Edward Kieswetter kisses R37 billion goodbye
The mining industry’s contribution to South Africa’s corporate tax revenue has nearly halved over the past three years as the sector faces several challenges.
The Minerals Council South Africa said the local mining industry is still a source of well-paid jobs and an important industrial sector in the economy.
South Africa once had a reputation as a mining powerhouse, dominating the production of minerals from gold to diamonds to platinum.
However, this reputation has disappeared over the past decade as the local mining sector navigated several headwinds.
This includes a challenging operating environment, rapidly increasing input costs, and volatile global commodity prices.
“The mining industry faces constrained rail and port logistics, high input costs for electricity and water, as well as increasing security concerns at mining operations and the products they mine,” the council said.
In addition, prices for key commodities like platinum group metals (PGMs) have fallen sharply in the past two years.
The rand price for PGMs, known as the basket price, was nearly 18% lower in 2024 compared to 2023. This followed a 28% decrease in the basket price of PGMs in 2023.
“This sustained low basket price is putting pressure on the sector and profitability,” the council said.
The Fraser Institute, based in Canada, conducts an annual survey on the attractiveness of different countries as mining jurisdictions. These days, South Africa ranks among the ten least attractive mining destinations.
Despite these challenges, the Minerals Council said the mining industry has grown employment significantly over the past few years, creating more than 14,900 jobs since 2021.
However, it noted that this growth is offset by the loss of nearly 10,000 jobs during 2024 as mining companies in the worst-affected sectors turned to retrenchments as a last resort in a challenging operating environment.
Pressures on the sector led to several rounds of job cuts from some of South Africa’s biggest miners.
In February 2024, Anglo American Platinum announced plans to lay off 3,700 employees following a 71% drop in annual profit, attributed to a sharp decline in metal prices.
In the same month, Kumba Iron Ore revealed plans to cut about 490 jobs due to challenges transporting iron ore to ports, primarily caused by inefficiencies in Transnet’s rail operations.
A few months later, Impala Platinum considered cutting up to 3,900 jobs across its Rustenburg, Marula, and Bafokeng operations.
The company said its decision was driven by declining metal prices and operational challenges.
In September 2024, Seriti Resources announced plans to reduce its workforce by approximately 1,200 positions at the Middelburg and Klipspruit South-East mines.
The company also cited unsustainable commercial performance and persistent challenges with Transnet’s rail services as primary reasons for the layoffs.
eNCA reported that, in the second quarter of 2024, the South African mining sector shed nearly 7,000 jobs, bringing total employment in the industry to approximately 472,000.
The reductions were mainly due to increased production costs, lower platinum group metal (PGM) prices, and logistical challenges.
However, the Minerals Council noted that mining employee earnings grew by R30 billion between 2021 and 2024. In 2024, the mining industry paid its workforce R195 billion in 2024 compared to R165 billion in 2021.
“The industry’s multiplier effect is estimated to be 10 other employment opportunities created for every one employee in the mining industry,” the council said.
Despite the sector’s impressive performance in the face of adversity, mining’s contribution to the country’s economy, as measured by the gross domestic product, fell to 6% from 7.6% in 2021.
In addition, corporate tax from the sector, which flows directly into government coffers, has fallen to R44 billion in 2024 from R81 billion in 2021.
South Africa’s latest tax statistics for the 2023/24 fiscal year saw a sharp decline in Company Income Tax (CIT) revenue, particularly due to less-than-expected revenue from the mining sector.
“To ensure the future and sustainability of the South African mining industry, it must have a stable, predictable and investor-friendly regulatory environment,” the council said.
In addition, the sector requires “a sound operating environment, including reliable and functional rail and port logistics, uninterrupted electricity supply at globally competitive prices, and certainty around water supply”.
“A transparent and modern cadastre mining system to manage mineral rights is essential to encourage investments in exploration, mine development and mining operations, which will all contribute towards increasing employment opportunities in the industry.”
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