SA's mining sector might be shedding jobs faster than you can say "election manifestos", but finance minister Trevor Manuel has a plan that might alleviate the economic pain. National treasury has extended a hand to the mining sector by delaying the implementation date of the Royalties Bill by a year (2010).
The bill, which was supposed to have kicked in from April, will now apply from April next year.
Under the bill, passed in 2008, companies will have to pay extra taxes proportional to their profitability. But the delay, says Manuel, will put R1,8bn savings into mining companies' pockets in 2009 - money that would have otherwise flowed to government coffers.
Says Cadiz Corporate Solutions analyst Peter Major: "That's great of Trevor. It gives the guys a bit of a breather." He does, however, criticise the mining companies for failing to hoard cash during the bull years to carry them through the tough times. "These guys must go back to Sunday school and read the Bible to learn about the seven fat years followed by seven lean years."
The Chamber of Mines is obviously grateful for the rescheduling. Director Frans Barker says this is particularly so as the postponement of the Royalties Bill was first flagged late in December when a government-labour-industry task force convened to study ways to reduce job cuts. For Manuel to have acted so swiftly was pleasing, says Barker.
Manuel reached the R1,8bn figure by forecasting production rates and commodity prices for 2009. Predicting what commodities prices will do this year is a bit like guessing the number of sand grains on a beach. But treasury has been conservative.
Had the bill been introduced in 2006, government would have already gleaned R4bn-R5bn from mining companies. But 2006 was a far better year for mining profits than 2009 will be.
The R1,8bn saving will be a welcome gift to the shell-shocked mining sector, which has gone into survival mode, shedding more than 20 000 jobs so far. Government is granting the concession in the expectation that it can persuade the sector to wield a smaller axe on its workforce.
Two days ago world number one platinum producer Anglo Platinum announced that 10 000 of its employees would lose their jobs this year, mainly contract workers. Treasury says mining houses are under no obligation to minimise retrenchments "but it is a good incentive" for them to do so.
But the companies shouldn't expect the same benevolence from treasury if commodities prices are still in the doldrums at the time of next year's budget. This is a one-off occurrence, treasury says.
Manuel also announced that an agency would be set up to mitigate the impact of job losses in mining and mining labour source areas. The agency will be jointly managed by labour, business and government and will invest in economic development in affected regions.
In another fine display of swift action, treasury will allocate funding in its medium-term budget policy statement if the agency is set up this year. Mining was the only industrial sector to receive support from Manuel's budget. Given its high employment levels of just over 500 000, this should not be surprising.
The day before Manuel's budget speech, minerals & energy minister Buyelwa Sonjica sounded a similarly positive note to the mining industry. She said her department was "happy to come on board" to help the struggling sector.
