Predictable and well-designed tax policy will be essential in helping mining and minerals processing companies, associated investors and government act in a coordinated manner, reports tax specialists from legal firm ENS.

South Africa’s mining ecosystem needs shared solutions, especially where infrastructure gaps continue to hold back exploration activity and beneficiation investment, reports ENS tax executives Annelie Giles, Kristel van Rensburg and Ntebaleng Sekabate.

This speaks to the theme of this year’s Investing in African Mining Indaba of Stronger together: Progress through partnerships.

While Sekabate says tax rules are not the primary reason investors hesitate, she notes that policy can still act as a “sweetener” that helps South Africa stand out.

Sekabate says most barriers to attracting exploration investment relate to the wider infrastructure constraints identified in government strategies, including electricity shortages and weak rail and road networks.

These challenges are already identified in the Department of Mineral and Petroleum Resources’ strategies for exploration and critical minerals.

“Encouraging mining companies to invest directly in solving these problems, backed by targeted tax incentives, is a practical way for industry and government to work together,” says Sekabate.

In terms of energy, Van Rensburg says section 12BA and the equivalent for mining companies section 36(11)(dA) of the Income Tax Act, introduced in 2023 to allow a limited time additional 25% allowance on expenditure incurred in respect of renewable energy, showed how a simple, time-bound allowance can unlock real capital.

She notes that while this success came from the combination of the additional allowance, clear rules and alignment with energy-permitting reforms, the two-year window of the additional allowance was too short for self-build renewable projects, which generally require an 18-month construction period. She would have liked to see the additional allowance being extended to three years at least to allow projects in the process to benefit from the additional allowance.

Van Rensburg also suggests a temporary allowance that lets mining companies deduct rail-infrastructure and related costs upfront, saying the current ten-year write-off does not reflect the urgent need for reliable transport corridors.

As for regulatory certainty, Giles says this depends on early guidance from Treasury and the South African Revenue Services (SARS), with plain-language interpretation notes, worked examples and regular engagement with industry being necessary to reduce disputes.

“There are instances where SARS has departed from long- standing practice, especially concerning Value Added Tax [VAT] on exploration spend, despite policy clarity provided by VAT Regulation 446,” she notes.

Giles adds that such deviations erode trust and raise financing costs when VAT refunds are blocked.

On VAT turnaround times, Giles believes SARS should apply different timelines to low-risk and high-risk claims, suggesting a fixed period of less than a week for low-risk refunds, with automatic payment of interest for delays.

For complex claims, she proposes published timelines tied to defined verification steps, supported by a monthly dashboard showing processing times and refunds for different risk tiers, in addition to current indicators showing percentage of refunds paid.

Independent audit of such reporting, says Giles, would strengthen accountability.

With regard to incentives for exploration, Sekabate says upfront deductions are ineffective because they only become useful once a mine is producing.

She believes flow-through incentives for shareholders, capped and limited to greenfields exploration, would produce better results.

For minerals processing, Van Rensburg argues that incentives should reward performance, including efficiency, throughput and local skills development.

In all, the executives agree that time-limited incentives must include early transition rules and milestone-based grandfathering to avoid stranding emerging projects.

They also advise mining companies to prepare detailed project-level tax packs, validate VAT documents upfront and maintain current transfer-pricing files to accelerate SARS approvals.