through
the Combined Development Agency and repayable over a period of ten
years, which is the term of the contracts. These had necessarily to
provide for costs of production and for a profit margin (which it was
arranged should vary with efficiency). To avoid international
complications, the price was not uniform for all South African
producers, and the contracts, though running for ten years, did not all
terminate on the same date but at varying dates after 31 December 1963.
(The Combined Development Agency also made provision for the finance of
an additional power station for the Electricity Supply Commission.)
The
effect of these arrangements was that the capital cost of the entire
uranium equipment of the Union would have been met without any
financial burden being imposed on the country (the 'real cost' was, of
course, represented by the diversion of labour and material from other
possible uses, and that could not be, and cannot be, shifted).
So
far as the profits of the mining industry are concerned, the position
was affected by the taxation measures adopted by the Government. The
Combined Agency itself had taken the view that uranium was merely a
'by-product' of mining, and that, therefore, mining costs as such
should not be included in the cost of production of uranium. (From the
strictly economic point of view, since the uranium content of ore was necessarily originally contained in the ore, it might well have been argued that uranium, though technologically obtained
from the leaching of residues, was a joint' and not a 'by' product of
mining.) The Union Government, on the other hand, based its taxation
policy on the view that uranium was not a 'base metal', but a
'precious' metal and therefore assimilated it to gold for taxation
purposes; the result was that profits derived from uranium, as well as
profits derived from gold, were subject to differential rates of
taxation. Nevertheless, this decision in the short run resulted in the
position that
the
mines producing uranium have been allowed to amortize the capital
expenditure on their uranium plants against their profits from gold
before even the uranium plants started operating. Thus, the Government
suffered a considerable reduction in revenue from gold-mining taxation
in the years from 1951 onwards. The Government will, in the long run,
however, recover this temporary loss of revenue through the added
yields from taxation of gold and uranium profits when the uranium
plants have been amortized.117
117 Hagart, op. cit., p. 570.
