Business News of 2014-07-28

Gov’t fearful of miners – Graham

Dr. Yao Graham, Coordinator of the Third World Network (TWN), a civil society group, has criticised government for showing “incredible weakness” in dealing with pressure from the mining sector to delay urgent industry reforms.

Multinational large-scale mining companies in the country employ about 16,000 people, but about a quarter of that workforce is likely to be laid off by the end of this year as companies take critical measures to deal with the weak price of gold.

And with threats of retrenchment from the companies, which also complain of dwindling margins, government has held-off introducing a planned 10 percent windfall profit tax on the industry.

Dr. Graham in an interview with the B&FT said the fall in the gold price since 2013, which has been used as an excuse by miners to resist plans to implement the windfall tax, is unfortunate.

“The mining companies have too much power and our politicians are afraid of them,” he said. “I don’t think the companies’ refusal or complaint against the tax has been helpful.”

This week the Institute of Economic Affairs (IEA), an economic think-tank, called for an urgent introduction of the windfall tax as part of proposals to grow the country’s revenues and reduce the budget deficit.

The IEA argued that over the decades, gold prices have moved from US$35 to US$1,500 per ounce and “mining companies have a duty to share their windfall profits with the country.”

From US$1,224.53 per ounce in 2010, gold prices rose to US$1,571 in 2011 and subsequently to US$1,669 per ounce in 2012. But in 2013 prices plunged by 28 percent and have recovered by only 8.5 percent this year. The metal traded yesterday below US$1,300.

Miners say the price slump has hurt profitability and they have to downsize to remain in business.

According to Dr. Graham, however, companies have not been consistent in their arguments as they have now introduced an all-inclusive cost to show that their cost is more, whereas previously they stressed their low costs to attract investment.

“Once upon a time, to get people to invest in the sector they claimed a certain level of cost. Now that they are under pressure to pay tax, they are claiming more cost. You have to check where the consistency is.”

Government in 2012 began a major review to boost fiscal revenues and improve the flow of benefits from the industry to mining communities.

The review revised payment of mining royalties from quarterly to monthly basis and increased the industry’s corporate tax rate from 25 percent to 35 percent.

Source: B&FT
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