SA’s strained fiscus is set for a $388m (R7.3bn) windfall from the restructuring of mining giant Anglo American, which includes the demerger of its SA-based platinum group metal (PGM) unit in June.
According to a circular released earlier this month, the decision by Anglo to let go of Anglo American Platinum (Amplats) will net the SA Revenue Service (Sars) $388m, with Anglo attracting $63m in capital gains taxes through the process.
Amplats in February declared an additional cash payout of R15.7bn in preparation for an exit by parent Anglo — despite profit plunging 45% in the 2024 financial year.
This action will see Sars net a tidy dividend tax. The cash injection comes at a time Sars is scrambling to fill a multibillion-rand budget gap. In terms of the budget review released on February 19, the revised tax revenue estimate for 2024/25 was revised downwards by R19.3bn.
Anglo last year reorganised its portfolio to focus on copper, premium iron ore and crop nutrients. The restructuring saw the group cut ties with Amplats, De Beers and its nickel and steel making coal business noncore. This left Kumba Iron Ore and its manganese business as Anglo’s only remaining assets in the country.
While announcing the structuring last year, Anglo CEO Duncan Wanblad insisted that the group would continue to work in the interests of South Africans and retain its corporate office in SA.
The move forms part of Anglo’s broader plan to sell off its steelmaking coal, PGM and diamond businesses to focus solely on its South American copper assets and SA iron ore operations, as well as crop nutrients in North America. As part of this process, Anglo recently announced the sale of its Australian steelmaking coal assets for nearly $5bn and Brazilian nickel business for up to $500m.
Business Day reported last year that Anglo shareholder Coronation had expressed concerns about capital gains tax and the friction costs associated with breaking up the parent company.
The deal will also impose one-off costs on Amplats, soon to be renamed Valterra Platinum, leaving the company more vulnerable to a downturn in PGM markets.
Amplats warned in its latest annual results that it would no longer be able to depend on certain existing sources to fund its future capital requirements and that “financing from new sources may be available on less favourable terms”.
Wanblad has been firm that the restructuring will deliver more value to shareholders and expects it to deliver cost savings of $1.7bn. He said that while Amplats has enjoyed many benefits as part of Anglo, “it became increasingly clear that the valuation and value creation prospects of both companies could be better optimised as two entirely separate entities”.
Once the demerger is concluded, Anglo plans to retain a 19.9% stake in Valterra Platinum, which will remain headquartered in Johannesburg.
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