GOVERNMENT revenues generated from mineral and petroleum royalties have fallen by more than a third and will remain weak for at least two more years, Treasury says in the 2016 budget.
Treasury revised its income from royalties to R3.46bn for the 2015-16 financial year — a R2.75bn drop from the amount for which it had budgeted.
While the figures are not substantial when compared with tax revenue of R1.07-trillion collected this year, they give an important indication of how difficult the local and international environment is for mining companies operating in SA.
In the previous financial year, income from royalty payments fell R181m short of budget, coming in at R5.45bn.
"Significant fluctuations in revenues from mineral royalties are the result of a combination of changing commodity prices and the profitability of mining companies," Treasury said on Wednesday.
Income from royalty charges has been volatile since the introduction in 2010 of the additional tax on mining companies. The percentage increase of 58% in the 2011/12 financial year has not been matched since, with declines every year except the 28% increase in 2013/14.
This year, royalty revenue fell 36.6% compared with last year, extending the 15% decline in the previous year.
The outlook for the royalty revenue stream over the next few years was subdued, Treasury said. For the 2016/17 financial year, Treasury pegged royalty income at R4.43bn and R4.8bn the year after, before lifting its forecast to R5.2bn for the 2018/19 financial year.
Ahead of the budget, the Chamber of Mines, which represents 90% of SA’s mining industry by value, had asked Treasury for "royalty relief" for loss-making mining companies. This was to save jobs and keep mines running.
Finance Minister Pravin Gordhan made little mention of mining, let alone mining taxes, in his budget speech.
Chamber CEO Roger Baxter said the possible deferral of royalty payments for struggling mining companies had been discussed with the Department of Mineral Resources and would be raised in further talks with Treasury on the matter.
"They are not ignoring us. We just need to engage further," Mr Baxter said on Wednesday when asked about Mr Gordhan and Treasury making no mention of their proposal.
Since 2012, gold, platinum and coal companies had cut 47,000 jobs, Mr Baxter said earlier this month. Mineral Resources Minister Mosebenzi Zwane said another 32,000 jobs were at risk.
"Given the parlous state of many loss-making mining companies, and given the discussions in the industry-agreed jobs declaration, the chamber believes that Treasury should consider giving royalty relief to loss-making mines, just to help them survive," the chamber said.
"This would be revenue neutral as the companies would repay the royalty at a later stage when commodity markets improve. This would help many loss-making companies survive the current crisis, with benefits for sustaining the majority of jobs and economic development benefits."
Royalties have been in force since March 2010 and are based on formulas according to whether the mineral sold is in its raw form or has had value added to it through beneficiation. The top end of the charge on earnings before interest and tax comes in at 7% and the bottom end is at 0.5%.
Treasury proposed that mining companies investing in mining community infrastructure such as housing, schools and clinics be given tax relief similar to the deductions companies can make on capital expenditure directly related to employees.
"Government proposes that the same relief be provided for community-related expenditure agreed to in a community-endorsed social and labour plan. The Department of Mineral Resources will improve monitoring and oversight of such plans," Treasury said.
Mr Baxter said: "There is no doubt that the equalisation of the tax treatment — the tax deduction — of investment in social and labour plans in labour spending areas would materially help the industry.
"This is something that we have engaged Treasury on and the relief is welcomed."
Treasury on Wednesday outlined its expectations of a range of key minerals exported from SA.
It forecast a dismal outlook for the platinum price, falling to an average $859/oz for this calendar year compared with $1,056/oz the year before, and then increasing marginally to $865/oz for the next two years.
It expects the average gold price to dip this year to $1,075/oz from $1,161/oz last year, before inching up to average $1,081/oz for the following two years.
Iron ore is seen at an average of $38/tonne this year before falling to $36/tonne for the next two years, a fraction of the $97/tonne achieved in 2014.
Coal prices are forecast to fall to an average of $47/tonne this year and $46/tonne for the next couple of years, continuing a downward trend since 2014’s $72/tonne in 2014 and $57/tonne last year.
HARSH TIMES: The Chamber of Mines has requested relief on royalty payments for struggling mines. Picture: THINKSTOCK
GOVERNMENT revenues generated from mineral and petroleum royalties have fallen by more than a third and will remain weak for at least two more years, Treasury says in the 2016 budget.
