As South Africa continues to try to manage what is proving to be the most difficult wave of the Covid-19 pandemic, the chromium enrichment industry faces significant challenges and needs key protection through the implementation of an export tax on crude chromium ore.
A recent statement from Save SA Smelters points out that the government’s slow adoption of a tax on the export of crude chromium ore is costing the country an estimated taxable income of R15 billion based on the tonnages of ore exported to from 2020.
More worrying is the fact that – according to Save SA Smelters – the slowness of the government’s approach to the implementation of this tax endangers around 3,000 jobs and between 8,000 and 9,000 downstream jobs.
This would have a devastating impact on the chrome mining industry, which is expected to meet global demand with a reduced workforce.
Lindelani Nyathikazi, co-organizer of Save SA Smelters, points out that countries like China and other Asian giants are looking to construction to revitalize their economies after Covid-19. South Africa needs to align its policy to meet this demand.
“The growing Chinese and Indonesian markets are growing and will dominate the demand for chromium ore and ferrochrome in the future.
“If the price disparity between China and the West is allowed to continue, then there will be no South African fusion industry,” Nyathikazi said.
“The Chinese marvel at South Africa’s growing indifference to allowing its minerals to be shipped overseas to the detriment of its domestic industry,” [which] is worrying.
“It will also be a betrayal of the great policies of the Mining Charter and the Charter of Freedom of the country … The imposition of this tax on the export of chromium will make this industry grow in South Africa instead of China and other countries.”
In the first line
Steph van Sittert, COO of the smelter at Samancor, says the impact this export tax would have on the industry should not be underestimated.
“Recent studies commissioned by the Ministry of Trade, Industry and Competition have revealed that it will be difficult to replace the volume of SA’s current chrome ore exports to China with alternative sourcing and that there is therefore a low probability.[s] for local chromium miners to absorb the proposed export tax on unenriched ore.
“Failure to apply the tax would lead to more risk of loss of industrial capacity not only for the ferrochrome producers but also for the supply industry, and would lead to further deindustrialisation of the South African economy,” said Van Sittert .
“The implication is that more and more minerals are exported at the expense of industrial capacity. There is, however, a continuing imperative to ensure the structural transformation of the South African economy and measures are needed to support further processing and manufacturing. ”
One of the biggest challenges facing South African chrome miners is the inflation of electricity prices, which has led to the closure of many smelters.
“These increases are not sustainable for the industry and without urgent interventions such as the tax on the export of ore, [the] the closure of other smelters will continue, ”said Van Sittert.
“The industry has engaged with all relevant government and Eskom departments for a number of years to discuss interventions and possible solutions to rising electricity prices.
“It was agreed by all parties that the use of an export tax as a stand-alone measure to support industry is insufficient and must be accompanied by other measures taken by both government and industry. , with an emphasis on energy efficiency. ”
Van Sittert adds that while there are players in the ferrochrome industry who were not sustainable in the face of rising electricity prices, the industry however maintained production levels until early 2020, despite the fewer players.
In the future, however, the risk is that without the export tax, the industry will experience further erosion of domestic ferrochrome production, impacting the entire chromium ore export sector.
“The export tax would be a catalyst to give the industry the confidence to make the investments necessary to regain its competitiveness and increase its capacity, which in turn will support 8% of the basic electricity supply. ‘Eskom and associated revenues, with the potential to increase long-term supply as the industry increases its capacity,’ says Van Sittert.
“The export tax will not solve the problem of electricity pricing, but would put foundries on a competitive basis in terms of total cost of production.”
The cornerstone of the South African economy has long been its rich abundance of minerals and its ability to capitalize on them before exporting them to international clients. In 2019, the mining sector contributed around 226.2 billion rand to the country’s GDP.
According to Charmane Russell, spokesperson for the Minerals Council South Africa, the added value of mineral enrichment in South Africa is quite significant.
“About 94% of South African cement is made locally from locally mined products. Eighty-three percent of South Africa’s steel is made locally from locally mined iron ore, chromium, manganese and coking coal, she says.
“About 30% of the country’s liquid fuels are produced from locally mined coal, as is 85% of its electricity. Most of our household chemicals, fertilizers, waxes, polymers, plastics are made from locally mined minerals and charcoal. Finally, 8% of the world’s platinum catalytic converters are produced locally, ”adds Russell.
She says the Minerals Council estimates that fortification adds about R500 billion to the overall value of commodity sales. In addition, he estimates that more than 200,000 jobs are created in downstream enrichment industries.
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Nyathikazi points out that Save SA Smelters has started a dialogue with the government. However, progress towards a viable solution is nowhere in sight.
“A special team has been formed by the Ministry of Trade and Industry and the Ministry of Mineral Resources to discuss the issue of taxation. They fully support it and believe that preserving jobs is vital for South Africa at a time when we need to develop our economy. ”
” The problem is [National] Treasure, ”says Nyathikazi. “We need to convince the Treasury that the taxation of chromium ore and the ramping up of enrichment plants across the country can add significant value at little cost.
“A special team has been set up to study what it would take to accelerate the ramp-up of the Lydenburg foundries. In addition, there are foundries in eNtokozweni [Machadodorp], Rustenburg and other factories across the country that will add significant value at little cost.
In addition to the Treasury’s reluctance to commit immediate funding to develop smelters across the country, the energy crisis is a binding constraint when it comes to upgrading chromium ore.
“This is an important problem that the government is aware of. We are working with various government task forces as well as the foundries themselves to find alternatives to alleviate the pressure they place on Eskom. However, this is not an easy problem to solve, ”says Nyathikazi.
The enrichment industry in South Africa adds significant value to the fiscus and employs a significant number of people in a country facing an unemployment crisis. Taxing the export of crude chromium ore will not only add more value to the fiscus, but will force countries like China and Indonesia to buy enriched ore rather than profit from it in their own countries.