[Ferro-Alloys.com] Chrome ore tax: transparency needed

A time-limited tax is difficult, if not impossible, to remove

Elias Mokwana of Save SA Smelters quotes extensively from a document produced by North West University in support of a chrome ore export tax which, it states, “should only be used in the short to medium term” (“Benefits of chrome-ore export tax”, November 9).

History has shown that a time-limited tax is difficult, if not impossible, to remove because of the big practical and economic changes that would have taken place. A few examples of these changes are listed by Mokwana in his letter — production increases, employment opportunities, increased spending, and, of course, the country’s need to overcome energy challenges. To this I would add inflation and a drop in quality. The egg is well and truly already scrambled.

I refer Mokwana to a World Trade Organization paper written some time ago, “The role of export taxes in the field of primary commodities”, which details both the advantages and the disadvantages of such a tax, and shows that its introduction would have a material effect on pricing, quality, production volumes, labour, competition, product substitution and trading partners in numerous other connected industries.

The main question is whether the proposed policy is likely to yield a net economic benefit to SA and its people. No single party would be capable of answering this question without extensive engagement, after opening the policy suggestions to the broadest possible audience for input and providing this audience with enough information to arrive at the best possible conclusion.

Full and fair participation by all interested parties will also produce far more support for a consensus policy than one that has been decided upon and implemented by a handful of unidentified advisers, who may well have skin in the game.

My purpose in writing this letter is not an attempt to convince readers of any particular conclusions but rather to plead for a fair and transparent process of research, communication and decisionmaking should such a tax be considered. Recent decisions affecting the steel and scrap metal industries have been reached without such transparency and consultation.

The various industry masterplans have been drawn up with input from industry players with a financial interest in the outcome. These players were never identified. No minutes of their meetings exist, and no pro forma document was presented and fully debated by the industry concerned, taking into account all inputs including criticism and then producing a consensus-driven plan. Ad hoc changes are made by the minister, who then announces the plans as fait accompli. That is hardly democracy in practice.

Should a chrome ore export tax be contemplated the minister and his advisers must be transparent from the beginning. They must identify all participating parties and their interests up front, provide meeting minutes, submit detailed plans for discussion, and negotiate with trading partners before distributing a detailed document showing the steps to be taken, as well as the economic value to be gained by SA.

If a chrome ore export tax is implemented without full inclusivity of all proponents and opponents in a fully transparent process, we should not be surprised if the exercise is a total failure at a huge and unaffordable cost to SA. We should have learnt this by now. Based on last week’s election results the voters are not convinced that we have.

Source: BusinessLIVE MMXXI

• [Editor:tianyawei]