Edward Kieswetter waves R42 billion goodbye

South Africa’s mining industry paid almost half the tax in 2024 compared to 2023, as the sector continues to struggle financially and operationally.

The Minerals Council of South Africa recently released its 2024 Facts and Figures for the country’s mining sector.

This report revealed that the industry’s turnover dropped by 9%, from R1.1 trillion in 2023 to R1 trillion in 2024.

This means the sector contributed significantly less to the country’s GDP, from 6.3% in 2023 to 6%.

In addition, the amount of company tax the industry paid fell by 49% to R43.6 billion, compared to R85.5 billion the year before.

This could spell significant trouble for the South African Revenue Service, which relies heavily on company and personal income taxes to reach its targets.

However, companies struggle to make a profit as the mining sector continues to face challenges in South Africa.

Relative to other sectors, the underperformance of the mining sector was evident in Stats SA’s gross operating surplus (GOS) figures. 

Measured in nominal terms, GOS figures provide a broad measure of profitability in the economy’s major sectors.

This data indicated that mining sector profits declined by 0.9% year-on-year in the first nine months of 2024. 

For comparison, profits in the non-mining sectors increased by 5.8% year-on-year in the same timeframe. 

“This starkly illustrates the profitability squeeze in important subsectors of the mining sector,” the Minerals Council said. 

It said this underperformance is most notable in platinum group metals (PGMs) producers.

In rand terms, the PGM basket price remained depressed, ending 5% lower in 2024 following a difficult 2023 when the basket price declined by more than 40% in dollar terms.

However, PGMs are not the only sector under pressure. The price of iron ore, for example, also spent the majority of last year under pressure.

The Minerals Council said the iron ore price was under pressure for most of the year amid concerns that the Chinese authorities were not doing enough to support growth in the commodity-hungry country. 

The iron ore price rallied briefly in October after more aggressive Chinese stimulus measures.

However, concerns about the global trade and GDP growth implications of a Trump presidency undermined the iron ore price once again later in the year.

One silver lining for the mining industry has been gold, as the precious metal continues to outperform the rest of the sector.

The dollar gold price ended the year more than 27% higher compared to 2023. In late October, gold reached an all-time record high in nominal terms of just below $2,800/oz. 

“Gold was supported by sustained strong global central bank buying and perhaps also some risk hedging before the US elections in November,” the council explained. 

“The yellow metal retreated from these lofty levels later in the year when a stronger US dollar weighed on the price.”

“The firm dollar also pushed the rand weaker, which shielded the local currency price of gold.”

Despite price pressures, South Africa’s mining industry is also struggling from an operations perspective, as output from the sector remains below pre-Covid-19 levels.

Data from Stats SA indicated that total real mining production declined by a stark 7.8% in 2022. Output barely budged from this depressed level in 2023, increasing by just 0.1%. 

While production improved in 2024, with an expected increase of 0.7%, the council said it remained “anaemic”.

“The muted recovery is emphasised by the fact that the level of real mining output in December 2024 was still somewhat below the pre-Covid level at the end of 2019,” it said. 

“Given the absence of mining load-curtailment since March 2024, this is a disappointing outcome.” 

“However, it does highlight the myriad other factors still constraining the performance of the mining sector.”