, deputy minister for economic development, said last week that Africa's biggest economy was thinking about overhauling its minerals tax regime to cash in on high commodity prices and could use Australia as a template.

Mark Cutifani, the chief executive of Africa's top gold miner, said Australia's tax move was a "terrible error" and urged South Africa not to follow suit and further dent confidence in the economically vital sector.

A series of scandals last year and disputes over rights upset many companies operating in the world's top platinum producer and a major supplier of gold.

Cutifani said the South African mining sector was underperforming against its global peers by about 30%, largely because of concerns about regulatory uncertainty.

"[The minister's comments] will raise some questions in the minds of investors," Cutifani said.

"There is nothing wrong with the debate . most of the other ministers are talking about how they can generate jobs, not destroy jobs."

Godongwana, in an interview last week, took aim at the mining companies that dominated the economy for much of the 20th century, accusing them of making super-profits out of the soaring price of metals such as gold, platinum and chrome.

Cutifani said South Africa still ranked among the top five countries for mining firms to work in.

But he said rapidly rising electricity prices were a concern, with power utility Eskom possibly demanding two additional annual tariff hikes on top of the three 25% increases it has already been granted.

"We probably could absorb half of that . but ultimately . it will impact our costs," he said.

Cutifani said AngloGold was aiming to keep its global increases to about half of the industry average, and he was cautiously optimistic about upcoming wage talks with unions.

AngloGold would only pursue deals which would allow it to stay in the bottom half of the cost curve, he said.