South Africa's mining sector faces costs of between 900 million and 1.8 billion South African rand per year as a result of new carbon tax legislation, but this figure may increase tenfold if electricity costs are transferred to customers and tax concessions are withdrawn when the second phase of the Carbon Tax Act takes effect in 2023, according to the Minerals Council South Africa.
The council, which represents almost all mining companies in South Africa including Anglo American PLC, Impala Platinum Holdings Ltd., AngloGold Ashanti Ltd. and Sibanye Gold Ltd., said in a report released on Sept. 9 that it was not clear whether the mining sector would continue to receive any tax concessions once the second phase of the legislation came into effect on January 2023. This could see tax costs for the sector increase to 10.2 billion rand, including costs fed through from the electricity sector to its customers.
The first phase of the tax, which came into force June 1 and runs to December 2022, applies only to scope one emissions, such as the mining sector. The South African Treasury will use this phase to evaluate the tax regulations before the start of the second stage.
"In the absence of policy certainty from the National Treasury and if the allowances granted in phase 1 are removed, the potential carbon tax liability on scope 1 emissions for the mining sector would rise to 10.2 billion rand per annum, 75 million tonnes of global greenhouse gas emissions multiplied by the carbon tax rate of 137 rand per tonne," the council said.
It points out that the mining companies are not able to pass on the carbon tax to final consumers so the costs are absorbed by the companies.
Overall, the council's analysis found that the imposition of the carbon tax would result in about 13,000 net job losses and indirect job losses in phase 1, and annual declines of 6,000 jobs a year in phase 2, as well as losses of 4 billion rand in output and 2.2 billion rand in investment in the mining sector.
In August, the council distributed a survey to gather some responses on the new tax.
"Across the 18 mining companies that responded to the survey, the carbon tax is estimated to cost as much as 517 million rand a year in phase 1 of the implementation of the tax," the council said. "In the absence of the offsets allowed in phase 1, the carbon tax liability for these 18 companies is estimated to increase to 5.5 billion rand for each year of phase 2."
South Africa is the first African country to introduce a carbon tax, and one of 57 globally to have done so.
Reaction to the regulations have been mixed, with the African Climate Reality Project saying in June that it believed the carbon price should be between 550 rand per tonne to 1,100 rand per tonne to have a real impact. Meanwhile, trade federation group Congress of South African Trade Unions commended the government on its efforts to reduce carbon emissions, but warned of the "fragile state" of the mining sector, which had shed over 70,000 jobs in the past two years.
