Higher metal prices mean miners will give more desperately needed tax to state
Royalty payments are estimated to climb 70% this year for listed miners covered by Morgan Stanley, while tax payments could lift as much as 80%
SA’s platinum and iron ore producers will generate additional tax revenues for the nation’s cash-strapped government as a rally in metal prices buoys their earnings, according to Morgan Stanley.
Royalty payments are estimated to climb 70% this year for the listed mining companies covered by the bank, while tax payments could increase by as much as 80%, Morgan Stanley analysts including Christopher Nicholson said in a note. Miners such as Anglo American Platinum and Kumba Iron Ore are reaping windfall profits from higher palladium, rhodium and iron ore prices, while a weaker rand lowers their costs.
“Improved profitability should lead to a materially higher tax and royalty take from SA mines in 2019,” the Morgan Stanley analysts said. “A much needed boost for the SA fiscus.”
SA’s government is under pressure as it seeks to bail out the debt-laden Eskom. That will probably widen a fiscal shortfall, which is already forecast to be the worst in 10 years.
SA’s mining industry’s tax payments rose 16% to R22bn in 2018, while royalty payments surged 31% to R7.6bn, according to Minerals Council SA.