* Gold miner's marginal tax rate cut to 34 from 43 pct
* Ruling ANC still mooting mine tax hikes
By Ed Stoddard
JOHANNESBURG, May 17 As African governments seek
to extract more revenue from their mining sectors, the
continent's biggest economy has given gold producers a
much-needed tax break tha t removes at least one head wind from a
Gold Fields, the world No. 4 bullion producer, on
Thursday became the latest South African gold miner to report
better-than-expected earnings partly on the back of the new,
lower tax regime. It benefited to the tune of close to 1 billion
rand ($120.46 million) from the change in the first quarter.
The companies' gain will cause some shareholder pain as the
burden has been partly sifted to dividends, but analysts
generally agree that the Treasury's revenue stream from the gold
sector will be less as a result.
It is impossible to forecast the precise net result as that
would hinge on a range of factors from the price of gold to the
Effectively it is a change in the formula which brings the
marginal tax rate for gold miners down to 34 percent from 43.
Not everyone in the industry sees it as a significant shift
in the South African government's thinking on resource
nationalism, which has been a defining feature of the region's
political risk profile.
"It is a structural change and I would not read too much
into a change of sentiment on that," Gold Fields' chief
executive Nick Holland told Reuters.
"The gold industry has already taken royalty taxes which is
about 300 million rand ($36.14 million) a year to us. Now we
have a mooted carbon tax coming which is probably another 300
million. We can't really take much more," he said.
Holland also noted that the ruling African National
Congress, while it has gutted the radical idea of mine
nationalisation, is mooting higher mine taxes that would
effectively translate into 50 percent on profits.
Still, while hardly a U-turn, the tax cut does at least
indicate that ruling party and government thinking on the
subject is not just running one way.
"We're not aware of any mining jurisdiction in the world
that's lowering mining tax at this time," JPMorgan Cavane noted
in March shortly after the changes were announced in the 2012
South African budget.
Mines minister Susan Shabangu told Reuters earlier this
week that any future changes to tax policy would aim to keep the
sector, which remains a vital source of employment, competitive.
Looked at against the backdrop of the domestic political
debate on mining and global and regional trends, the move does
Across Africa and elsewhere, the trend - spurred by red-hot
commodity prices which have recently cooled - has been to raise
mining taxes and royalties or get a bigger slice of the action.
This has ranged from tax hikes in Ghana to Zimbabwe's drive
to get foreign mining houses to surrender 51 percent stakes in
their local operations to black investors there.
Not all investors will be happy with part of the burden
shifted to shareholders in the form of a dividend tax.
And while the formula by which gold miners get taxed has
changed, this has not been extended to other sectors, such as
platinum and coal.
NOT ALL THAT GLITTERS
This may partly stem from the fact that platinum and coal
are regarded as growth areas while gold needs all of the help it
But can it arrest a decline in South Africa's gold industry,
which has seen it fall from being the Saudi Arabia of the
precious metal to the world's fourth biggest producer?
That must surely be the government's aim given the sector's
importance on the employment front in a country where the
jobless rate is probably over 40 percent.
But the money that flows to the gold miners' bottom line
will likely flow out of the country.
The Big 3 gold miners, Gold Fields, AngloGold Ashanti
, and Harmony, are all investing heavily in
expansion plans elsewhere.
With the world's deepest mines, steeply climbing power costs
and wages rising by double digits annually, the sun is setting
on the sector here.
And when the additional earnings get ploughed into Papua New
Guinea, Mali and other frontier mining states, the government
may not be impressed.
This could spark a U-turn on the tax policy for gold
miners.($1 = 8.3015 South African rand)
(Editing by Ron Askew)