South Africa's mining sector seeks assurance in the wake of the new Carbon Tax

David French, Director of Tax Consulting at Mazars, has offered his take on the newly instated Carbon Tax in South Africa, claiming that the repercussions of the new bill will be evident for the government to see in due time. His comments come amid increased pressure on the government from the minerals council.

The Carbon Tax Bill was enacted earlier this year, with the dual purpose of boosting tax revenues for the government and promoting sustainability as a key priority for businesses in South Africa. Although the intentions behind the new tax appear admirable, it has come under considerable criticism from some experts. 

A sustained period of sluggish economic growth has brought South Africa to a period where enabling domestic business and drawing foreign investment are crucial, which is evident from the government’s reiteration of these priorities. Experts fear that the carbon tax interferes with South Africa’s economic recovery.

Not only is the tax expected to increase operational costs for businesses in most industries, it is expected to have a particularly strong impact on the mining sector, which traditionally has a substantial carbon footprint. Incidentally, the mining sector is a primary contributor to South Africa’s GDP.

There has been significant backlash from the mining sector as a result, with stakeholders from the industry arguing that the new tax will have adverse long-term consequences. The Minerals Council in particular has been vocal in demanding more information from the government. 

“The industry recognises the importance of the battle against climate change. However, our view is that the carbon tax will not have any positive effect in this regard, yet, by raising costs, will have serious impacts on the viability of many mines that are already struggling to survive,” said the council in a statement.

David French of Mazars, who has previously warned of the detrimental impact that the tax could have, has added that these consequences will manifest themselves soon enough. He recommends that businesses begin to examine mitigation strategies.

“the one certainty is that businesses can expect substantially higher costs of doing business. With this in mind, it is crucial to start looking at sustainability from a price perspective, and involving a tax team early on in the process,” said French.