South Africa’s revised 2025 National Budget underscores the vital role of the mining sector in stabilising the economy and preventing future tax increases, as government revenue forecasts fall by over R60 billion due to a weaker GDP outlook and the scrapping of proposed VAT hikes. The Minerals Council South Africa warns that without stronger real GDP growth and a thriving mining industry, the country’s public finances will remain dangerously exposed to domestic and global economic shocks.

According to treasury, the projected nominal GDP growth for 2025 has been revised down to 5.8% from the earlier 6.9%, following disappointing fourth-quarter GDP results for 2024 and rising concerns over global trade tensions. This downgrade directly affects government revenue, prompting a set of countermeasures to manage the shortfall, including previously announced personal income tax increases, a rollback on zero-rated VAT items, and a modest inflation-related fuel levy hike.

While these steps aim to partially close the revenue gap left by the abandoned VAT increases, Treasury has also warned of potential tax hikes totalling over R41 billion between 2026 and 2027. The exact nature of these increases remains unclear and depends on whether the South African Revenue Service can improve tax collection efficiency.

In response, Minerals Council chief economist Hugo Pienaar stressed that unlocking the full potential of South Africa’s mining sector could be a game-changer for public finances. “The revised 2025 budget once again emphasised that in the absence of sustained higher levels of real GDP growth, South Africa’s public finances remain particularly exposed to domestic and global shocks. The latest of these is increased global trade tensions.” He highlighted that continued structural reforms under Operation Vulindlela, alongside a stable mining policy environment, are crucial to achieving this goal.

Pienaar also noted the importance of addressing infrastructure bottlenecks that hinder mining output, particularly within the rail and port logistics systems managed by Transnet. Although the government has ruled out immediate debt relief for Transnet, another state-backed debt guarantee is under consideration, in addition to the R47 billion already provided in 2023.

“The bulk mining sector relies heavily on reliable transport infrastructure. Reforms that improve Transnet’s borrowing capacity and attract private sector participation are critical,” Pienaar said.

The Minerals Council further outlined several priorities necessary for mining-led economic growth, including affordable and stable electricity supply, improved access to water, and enhanced local government service delivery. A tough stance on crime and corruption was also identified as key to fostering investor confidence and sector stability.

As the global demand for essential minerals increases, South Africa has a distinct chance to enhance its mining sector and strengthen economic stability. However, the Council contends that achieving this will depend on comprehensive policy changes, investment in infrastructure, and collaboration between the public and private sectors.