SOUTH AFRICA: GENERAL METADATA

Data documentation

General notes

The fiscal year in South Africa runs from 1 April to 31 March of the following year. Following OECD conventions, data are allocated to the starting calendar year so that data covering the period April 2005 to March 2006 are allocated to 2005.

The initial data were obtained from the National Treasury and the National Budgets (not the Provincial Budgets). For several estimates, data are taken from annual reports of companies such as Eskom, from other government organisations such as the South Africa Revenue Service SARS), and from other organisations working in the field.

Methodological note

A large part of support to fossil fuels in non-OECD countries (and in a few member countries such as Mexico) takes the form of price controls or regulations benefitting final consumers. In many cases, this occurs through the government mandating state-owned oil and gas companies to charge lower retail prices, thereby lowering the revenues these companies collect through sales of fuel. This often results in the government subsequently intervening to compensate state-owned oil and gas companies for the losses they incurred in the downstream sector due to the regulated prices, with this compensation taking many forms. Some governments choose, for example, to compensate national oil and gas companies through targeted tax concessions (e.g., VAT exemptions) or equity injections.

This inventory focusses on the direct budgetary transfers and tax expenditures that encourage the production or consumption of fossil fuels, including those benefitting national oil and gas companies. Estimates of the support directly conferred to final consumers by regulated prices are available from the International Energy Agency (IEA), which estimates these induced transfers as part of its annual "World Energy Outlook" publication. Readers are therefore advised not to add together the OECD and IEA estimates given the significant risk of overlap and double-counting this involves.

Producer Support Estimate

The fiscal regime applicable to oil, natural-gas, and mining companies in South Africa consists mostly of a corporate income tax, indirect taxes, and royalties. Additionally, oil, natural-gas, and coal-mining companies pay the indirect taxes paid by other sectors, including the regular VAT and the customs duties and import tariffs that are levied on purchased inputs.

Resident and non-resident companies are liable for corporation tax at a rate of 28 %. In addition, the government levies various withholding taxes including: on royalties paid to non-residents (at a rate of 15%), on interest payable to non-residents (at a rate of 15%), on dividends (at a rate of 15%), and on the disposal of immovable property (at a rate of 7.5% for a company). Finally, capital gains tax is payable at a rate of 22.4%from 2018.

The tenth schedule to the Income Tax Act of 1962 sets out specific provisions relating to the taxation of upstream oil and gas exploration and production. These measures include deductions for all expenditures and losses related to exploration and post exploration losses, as well as 100% of capital spend on exploration activities and 50% on post-exploration activities. Furthermore, dividends paid out of income relating to oil and gas activities are not liable to the 15% withholding tax described above.

Prior to 2010, South Africa’s oil, natural-gas, and mining companies did not have to pay royalties. The Mineral and Petroleum Resources Royalty Act (MPRRA) of 2008 imposed royalties related to extractive activities, with the rate calculated as a function of gross sales and profit (specifically, earnings before interest and tax), and varying between 0.5% and 5% (for refined resources) and between 0.5% and 7% for non-refined resources). Exemptions apply for certain small producers, but these are also applicable to operators extracting non-energy minerals. Given the size of South Africa’s total mining sector, royalty concessions such as these lack the specificity required to be characterised as support measures for the purpose of the present inventory.