Photo by: Creamer Media
With various commodity prices taking a nosedive over the past year, windfall tax gains from high commodity prices over the preceding two years have come to an end, resulting in a sharp fall in mining tax revenue, National Treasury has said.
In the 2024 Budget Review released on February 21, it was revealed that, for the first ten months of the 2023/24 fiscal year, provisional corporate tax collections from the mining sector fell by R39.2-billion, or 50.4%, year-on-year.
This significant decline was attributed primarily to lower commodity prices and weaker global growth. However, local issues such as increased power cuts and operational problems at South Africa’s ports, have also weighed heavily on the sector. These challenges have resulted in reduced export capability, while safety stoppages, strikes and crime have driven operational costs up.
National Treasury expects that these domestic constraints will continue to exert pressure on the mining sector in the year ahead.
Although Finance Minister Enoch Godongwana said he expected commodity prices to stabilise over the next 12 months, he projected that corporate profitability in the mining sector would remain weak in the 2024/25 fiscal year.
Mining was not alone in delivering decreased tax revenue over the past year. Collections from the manufacturing sector also contracted, while the finance sector registered only marginal growth.
Following robust growth over the two prior years, import value-added tax (VAT) and customs duties collections slowed considerably. As such, Godongwana revealed that VAT collections for the 2023/24 fiscal year had been revised down by R26.1-billion compared with 2023 Budget expectations.
Overall, National Treasury said that gross value added in the mining sector contracted by 1.6% in the first three quarters of last year, compared with the same period in 2022. Mining sales declined by 14.9% in response to weaker global demand.