Dark clouds gather over one of South Africa’s biggest employers

South Africa’s mining industry is one of the country’s most important sectors, but it faces mounting challenges that threaten its stability, growth, and ability to create jobs.

Mining contributes significantly to the South African economy, accounting for around 6% of the country’s nominal GDP in the first three quarters of 2024.

The sector also accounts for almost half a million South African jobs, or approximately 2.9% of the country’s total formally employed persons as of Q4 of 2024. 

In a statement made on 15 April 2025, the Minerals Council South Africa (MCSA) noted that mining production is expected to contract in the first quarter of 2025, placing pressure on the country’s real GDP. 

February’s production figures, released by Stats SA, highlight the challenges. Nine of 12 mining subcategories reported month-on-month declines, with total seasonally adjusted mining output falling by 4.4%. 

The MCSA highlighted that Nickel and platinum group metals (PGMs) were hardest hit, with output plunging by 24.6% and 18.8%, respectively. 

The February year-on-year decline stood at 9.6%, reflecting the recent downturn and a high base of comparison from 2023.

While some sub-sectors like manganese, copper, and nickel showed resilience, major industries such as PGMs and iron ore continue to drag the overall sector. 

The uncertain demand for PGMs, coupled with depressed prices, has led to cautious production strategies despite modest rand price increases for platinum, palladium, and rhodium. 

“Tariff uncertainty suggests that the major PGM producers will be in no hurry to increase production in the near term,” MCSA warned.

Iron ore production faces its own woes, primarily due to ongoing logistical challenges that are yet to be resolved. 

Although March production data is still pending, early indicators from January and February point to a significant quarterly contraction.

The repercussions are already being felt in employment. The sector shed 12,877 jobs in 2024, bringing the total workforce to 468,898, down from 481,775 in 2023. 

The losses were driven by weak PGM prices, soaring electricity costs, and ageing gold mines, which together delivered four consecutive quarters of declining employment.

“The poor start to the year for mining production comes on the back of ongoing downgrades to the global real GDP growth outlook in an environment of significant uncertainty about tariffs and global trade,” the Council said. 

It added that this emphasises the need for a business-friendly, lower-cost operating environment for mining in South Africa.

Why South African taxpayers should care 

South African taxpayers have a direct stake in the health and performance of the country’s mining industry.

MCSA explained that not only is it an important contributor to the economy, but its performance can help prevent further tax increases in the years ahead. 

According to the Council, stronger growth in the mining sector could act as a crucial catalyst for boosting government revenue and reducing the need for short-term, stop-gap tax hikes.

In the recently tabled 2025 Budget, Finance Minister Enoch Godongwana reiterated that stronger economic growth is the only sustainable path to stabilising South Africa’s public finances. 

Yet, with real GDP growth remaining sluggish and mining profitability under pressure, Treasury has had to rely on higher taxes and limited fiscal spending to plug revenue shortfalls.

The budget includes a proposed 1.0% VAT increase, phased over two years, taking the rate from 15% to 16% by April 2026—the first hike since 2018. 

Personal income tax brackets have not been adjusted for inflation, resulting in higher effective tax burdens. 

According to the MCSA, mining employees earning R350,000 a year who receive a 5% raise in 2025 will pay R380 more in tax each month. A 6% raise would mean R455 more.

These tax measures come against a backdrop of declining mining tax contributions. Corporate tax collections from the sector are expected to fall 28% year-on-year, while royalty revenues dropped from R15.9 billion to R11.3 billion. 

This reflects persistent challenges in the industry, including infrastructure constraints, policy uncertainty, and weak commodity prices.

“Sustained weak real GDP growth, in part as a result of an underperforming mining sector, means that the economy is unable to grow,” said Hugo Pienaar, chief economist at the Minerals Council. 

“This includes the inability to generate sufficient revenue to, amongst others, to finance large pro-poor expenditure.”

“The only way to break the sub-optimal cycle of tax hikes or spending cutbacks to frontline services is through higher rates of inclusive GDP growth.”

Despite concerns, the budget did include positives: expanded diesel refunds for miners, a longer carbon tax relief period, and investment in infrastructure corridors.

He argued that to prevent additional tax rises in the coming years, the full potential of mining needs to be unlocked. This would be an essential catalyst for improved government revenue.