Cadiz Corporate Solutions mining policy consultant Peter Major noted at the Steel and Engineering Industries Federation of Southern Africa’s post-Budget speech industry briefing that there was little mention of the mining industry during Finance Minister Pravin Gordhan’s 2016 Budget speech last month, indicating that government was “distancing itself” from the industry.

He highlighted that, out of the R1.7-trillion in taxes collected last year, mining royalties accounted for R3.5-billion, or 0.3%, with the National Treasury’s forecast for such royalties being R4.4-billion, R4.8-billion and R5.3-billion in 2016, 2017 and 2018 respectively.

However, Gordhan’s two-year price forecasts were too negative, according to Major – with coal being predicted to sell at about $47/t, iron-ore at $37/t, platinum at $860/oz and gold at $1 080/oz. Major questioned how the National Treasury could expect to collect more royalties with such low commodity price predictions.

He was also critical of the absence of any reference to job creation in the speech, asserting that government should be more focused on job creation and promote a favourable environment for jobs to flourish.

Meanwhile, he pointed out that, since President Jacob Zuma had been elected into office in 2009, South Africa had increased its debt by another R1-trillion, at an interest rate of R170-billion a year. “There is no intention, let alone a plan, to pay any of that debt back.”

According to Major, Gordhan made “a lot of optimistic assumptions and promises” about improving operational efficiency and cost cutting while improving the country’s gross domestic product and revenue stream. These cost cuts and revenue gains would, however, be realised only in future years and were unlikely to prevent South Africa from being downgraded to ‘junk’ status by ratings agencies such as Moody’s and Standard & Poor’s, he added.

“Only economic growth can save South Africa and I think government is lost as to how it can do anything to create economic growth,” he concluded.