The recently announced national budget by Finance Minister Enoch Godongwana has raised concerns within South Africa’s mining sector, with the Minerals Council South Africa warning that employees will face several financial pressures.
Among the key impacts are higher personal income tax (PIT) payments, cost-of-living challenges, and limited prospects for further interest rate cuts. Employees earning a taxable income of R350,000 in 2024, for instance, will see their PIT increase by approximately R380 per month if they receive a 5% salary hike in 2025. A 6% salary increase would result in an additional tax burden of R455 per month.
Adding to the financial strain, the planned 0.5 percentage point increase in value-added tax (VAT) from 1 May 2025 could push overall consumer inflation up by 0.2 percentage points. An additional 0.5 percentage point VAT increase is set for April 2026, which will further drive inflation. To mitigate the effects, Treasury plans to expand the list of VAT zero-rated food items, including tinned vegetables and certain types of edible offal. However, excise duties on alcohol and tobacco will see above-inflation hikes, increasing consumer costs.
On the positive side, the budget will maintain fuel and Road Accident Fund levies at current levels, helping to ease fuel price pressures. However, with inflationary risks increasing, partly due to VAT changes and global economic uncertainties, the South African Reserve Bank (SARB) may find it difficult to reduce interest rates further. The SARB’s next interest rate decision is scheduled for March 20.
The Minerals Council noted that the tax measures in the 2025 budget come at a time when the profitability of the mining sector has been under strain. According to Statistics South Africa, the gross operating surplus (GOS)—a broad measure of profitability—showed that mining profits declined for the second consecutive year in 2024. After plummeting by 18.5% in 2023, mining profits dropped by a further 1% in 2024.
Provisional tax data in the budget also revealed that corporate tax collections from the mining industry are expected to shrink by 28% in the 2024/25 financial year. Revenue from mining and petroleum royalties is projected to fall from R15.9 billion in 2023/24 to R11.3 billion in 2024/25—a significant shortfall from Treasury’s initial estimate of R16 billion.
Hugo Pienaar, chief economist at the Minerals Council, warned that sluggish GDP growth, partly due to the mining sector’s underperformance, is limiting government’s ability to generate sufficient revenue. This, in turn, is making it harder to finance public services, including pro-poor expenditure and an expanding public sector wage bill.
Despite concerns over tax increases, the Minerals Council expressed support for Treasury’s decision to allocate additional funds to the South African Revenue Service (SARS) to improve tax efficiency and broaden the tax base. However, government debt remains a pressing issue. Gross public debt is now projected to peak at 76.1% of GDP in 2025/26, up from Treasury’s previous forecast of 75.5% in October 2024.
On a more positive note, the government has outlined plans to invest R1.29 trillion in public infrastructure over the medium-term expenditure framework (MTEF) from 2025/26 to 2027/28. However, the Treasury has projected a decline in infrastructure spending growth in the latter years of the MTEF, which raises concerns about long-term economic recovery.
A major issue for the mining sector is the absence of direct budget allocations for Transnet’s capital expenditure needs. Without government funding, Transnet will have to seek private investment or contributions from the mining industry to upgrade rail infrastructure for mineral exports.
Through the Budget Facility for Infrastructure (BFI), Treasury has allocated R1.3 billion to expand the land-side container terminal at Cape Town port and R2 billion for improvements to the freight rail corridor between Gauteng and the Eastern Cape, benefiting agricultural and vehicle exports. However, the mining sector hopes for further infrastructure investment in the future.
Relief for the Mining Industry
Despite the financial pressures, the budget does provide some relief for the mining sector. From 1 April 2025, mining companies will be eligible for a full refund on all qualifying diesel purchases declared to SARS, up from the current 80% refund cap. Additionally, the industry has welcomed the five-year extension—until 31 December 2030—of the commitment to electricity price neutrality, preventing Eskom from including carbon tax costs in its tariffs.
The government has also proposed increasing the carbon offset allowance by five percentage points from 1 January 2026, offering further relief for companies in the sector.
To prevent further tax increases, the Minerals Council emphasised the need to maximise the potential of South Africa’s mining sector. The global race to secure critical minerals presents a valuable opportunity for the country to boost economic growth and government revenue.
However, realising this potential will require a stable and predictable mining policy framework, reliable and affordable electricity supply, upgraded rail and port infrastructure, improved access to water resources, greater efficiency in local government, and stronger measures against crime and corruption.
