Mining must be a national priority in South Africa’s budget strategy

The CEO of the Minerals Council South Africa, Mzila Mthenjane, has urged government to recognise mining as a national economic priority following the National Budget presented by Finance Minister Enoch Godongwana.

Although mining was not directly mentioned in the Budget speech, elevated gold and platinum group metals (PGMs) prices played a significant role in strengthening the fiscus, contributing to a R21.3 billion increase in gross tax revenue. The sector once again demonstrated its importance to South Africa’s economic stability, even without formal acknowledgment.

Mining tax collections rose by 29%, largely due to higher gold and PGM prices, alongside increased chrome and manganese exports. Gold and PGMs account for about 40% of South Africa’s mining production and support approximately 262,000 jobs out of the industry’s 474,000 workforce.

The Minerals Council agrees with National Treasury that the near-term benefits of higher gold and PGM prices are positive for the fiscal outlook. However, the improvement is concentrated in a limited group of minerals and driven primarily by price gains rather than increased production.

The mining sector previously helped stabilise the economy during and immediately after the Covid-19 pandemic in 2020 and 2021. Once again, commodity strength has bolstered national revenue.

Despite mining’s substantial contribution to tax revenue and the emerging budget surplus, the industry received no direct mention in the Budget address.

“The absence of any direct mention of mining’s performance and its contribution to the fiscus, despite its significant impact on tax and the budget surplus was a missed opportunity. Mining should be a sector of national economic priority. Given the government’s continued social expenditure to avert social distress, and to deliver essential basic services and infrastructure, mining’s ability to deliver, ensure its future growth, and to leverage its employment multipliers, the sector has an important role in South Africa’s future social and economic security,” says Mthenjane.

The industry also raised concerns about electricity pricing pressures on the ferroalloys sector.

“The mining industry is disappointed that there was no mention in the Budget about reduced electricity tariffs for the ferroalloys industry, which is facing closure and job losses because of the more than 900% increase in electricity prices for industrial users since 2008, rendering the industry uncompetitive,” says Bongani Motsa, Acting Chief Economist at the Minerals Council.

Encouragingly, the increased allocation of R21.9 billion to five major infrastructure projects has been welcomed. Plans include restoring iron ore railway capacity to 77 million tonnes and coal rail lines to 60 million tonnes. Coal and iron ore together contribute another 40% of mining production and nearly 121,000 direct jobs.

Public-sector investment is set to accelerate in 2025/26, with R1.07 trillion earmarked over the medium term. Of this, 54.1% (R577.4 billion) will be delivered by state-owned companies and public entities.

Spending increases include energy infrastructure (up 17% to R59.2 billion), water and sanitation (up 29% to R62.7 billion), and transport and logistics (up 19% to R130.7 billion), underscoring a strong near-term focus on industries critical to economic growth and mining performance.

Mineral royalties are projected to rise to R11.8 billion, compared to R10.6 billion in the previous year, while stronger corporate profitability has lifted dividend tax collections. Finance Minister Godongwana noted a growing primary budget surplus, improved revenue collection, and a projected peak in the debt-to-GDP ratio — positive signals for investor confidence and credit ratings.

However, Mthenjane emphasised that sustained fiscal gains require production growth and exploration incentives.

“With the current outlook for mining volumes to continue contracting, we’d like to see incentives for mining in future budgets that encourage exploration as well as assistance to sectors that are under distress such as ferrochrome and diamonds to increase production and to sustain and grow jobs in longer term,” says Mthenjane.

“These outcomes underline the extent to which it is essential to accelerate the structural reforms we have seen to date and pragmatic policy reforms with regards to mineral resources development, reinforcing the importance of enabling sustained growth and job creation through increased production in the sector if such fiscal gains are to become more regular and reliable rather than cyclical,” says Motsa.

Mining remains central to South Africa’s social and economic security. While elevated gold and PGM prices have strengthened the fiscal position in the short term, industry leaders argue that sustained growth, infrastructure efficiency, and supportive policy reform will determine whether these gains become structural rather than cyclical.