(Bloomberg) -- South Africa's platinum and iron ore producers will generate additional tax revenues for the nation's cash-strapped government as a rally in metal prices buoys their earnings, according to Morgan Stanley.
Royalty payments are estimated to climb 70% this year for the listed mining companies covered by the bank, while tax payments could increase by as much as 80%, Morgan Stanley analysts including Christopher Nicholson said in a note. Miners such as Anglo American Platinum Ltd. and Kumba Iron Ore Ltd. are reaping windfall profits from higher palladium, rhodium and iron ore prices, while a weaker rand lowers their costs.
“Improved profitability should lead to a materially higher tax and royalty take from South African mines in 2019,” the Morgan Stanley analysts said. “A much needed boost for the South African fiscus.”
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South Africa's government is under pressure as it seeks to bail out the debt-laden state power utility Eskom Holdings SOC Ltd. That will probably widen a fiscal shortfall, which is already forecast to be the worst in 10 years.
South Africa's mining industry's tax payments rose 16% to 22 billion rand ($1.5 billion) in 2018, while royalty payments surged 31% to 7.6 billion rand, according to Minerals Council South Africa.
To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Dylan Griffiths
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