South Africa’s chrome rexporters have described the government’s proposed 25% tax on chrome exports to protect the local ferrochrome industry as “madness”.
Business Times reported the government was mulling a 25% tax to help cushion the industry, prevent job losses and keep input costs low in the face of fierce competition from international peers.
The government’s strategy calls for Eskom to offer preferential energy rates to ferrochrome producers while not penalising those seeking to build their own generation capacity.
However, speaking at the 13th annual Joburg Indaba on Thursday, CEOs said the tax would threaten jobs and the economy.
Sibanye-Stillwater CEO Richard Stewart said the tax was a misdirected effort. “It is a good example of madness, it is a good example of a misdirected effort,” he said.
The tax would have a negative impact on employment prospects in the industry, he said, pointing to each mine employee looking after 10 other people, meaning that the mining industry looked after 2% of the population.
South Africa’s mining industry accounts for 6% of GDP and R800bn worth of exported mineral products, representing 45% of total exports, while taxes paid by companies amount to R43bn, contributing 14% of total corporate tax collection
Also speaking at the indaba, Valterra Platinum CEO Craig Miller said climbing electricity prices had placed a burden on the ferrochrome industry. Miller said Valterra Platinum would refine chrome if it was economically viable to do so.
“At today’s electricity prices it is not viable to do so. While we are supportive of the department of trade and industry’s ambitions and current proposals, in our opinion it will result in job losses in the industry,” he said.
About 14 smelter closures in recent years have led to 350,000 job losses across the ferrochrome value chain.
Companies including Glencore have undertaken retrenchments. The company is retrenching at its ferrochrome smelter jointly operated with Merafe Resources that will affect the Boshoek and Wonderkop smelters in Rustenburg.
Paul Dunne, president of the Minerals Council South Africa, said illegal mining and exports of chrome was a major challenge for the sector. He said the council was in talks with the government on the legislative issues, including the proposed amendment bill and the chrome export tax.
Dunne called for policy certainty, saying providers of capital will not put their money into risky environments where regulatory uncertainty, crime and corruption, and failing infrastructure place their returns at risk. He sid it takes 10 years to build a decent-sized mine at a cost of R20bn, with few mining companies having that kind of money lying around on the balance sheet.
“The mining industry has been severely constrained during the past three decades by regulatory uncertainty, weak administrative processes, unnecessary delays in licensing authorisations, as well as the severe repercussions that state capture has had on electricity supply and costs, and rail and port disruptions,” he said.
South Africa’s mining industry accounts for 6% of GDP and R800bn worth of exported mineral products, representing 45% of total exports, while taxes paid by companies amount to R43bn, contributing 14% of total corporate tax collection.
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