The Minerals Council South Africa asserts that unlocking mining’s potential is key to economic transformation, following the announcement of supportive measures in the 2025 Budget. While positive steps include diesel refunds and carbon tax extensions, concerns over declining profitability and tax burdens for employees are evident. Improved policies and infrastructure investments are critical for maximizing the mining sector’s contribution to the economy amid rising global demand for minerals.
In response to the 2025 Budget delivered by Finance Minister Enoch Godongwana, the Minerals Council South Africa (MCSA) stresses that unlocking the mining sector’s potential could transform the nation’s economy. The budget, effective from April 1, introduces a full refund of eligible diesel purchases for primary sectors, an extension on carbon tax commitments, and an increase in carbon offset allowances. These measures aim to accelerate growth in the mining industry as well as the economy at large.
The MCSA highlights that consistent higher growth rates are essential for improving public finances in South Africa. Hugo Pienaar, Chief Economist at the MCSA, states that weak GDP growth has impeded the economy’s capacity to generate adequate revenue for public expenditure, emphasizing, “Sustained weak real GDP growth, in part as a result of an underperforming mining sector…” He notes that to disrupt the cycle of tax hikes, inclusive GDP growth is vital.
The 2025 Budget tax measures come as profitability in the mining sector continues to dwindle, impacting Treasury’s tax income from this industry. According to recent statistics, mining profits fell for the second consecutive year in 2024, leading to a projected contraction of 28% in corporate tax collections from mining during the fiscal year 2024/25.
While the government plans to invest R1.29 trillion in public infrastructure over the medium-term, there are concerns regarding the lack of support for Transnet’s capital expenditure, which is crucial for enhancing rail infrastructure. The MCSA urges that without necessary funds, Transnet must seek alternatives, including private sector investments in major commodity transport corridors.
The budget will also affect mining sector employees, leading to increased personal income tax burdens and limited relief from cost-of-living expenses. For instance, an employee earning R350,000 will face higher monthly tax dues with any salary increase. Moreover, a planned VAT increase is expected to raise consumer inflation rates, although efforts are being made to mitigate its impact by expanding VAT zero-rated food categories.
To minimize need for future tax hikes, the mining sector must fully realize its potential through several measures: establishing a stable mining policy, ensuring reliable and affordable electricity supply, enhancing rail and port performance, and combating crime and corruption. With the global demand for critical minerals rising, this is a pivotal moment for South Africa’s mining industry.
The 2025 Budget presents both opportunities and challenges for South Africa’s mining sector. While supportive measures such as diesel refunds and extended carbon tax allowances aim to stimulate growth, the declining profitability and increasing tax liabilities pose risks. The successful enhancement of mining’s contribution to the economy hinges on addressing infrastructure deficiencies and adopting favorable policies. With global demand for minerals escalating, the sector’s development is crucial for the nation’s financial stability.
Original Source: www.bizcommunity.com
