In a statement shared with Bizcommunity, Minerals Council South Africa has responded positively to Minister of Finance Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS), presented as the first fiscal policy framework since the establishment of the GNU in June 2024. The MTBPS lays out a cautiously optimistic economic outlook, projecting an average 1.8% real GDP growth between 2025 and 2027, a slight improvement compared to February’s forecast.
Minister Godongwana remained firm on the Treasury stance regarding no further Transnet bailouts. Source: x.com
This renewed economic optimism stems largely from improved power supply, regulatory reform, and stronger investor confidence following the GNU’s formation.
However, the Minerals Council has cautioned that, while a stronger economy is encouraging, sustained growth above 2% is essential for the mining sector’s development.
To achieve this, structural reforms must be accelerated to address longstanding obstacles such as infrastructure inefficiencies, crime, and regulatory hurdles.
Gondongwana pointed to underperformance in South Africa’s logistics infrastructure, notably at Transnet, as a major throttle on mining sector’s output despite the improved energy supply.
Mining production remains below pre-pandemic levels, attributed to poor rail and port performance.
The infrastructure problem
Deputy Minister of Finance David Masondo acknowledged these challenges when he addressed the metals and engineering industries at a ministerial conference in September.
Investment in infrastructure is crucial to overcoming bottlenecks in our network industries and setting a foundation for long-term growth.
Masondo’s comments pointed to the MTBPS stance that economic growth cannot rely on fiscal measures alone.
He noted the importance of Operation Vulindlela and ongoing structural reforms as pivotal in promoting competitiveness across sectors such as rail, logistics, and energy – all essential to the mining industry.
Godongwana confirmed that, while Transnet will not receive additional financial support beyond the R47bn guarantee facility issued in 2023, private sector participation remains a top priority.
Transnet is expected to pursue joint ventures, alternative funding, and disposal of non-core assets to manage its budget constraints.
Backlog risk
“While we fully support these sentiments and appreciate the country’s fiscal straight jacket, it remains unclear how Transnet will fund a significant maintenance backlog without a degree of balance sheet recapitalisation that is tied to strict conditions,” argues Minerals Council chief economist Hugo Pienaar.
“This will not only boost growth, investment and jobs in the bulk mining industry, which is responsible for almost 50% of total mining production and which provided export earnings of more than R260bn in 2023, but it will also support non-mining sectors such as agriculture and manufacturing.”
Looming tariff increases
Eskom’s application for a 36% electricity price increase in 2025 presents an additional risk, with the National Treasury projecting a lower inflation rate for electricity of 12.3%.
“Exorbitant electricity costs could severely impact inflation and economic growth, adding further uncertainty for the mining industry,” Pienaar cautioned.
Nevertheless, the MTBPS outlines strategies to enhance public sector infrastructure investment.
These include earmarking infrastructure bonds, scaling up private-sector participation, and ensuring government borrowing for infrastructure development is prioritised.
The Treasury has held firm that these moves are intended to position 2025 as a year of growth, with a focus on overcoming logistical hurdles and enhancing investor confidence through policy stability.
Debt management
South Africa’s public debt remains a concern, projected to peak at 75.5% of GDP by 2025/26.
While debt stabilisation remains a Treasury priority, the emphasis is on debt reduction as a means to foster resilience in the mining and metals sectors, with lower debt freeing up resources for infrastructure critical to these industries.
The Minerals Council’s cautious optimism in response to the MTBPS suggests alignment with government objectives for a more competitive mining sector.
“The vision of an ‘infrastructure era’ for South Africa hinges on swift, committed action across sectors,” says Pienaar.
“It is vital that government, industry, and private investors collaborate fully to realise this potential.”
