The possible impact of the proposed carbon tax on the mining industry

Abstract

National Treasury is proposing that the carbon tax be implemented on 1 January 2015. With the rise in electricity costs and this additional carbon tax, the gold mining industry will be under a lot of pressure.

The objective of this study is to compare the proposed South African carbon tax to the carbon tax implemented in Australia and to determine the potential impact on gold mining companies in terms of cost.

The research was in the form of a case study. One of South Africa’s leading mining houses was used to demonstrate the possible effects that the carbon tax may have.

It was found that compared to Australia, South Africa’s carbon tax is much more lenient with a rate much lower than Australia’s as well as higher tax-free thresholds. It also found that based on 2010 figures it will cost AngloGold approximately R70 million. If this be the case some of AngloGold’s’ mines which are already breaking even will go past the breaking line into making losses. This could result in mine closures as well as major job losses.

It is recommended that government and mining houses work together towards a mutual agreement, one that will benefit both mining and government and in the end the South African economy.