Trouble for SA economy as tax-take from miners forecast to halve

THE tax take from South African mining companies was estimated to halve in 2023 at current spot prices compared to 2021 when the country collected R110bn in corporate taxes and royalties from mining firms.

This was based on data collected from 15 mining companies representing the majority of corporate tax from the mining sector, said RMB Morgan Stanley in a report today.

Total taxes and royalties this year were expected to be about R50bn of which platinum group metal companies comprised the largest contribution. Tax from profits of iron ore and coal were the next largest contributors.

If realised, this would spell trouble for South Africa’s twin deficit risks. “If our base case is right then South Africa’s twin deficits are set to keep downside pressure on the rand and upside pressure on bond yields and interest rates,” the bank’s economists said.

However, a weaker rand acts as a “circuit breaker” when commodity prices fall, said the bank, adding however that after an initial positive contribution from a weaker rand, input costs rise for imported products.

South Africa posted a current account deficit for the first time in three years in 2022 as imports increased and power shortages and logistics network constraints curbed exports.