Listed mining companies paid more than R130 billion in tax over the last five years, and are on target to hand over more than R60 billion in 2021.
Shareholders did even better, banking more than R176 billion in dividends since 2016 as miners benefitted from surging commodity prices and a firm grip on cost inflation.
Nearly half of the R45 billion paid in company taxes by miners in 2020 came from less than a handful of precious metals producers – Anglo Platinum, Impala Platinum and Sibanye-Stillwater, though the biggest tax haul came from Kumba Iron Ore, which accounted for nearly a quarter of the total tax paid by listed miners last year.
Trade between China and SA jumped 70.4% in US dollar terms in the first half of 2021, with iron playing a key part in this growth, according to the Global Times of China.
That improvement in trade has been a boon to the South African Revenue Service (Sars) and to shareholders.
Not all of the reported tax revenue would have gone to Sars, given that mining groups listed on the JSE operate in different tax jurisdictions. Most of the declared tax, however, would have been collected by Sars.
Strong tax revenue
According to the Minerals Council of SA, mines paid R27.2 billion in income tax last year (2019: R24.2 billion), and a further R12 billion (R8.6 billion) in royalties.
Interestingly, mine employees paid R26 billion in personal taxes in 2020, almost the same as was paid in company taxes.
According to Minerals Council chief economist Henk Langenhoven, mine product is almost the same as it was pre-Covid, the only real difference being an average 25% increase in the commodity prices most relevant to SA – coal, iron ore, gold and platinum group metals (PGMs).
The tax haul for 2021 from mining companies is likely to exceed R60 billion based on mining results posted so far for the year. This is six-fold the level of tax receipts from miners in 2016 and 2017, and shows the importance of the sector to Sars as commodity prices have come to the rescue of both the economy and the fiscus.
Several mining groups have reported blowout results in recent weeks
Earlier this month, Anglo Platinum announced a 28% increase in metal production for the first six months of the year to June, with earnings shooting up 385%.
Last week, diversified resources group Exxaro reported a 106% leap in headline earnings per share for the half year to June, powered largely by strong iron ore prices.
Also in August, Royal Bafokeng Platinum (RBPLat) announce a 322% leap in gross profit and a 163% improvement in Ebitda (earnings before interest, tax, depreciation and amortisation) for the half year to June 2021.
Shareholders took home R176 billion in dividends since 2016, and last year alone banked nearly R45 billion, a 500% increase over the R7.55 billion in aggregate dividends paid by listed miners in 2016.
Peter Major, mining director at Mergence Corporate Solutions, last week told Moneyweb that the current leg of the commodity ‘supercycle’ differs from the early 2000s in that mine managers have been far more disciplined in their spending and investment decisions. The previous leg of the cycle was characterised by some awful investment decisions that resulted in nearly $2.5 trillion in projects being written down almost to zero.
Dow Jones Commodity Index
The following chart shows the impact of precious metals producers (mostly platinum) on tax and dividend contributions.
Mining, written off as a sunset industry a few years ago, has rebounded to the delight of shareholders and tax authorities.
The tax contributions and dividends will certainly end 2021 at much higher levels than displayed in the graph below, as several miners have still to report their financial results. Slowing growth in China may put a crimp in the current commodity boom – at least for a while – though the years of judicious capex and cost control means shareholders and Sars should yet be able to count on a few more good years from the mining sector.