Treasury revised its income from royalties to R3.46bn for the 2015-16 financial year — a R2.75bn drop from the amount for which it had budgeted.
While the figures are not substantial when compared with tax revenue of R1.07-trillion collected this year, they give an important indication of how difficult the local and international environment is for mining companies operating in SA.
In the previous financial year, income from royalty payments fell R181m short of budget, coming in at R5.45bn.
"Significant fluctuations in revenues from mineral royalties are the result of a combination of changing commodity prices and the profitability of mining companies," Treasury said on Wednesday.
Income from royalty charges has been volatile since the introduction in 2010 of the additional tax on mining companies. The percentage increase of 58% in the 2011/12 financial year has not been matched since, with declines every year except the 28% increase in 2013/14.
This year, royalty revenue fell 36.6% compared with last year, extending the 15% decline in the previous year.
The outlook for the royalty revenue stream over the next few years was subdued, Treasury said. For the 2016/17 financial year, Treasury pegged royalty income at R4.43bn and R4.8bn the year after, before lifting its forecast to R5.2bn for the 2018/19 financial year.
Ahead of the budget, the Chamber of Mines, which represents 90% of SA’s mining industry by value, had asked Treasury for "royalty relief" for loss-making mining companies. This was to save jobs and keep mines running.
Finance Minister Pravin Gordhan made little mention of mining, let alone mining taxes, in his budget speech.
Chamber CEO Roger Baxter said the possible deferral of royalty payments for struggling mining companies had been discussed with the Department of Mineral Resources and would be raised in further talks with Treasury on the matter.
"They are not ignoring us. We just need to engage further," Mr Baxter said on Wednesday when asked about Mr Gordhan and Treasury making no mention of their proposal.
Since 2012, gold, platinum and coal companies had cut 47,000 jobs, Mr Baxter said earlier this month. Mineral Resources Minister Mosebenzi Zwane said another 32,000 jobs were at risk.
"Given the parlous state of many loss-making mining companies, and given the discussions in the industry-agreed jobs declaration, the chamber believes that Treasury should consider giving royalty relief to loss-making mines, just to help them survive," the chamber said.
"This would be revenue neutral as the companies would repay the royalty at a later stage when commodity markets improve. This would help many loss-making companies survive the current crisis, with benefits for sustaining the majority of jobs and economic development benefits."
Royalties have been in force since March 2010 and are based on formulas according to whether the mineral sold is in its raw form or has had value added to it through beneficiation. The top end of the charge on earnings before interest and tax comes in at 7% and the bottom end is at 0.5%.
Treasury proposed that mining companies investing in mining community infrastructure such as housing, schools and clinics be given tax relief similar to the deductions companies can make on capital expenditure directly related to employees.
"Government proposes that the same relief be provided for community-related expenditure agreed to in a community-endorsed social and labour plan. The Department of Mineral Resources will improve monitoring and oversight of such plans," Treasury said.
Mr Baxter said: "There is no doubt that the equalisation of the tax treatment — the tax deduction — of investment in social and labour plans in labour spending areas would materially help the industry.
"This is something that we have engaged Treasury on and the relief is welcomed."
Treasury on Wednesday outlined its expectations of a range of key minerals exported from SA.
It forecast a dismal outlook for the platinum price, falling to an average $859/oz for this calendar year compared with $1,056/oz the year before, and then increasing marginally to $865/oz for the next two years.
It expects the average gold price to dip this year to $1,075/oz from $1,161/oz last year, before inching up to average $1,081/oz for the following two years.
Iron ore is seen at an average of $38/tonne this year before falling to $36/tonne for the next two years, a fraction of the $97/tonne achieved in 2014.
Coal prices are forecast to fall to an average of $47/tonne this year and $46/tonne for the next couple of years, continuing a downward trend since 2014’s $72/tonne in 2014 and $57/tonne last year.
Change: -0.47%
Change: -0.57%
Change: -1.76%
Change: -0.34%
Change: 0.02%
Data supplied by Profile Data
Change: -1.49%
Change: 0.08%
Change: -0.47%
Change: 0.00%
Change: -0.04%
Data supplied by Profile Data
Change: -0.34%
Change: 0.03%
Change: -0.10%
Change: -0.22%
Change: -0.81%
Data supplied by Profile Data
Change: -0.28%
Change: -1.15%
Change: -0.07%
Change: -1.21%
Change: -0.22%
Data supplied by Profile Data