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Enoch Godongwana, head of the ANC’s economic transformation committee, this week stated that if companies such as Kumba (South Africa’s top iron-ore producer) “did not play ball” in providing a new state steel player with competitive cost-plus iron ore prices, the government could whack the company with high export taxes.

Godongwana also entertained the notion of nationalising Kumba through section 25 of the Constitution. The state is apparently in negotiations with a foreign player to establish an integrated steel plant, a vehicle of beneficiation for raw iron-ore.

I will be writing to the Minister of Mineral Resources, Susan Shabangu, to ask her to explain why government are still sending mixed messages about nationalisation.

Also, how exactly will a tax on raw material exports possibly help companies attain pro-poor redress through share divestiture?

A tax on raw mineral exports is one of a suite of ‘nationalisation by stealth’ measures proposed in the ANC study on mining in South Africa. Instead of making exports more difficult, government should make beneficiation easier.

But they seem not to be able to escape the temptation to tax everything mining-related. In so doing, they demonstrate that they still do not understand the long-term, complex nature of the mining industry.

Export taxes are counter-productive, as they eat into the profits that have enabled companies like Kumba to go beyond narrow elite-serving BEE and really serve historically disadvantaged South Africans.

The Kumba Iron-Ore company turned 6 209 below-management workers into pre-tax half-millionaires in 2011. Its share price underwent a 4.3-fold uplift in five years, appreciating from R120 a share on listing in 2006 to R516 a share on maturation of the first five-year phase of the Share Equity Ownership (ESOP) scheme in 2011.

A total of R290 million was then paid out in dividends, at an average of R55 000 per employee, half of which was used to pay off the loan given to workers to buy the shares.

This kind of share divestiture constitutes genuine, pro-poor, broad-based empowerment. But it is only possible if companies like Kumba continue to remain profitable.

Government’s failure to make a decision on nationalisation and various forms of ‘resource nationalism’ undermines profitability and disincentivises investment in a fragile industry.

While some profit rates may make government starry-eyed with revenue potential, the Democratic Alliance urges them to understand that profits are just as likely as losses, given the high fluctuations of commodity prices.

Instead of looking for means of expropriating as much as possible in the short run from mining companies, government should do everything they can to ensure the long-run sustainability of the industry.