London, 18 March 2011

South Africa is thinking about overhauling its minerals royalties regime to cash in on high commodity prices and may use Australia's controversial resources tax as a template, a minister said this week. "We South Africans are getting a raw deal," Enoch Godongwana, deputy minister for economic development, told Reuters on a visit to Australia.

Godongwana, a key figure in economic policy-making, 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.

South Africa is the world's biggest platinum producer and number three gold producer, although output is declining. "They have taken the wealth, they've taken the gold, they've taken everything," he said. "The problem is the golden eggs are not being shared. We must be able to catch up with the commodity boom."

Similar pressure last year in Australia led to a government push for a 40 percent minerals tax on the massive profits being made by mining companies, although this was watered down to 30 percent after a huge corporate backlash.

However, Godongwana said such a move was one of several options being examined by the National Executive Committee of the ruling African National Congress (ANC) party. "I can't rule that out. We are exploring different possibilities and what will suit our own circumstances," he said, when asked if South Africa might go down the Australian route.

So far, the ANC has not consulted mining companies on the issue, he said. Australian miners, including sector heavyweights BHP Billiton and Rio Tinto, unleashed a barrage of anti-tax advertisements and lobbied politicians to have the tax modified before meeting to hammer out a more palatable levy.

It still must pass through the parliamentary approval process before its mid-2012 introduction date. Despite South Africa's vast mineral wealth, its mining sector is in decline due to a mixture of dwindling gold reserves and a lack of investment stemming from uncertainty over govermment policy towards the sector and soaring energy costs.

The ANC was still months if not more away from making any decisions, Godongwana said, although given the cyclical nature of commodities markets, the government would like to see a policy in place as soon as possible.

Raising the pressure on the mining companies, radical elements in the ANC are calling for outright nationalisation of the sector although Godongwana reiterated that it was not government policy.

"What is the best model we need to develop to ensure that South Africans share in mineral wealth? That is yet to be determined," he said.

"We are not going to take something off the shelf and simply translate it to South Africa. We need to take a model and modify it to our own circumstances."

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