The Association of Mineworkers and Construction Union (AMCU) has called on the Department of Mineral Resources (DMR) to ensure industry misconduct is stopped.

Speaking at the Socio-Economic march in Tshwane last week AMCU President, Joseph Mathunjwa, warned that industry malpractices were stealing opportunities from South Africans.

“Curtail industry malpractices such as transfer pricing and mis-invoicing which affects industry performance and job creation,” AMCU said in one of its demands tabled to the DMR last Tuesday.

“The DMR needs to institute legislation that will stop illicit financial flows, which steal opportunities from South Africans in pursuance of super profits,” added the Union which gave DMR seven days to respond to the demands.

Former President, Thabo Mbeki, put the annual illicit flow out of Africa, which include mis-invoicing and transfer pricing, at $50bn.

South Africa contributes a bigger share to this figure which is why AMCU is urging the government to halt the malpractices in the mining sector.

How do companies avoid paying their dues?

Transfer pricing and mis-invoicing help companies to dodge paying taxes, a loophole many mining companies in Africa are increasingly being exposed for.

Several South African mining companies have subsidiaries located in tax havens which position them for transfer pricing and other forms of mis-invoicing, whether deemed to be legal or not.

Many African countries, including South Africa, although having basic provisions in place dealing with transfer pricing, do not have in place appropriate documentation rules and or have not yet published the necessary implementing regulations.

Weighing in on challenges that most African countries are facing, the International Mining for Development Centre has said “The ability for tax administrations to identify and address transfer pricing risks is highly dependent on the existence of commensurate legislation.”