FOOD FOR THOUGHT

The Minerals Council South Africa has welcomed the Government’s continued resolve for fiscal consolidation enabled by budget overruns, its doubling of capital expenditure, and its highly conditional financial support of key state-owned entities that are constraining economic growth.

There was clear recognition in the Medium-Term Budget Policy Speech delivered by Finance Minister Enoch Godongwana on 25 October of the extensive damage caused to state-owned entities during years of corruption and mismanagement, and which are now having severe negative consequences for the entire economy. He also announced progress in designing a framework for the evaluation of the continued existence of state-owned enterprises.

Strict conditions would apply to the future funding provided to Transnet, Eskom, Denel and other state-owned entities, a decision strongly endorsed by the Minerals Council, which  noted the enormous amounts of money injected into government companies with very little to show for it.

The gross tax revenue overrun for the 2022/23 financial year was revised upward by R83.5 billion, with the financial, manufacturing and mining sector royalties providing improved corporate income tax.

However, the Minerals Council remains concerned about Richards Bay, which is a major bottleneck for exports of chrome, ferrochrome and magnetite along with other exported and imported products. Transnet is lagging behind rail delivery targets for bulk minerals. The Minerals Council estimates an opportunity cost of R50 billion for the industry this year when actual deliveries are measured against target. In 2021, the industry lost R35 billion using the same metric.

The Minerals Council is disappointed that there is still no firm government decision to increase private-sector access to Transnet’s rail and port infrastructure, particularly on the bulk mineral export corridors, outside the limited access the Government has already earmarked. Private sector participation in rail and port infrastructure is key to unlocking an estimated R151 billion of mineral exports.

Government is determined to increase carbon taxes steeply after 2023, as announced earlier. However, a paper on tax-free allocations to be published in 2023 is eagerly awaited, as mining, which is a low carbon emitter, will simply experience higher tax costs without being able to cut emissions much further. Most self-generation projects will entail renewable energy sources though. Mining companies have a pipeline of 6.5GW of renewable energy projects worth more than R100 billion to reduce their reliance on Eskom’s carbon-heavy electricity supply.

Government’s strong resolve to fund increased policing and security to curb crime, is strongly supported. The mining sector suffers from the disruptions of public infrastructure theft, criminals attacking the transportation routes for exports and mining installations, as well as the prevalence of illegal mining.