A chrome ore export tax considered in isolation is a blunt instrument, mineral and petroleum resources minister Gwede Mantashe has acknowledged, saying its introduction would have to go hand in hand with developing the country’s smelting capacity.
He stressed that a decision whether or not to impose a chrome ore export tax would be guided by inputs from other government departments and key stakeholders, including the Treasury and the department of trade, industry and competition (DTI).
The government believes that its proposed tax of 25% would encourage chrome miners to reconsider their investment plans and reroute their output towards local smelters, stimulating local beneficiation and bringing the hundreds of idle SA ferrochrome plants back online.
It considers export controls a necessary intervention to combat illegally mined chrome ore, which is thought to account for 10% of all chrome ore mined in the country each year.
In a bid to curb illegal chrome ore exports, the DTI is also proposing that chrome ore exports require permits issued by the International Trade Administration Commission (Itac).
In a written reply to a parliamentary question by ANC MP and chair of parliament’s mineral and petroleum resources committee Mikateko Mahlaule, Mantashe said, “The department notes that the chrome tax, in isolation, is considered a blunt instrument. Therefore, its introduction must be supported by complementary measures aimed at revitalising the country’s smelting capacity. These measures are expected to contribute to local beneficiation and economic opportunities, including potential spin-offs in rural mining communities.
“The department is engaged in an ongoing collaborative process with various stakeholders, including the Minerals Council SA and primary chrome producers, to support local smelting capacity. These consultations inform the coordinated approach to determine whether the tax’s implementation is warranted,” Mantashe said.
“The department is advocating for the introduction of quotas to support local beneficiation as an alternative or complementary measure. This is part of a co-ordinated strategy to strengthen local smelting capacity and promote downstream beneficiation without relying solely on an export tax,” the minister said.
SA’s chrome dominance
SA is home to about 80% of the world’s chrome, which is mainly used in the production of ferrochrome, an essential ingredient in steelmaking, and increasingly in the production of chromium batteries. Chrome is one of SA’s top mineral exports generating about R85bn in revenue in 2024 and employing in the region of 25 000 workers.
The Minerals Council is opposed to the introduction of a chrome ore export tax, which it argues could further erode the global competitiveness of SA’s chrome mining and ferrochrome sectors. The main constraint on the profitability of the sector was the high cost of electricity, which had caused many smelters to shut down.
It is for this reason that the government has taken the initiative to extend negotiated pricing agreements (NPAs) to SA’s alloy and ferrochrome industries, allowing these companies to negotiate their electricity prices in a bid to promote beneficiation.
Mining executives such as Sibanye-Stillwater CEO Richard Stewart and Valterra Platinum CEO Craig Miller have reportedly warned that a levy on chrome ore exports could weigh on export volumes, costing the fiscus much-needed revenue and resulting in job losses at chrome mines.
Minerals Council acting chief economist Bongani Motsa said recently that it risked sacrificing even more of SA chrome miners’ dwindling competitive edge.
Minerals Council data shows that the average cost of producing ferrochrome was about $119 a tonne last year in SA, compared with just $103 a tonne in China, despite SA benefiting from significantly lower feedstock and transport costs than that country.
With Jacob Webster
