Austerity Comes to South African Platinum Mining Industry
Why so many woes for South Africa’s mining industry? The mining in South Africa is the bedrock of the South African country, however crisis within the industry could lead to major transformations in mining in South Africa. Not only are platinum mines being affected by strikes, but the national government there is considering the imposition of a so-called “super-tax” on mining operations in the country. In terms of platinum, of which 3/4 of the world supply comes from South Africa, this could mean higher prices and diminished supply for the world.
Platinum output from South Africa is declining as the nation’s mining industry is faced with strikes, closures and relocation of its factories. Last week the in-charge African national Congress said it intends to increase taxes on the mines possibly via a “super tax.” It said also Friday that it is considering giving the state mining company a greater share of “strategic” materials, perhaps a hint of some kind of mine nationalization. The Chamber of Mines, representing several international mining, stated that a super tax could “well be the tipping point at which foreign investors choose to overlook the South African mining industry as an acceptable destination for their investment capital.”
In the past, South Africa was the world’s largest producer of gold. Today, it is the fifth. On the other hand, South Africa remains the world’s top platinum producer, but four platinum mines are suffering currently from worker’s strikes.
South Africa President Jacob Zuma has even called for a “giant leap” towards “social transformation.” He has spoken of a “second transition” the first coming with the end of Apartheid 18 years ago. A controversial report was recently released titled “State Intervention in the Mining Sector,” discussed at the conference, avoids referring to nationalization directly. It does however propose a 50 percent tax – called a resources rent tax – on mining companies’ profits in excess of 15 percent return on investment. The document claims this could help the government raise R40 billion, or $4.7 billion, in revenue.
