Cape Town: Government remains committed to ensuring that South Africa continues to benefit equitably from its mineral wealth, while reaffirming that there are no current plans to reform the country’s mineral royalty regime.
According to South African Government News Agency, President Cyril Ramaphosa addressed concerns in the National Assembly regarding the country’s ability to fully capture the potential fiscal benefits of its mineral resources amid a global surge in demand for metals and minerals critical to the renewable energy transition. He emphasized the necessity for companies extracting mineral resources in South Africa to pay a mineral royalty, citing the finite nature of these resources.
While reviewing existing policies against national priorities is beneficial, President Ramaphosa stated there is currently no intention to reform the mineral royalty regime. He discussed the concept of resource rent taxes, which ensure companies pay a larger share of their profits to the government during periods of high profitability. South Africa’s current mineral royalty regime incorporates principles of resource rent taxes by applying a royalty rate to the sales value of minerals, determined by profitability and the refinement status of the mineral.
The President highlighted statistics from the South African Revenue Service, noting that mineral royalties doubled from R14.2 billion to R28.5 billion between 2020/21 and 2021/22 due to the commodity boom, before decreasing to nearly R16 billion in 2023/24 as company profitability declined.
In addition to mineral royalties, mining companies contribute to national revenue through corporate income tax, capital gains tax, VAT, and employees’ pay-as-you-earn tax contributions. In the last financial year, the mining industry accounted for 14% of all corporate taxes in South Africa.
President Ramaphosa also mentioned the adoption of a Critical Minerals Strategy by the Cabinet, focusing on maximizing the country’s potential in the global market for critical minerals essential for the just energy transition. The strategy aims to ensure South Africa benefits more from its mineral wealth through beneficiation, localization, and employment opportunities within the industry.