When your personal fortune is estimated at $10 billion, can you really claim to be on the side of small business people?
That was the unusual position taken by Gina Rinehart, who used the business conference attached to the Commonwealth Heads of Government Meeting to launch a stinging attack on the red tape and taxation burden she feels is retarding the growth of her business.
She revealed that the development process for her $7.2 billion Roy Hill mine project will require 3,104 permits and approvals for the mine, railway and port developments.
“One of the issues that needs to be tackled is the cost, risk and time lost on approvals, permits and licences before revenue can be earned [which] has very greatly increased in Australia, making it almost impossible for small companies to carry and comply with such burdens.”
Rinehart’s idea of a “small company” is perhaps quite different to that of many entrepreneurs. I am not sure she would fit under the $2 million revenue threshold that the taxman uses to define a small business, for example.
But I can see why she would consider herself small. In a sector such as mining, where companies such as Rio Tinto (market capitalisation: $129 billion) and BHP Billiton (market cap: $207 billion) Rinehart’s company Hancock Prospecting remains a small player. Indeed, the vast majority of her revenue comes from royalties from Rio Tinto’s iron ore operations.
However, Rinehart’s battle against the mining tax and what she sees as “excessive regulation” is clearly motivated by her bottom line.
Mining requires huge amounts of capital and as she continues to point out, costs here (primarily labour) are high. For Rinehart, every day she is delayed waiting for various approvals is an expensive one.
That’s not to say these permits and approvals processes aren’t valid. It’s also perhaps not surprising that a $7.2 billion project has a large number of regulatory hurdles to jump.
But Rinehart stands at the juncture of a critical debate in Australia and one I can see raging for years to come.
In an economy that has become increasingly reliant on the momentum provided by the resources boom, how do we ensure that mining remains sustainable and the proceeds of that boom are spread more fairly throughout the community?
The regulatory burdens that Rinehart rages against aren’t direct attempts to stifle entrepreneurship. They are mechanisms to ensure that the needs of the mining are balanced with other needs in our community, such as environmental and native title concerns.
Similarly, the mining tax is an attempt to try and redistribute some of the proceeds of the mining boom across the country.
But that’s not to say that Rinehart’s complaints should be ignored and she is right when she said Australia cannot view these questions in isolation.
“We tend to see ourselves in Australia as unique and we’re not – there are minerals all over this world and we have got to ship them out competitively or else countries will buy them elsewhere.”
This is not so much an issue now when demand for commodities is running hot and everyone is making piles of money. But when the heat comes out of this resource boom and commodity prices fall back towards long-term averages, the competitiveness of the sector will matter – particularly if Australia’s economy is still reliant on mining.
While it is easy to dismiss Rinehart as a whinging billionaire, beneath her obviously biased rhetoric are some questions that require careful consideration and long-term thinking.
For the next two decades, politicians of all persuasions face a major juggling act.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
