The Minerals Council South Africa (MCSA) has expressed concerns following the tabling of the 2025 National Budget, which highlighted urgent fiscal measures amidst sluggish economic growth.
Finance Minister Enoch Godongwana announced significant tax hikes and fiscal adjustments aimed at stabilizing public finances, but the implications for the mining sector are profound.
The proposed budget includes a 0.5 percentage point increase in the value-added tax (VAT) from 1 May 2025, with another hike planned for April 2026, raising the VAT to 16%.
This, combined with stagnant personal income tax (PIT) brackets, translates to higher taxes for all employees, impacting disposable income and cost-of-living for mining sector workers. Employees earning R350,000 annually will see a monthly PIT increase by R380 with a 5% salary hike, or R455 with a 6% increase.
“Sustained weak GDP growth, partly due to an underperforming mining sector, hampers revenue generation needed for crucial public spending,” stated Hugo Pienaar, Chief Economist at the Minerals Council. He emphasized the necessity of inclusive GDP growth to break the cycle of tax hikes and spending cutbacks.
In 2024, mining profits declined by 1%, with corporate tax collections from the sector expected to fall by 28% year-on-year. Revenue from mining royalties is also projected to drop from R15.9 billion to R11.3 billion.
The budget’s impact extends beyond taxes. The lack of support for Transnet’s rail infrastructure, crucial for mineral exports, forces the sector to seek private funding, adding financial pressure. However, some relief comes with the refund of all eligible diesel purchases for primary sectors, including mining, starting 1 April 2025.
The global scramble for critical minerals presents a golden opportunity for the South African mining sector, but unlocking its full potential requires a stable mining policy, affordable electricity, improved infrastructure, and effective governance.
“The only way to ensure a durable improvement in South Africa’s public finances and break the sub-optimal cycle is through higher, inclusive GDP growth,” reiterated Pienaar. The 2025 Budget’s measures, while necessary, pose significant challenges and opportunities for the mining sector and the broader economy.
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