Advisory firm PwC has warned African nations against overtaxing investments in the resources sector.
Launching a new report on the second day of the Africa Downunder conference, PwC African practice leader and resource sector partner Ben Gargett said taxation and fiscal settings had been a contentious issue across the globe for a number of years, with emerging markets at the forefront of the debate.
“There are only so many profits and so much cash flow generated by a mining project. If the costs are too high, the project is uneconomic. The same applies to government taxes. If they are too great for the project, there is insufficient (room) left for the miner to generate a commercial return, Gargett said.
He pointed out that it was the miner who was bearing the full capital and operating risk of a mining project and added that the miner’s capital was mobile and decisions were made in the allocation of this capital on a regular basis.
“But further than that, in this tough market, where funding is scarce and hard to get, the decision may well be out of the hands of the miner and in the hands of those who finance such projects. The financiers are a further step removed and typically don’t have the same connection with the project or country and act on a pure commercial basis.
“Therefore, I would put it to you – that a smaller share of the pie is a better outcome for the government than no pie at all,” Gargett said.
The new PwC report studied the taxation regime of four African nations, Tanzania, Burkina Faso, Namibia and Ghana, and analysed the impact of the tax setting in each of the four countries and on decisions to develop a new mine in the region.
Key assumptions covered an open-pit gold mine with exploration costs of US$30 million (N$408 million), a two-year approval process, development capital expenditure of US$150 million (N$2 trillion) for 150 000 oz/y in output and all-in sustaining costs of US$957 (N$13 015.20)/oz, driven by a workforce of 1 100 local employees.
The study found that, based on that modelling, Namibia would be the only country where a new gold mine would be developed, with a “maybe” assigned to Tanzania and Ghana.
On the upside, the PwC study found that every direct mining job generated three to five jobs elsewhere in Africa and every mining dollar generated drove an additional US$3 (N$40.80) into local economies.
Jobs were the real beneficiary, with the modelled gold project generating 3 300 to 5 500 additional jobs.
Commercial banks have until the end of this month to ensure that customers switch from the outdated magnetic-strip card system to the modern chip-and-pin (EMV) format.
“It is the Bank of Namibia’s requirement that all commercial banks do not issue any mag-strip cards after September 30, 2015,” FNB Namibia’s head of e-banking, Herman Kruger, said last week. “Whilst mag-strip cards will continue working after October 1, 2015 on all ATM and Speedpoint machines throughout Namibia, it is in both the customer and the bank’s interest to convert to the safer EMV card,” he added.
EMV technology is considered superior in terms of security, as the customer’s secret PIN is embedded in the chip, without revealing this number even to the user.
“If the two match, the chip signals the terminal that the PIN was correct, otherwise it informs it that the PIN was incorrect,” Kruger said. This technology will stop the practice of cloning, he said, adding that improved authentication time is an added benefit.
EMV cards are set to replace their mag-strip predecessors in debit and credit cards, and FNB says the first of them will be provided to customers free of charge.
Courtesy Namibian Sun