LETTER: Benefits of chrome-ore export tax

Former finance minister Tito Mboweni’s 2020 medium-term budget policy statement looked to foster the government’s central policy goals over the next three years to position the economy for faster broad-based economic growth and to return the public finances to a sustainable position.

This required the implementation of an economic recovery plan, with immediate measures to boost confidence and investment and longer-term reforms to promote sustained higher economic growth. We are yet to see the fruits of these.

In his midterm budget policy statement on Thursday new finance minister Enoch Godongwana needs to focus on saving jobs and livelihoods. Most importantly, he must save our minerals by announcing the resuscitation of the domestic smelting industry through the implementation of an export tax on raw chrome ore. If the government still has doubts about implementing this tax, we would like to draw attention to the report on North West University research titled “A document of strategic intent regarding the merits of a proposed export tax on chrome ore in SA”. The research found that “such taxation should only be used in the short to medium term, during which period SA and industry need to overcome challenges, particularly those related to energy”.

The study echoes our sentiment that a differentiated export taxation on chrome ore is necessary, and that “such taxation will increase domestic ferrochrome production, which in turn will support the SA economy by creating employment opportunities, increasing local spend, driving development and adding to the value chain”. We have been clear that we understand fully the challenges related to energy, but mineral resources & energy minister Gwede Mantashe’s department is at an advanced stage of getting SA much-needed extra energy supply, and at the same time has agreed to independent power generation. The energy crisis can be managed.

The North West University study notes that “SA’s chrome ore is largely unbeneficiated, with excess capacity available in the SA smelting industry”. Godongwana should be worried about the high unemployment rate of 34.4% in the second quarter of 2021, and we can only assume that he would agree with the authors of the study that it would be “logical and obvious that the government would use all statutory means possible to encourage beneficiation. The ideal is for capital owners to find value in an evolving value chain”.

The chrome-ferrochrome industry lends itself perfectly to President Cyril Ramaphosa’s call for industrialisation of the economy and value chain evolution through beneficiation, which should be pursued as a matter of urgency. The country’s fiscal position shows that the government has clearly exhausted its ability to borrow and spend large amounts in an attempt to stimulate the economy. The announcement of an export tax on chrome ore on Thursday would create an environment conducive to the private sector investing in key growth projects, and thereby save jobs, our minerals and our smelters.

Elias Mokwana 
Save SA Smelters 

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