Budget 2026 and the inequality question we still avoid

When President Cyril Ramaphosa aligned himself with Joseph Stiglitz’s G20 inequality framing, the message was clear: extreme inequality is not only unjust, but also economically self-defeating. Concentrated wealth suppresses demand, weakens institutions and undermines sustainable growth.

Yet Budget 2026 has left one of South Africa’s deepest inequality drivers largely untouched: the fiscal architecture governing mineral wealth.

The government will correctly point out that nearly 60% of the R1.95-trillion main budget funds the “social wage”; education, healthcare and social grants. In a deeply unequal society, that commitment matters. It stabilises households, it reduces extreme poverty and it keeps millions afloat, albeit barely.

But there is a difference between redistribution and reinvestment.

The “social wage” manages the consequences of inequality, but it does not transform the causes, nor does it restructure the system that produces inequality. It also does not convert depleted mineral wealth into durable productive capacity in mining regions. It does not repair acidified rivers in Mpumalanga. It does not diversify mono-economies in Rustenburg. It does not protect municipalities from collapse when commodity prices fall or companies restructure offshore.

In short, South Africa intervenes only after inequality has already been created. It redistributes the fallout but leaves the engine of extraction untouched. Until mineral rents are governed at their source, inequality will not merely persist, it will be reproduced.

Mining remains central to export earnings and national revenue. Budget 2026 strengthened the arteries through which minerals leave the country — rail, ports and energy — on the assumption that increased extraction will generate broader prosperity. However, South Africa’s mining history shows the opposite. The result of these trickle-down policies has not been shared prosperity, but rising inequality, fragile mining towns, and wealth that leaves the country faster than you can say “accountability”.

The state invests heavily to enable extraction; corporate profits rise with commodity cycles; revenue flows into the National Revenue Fund, and is then pooled and redistributed nationally.

What is missing is a clear rule that keeps a fair share of mining’s biggest profits in the communities and society from where the minerals are taken and turns that once-off natural wealth into lasting schools, infrastructure and economic opportunities.

The data from recent cycles are instructive. During commodity booms, mining profits surged dramatically. Yet tax contributions did not rise proportionately. Corporate restructuring, allowances and capital mobility weakened the link between profitability and public capture.

Unchanging pattern

Between 2019 and 2021, aggregated mining profits surged from R32-billion to nearly R300-billion. Yet the effective tax rate remained around 25%, and royalties stayed in single-digit billions even when profits exceeded R200-billion. A historic windfall did not trigger a higher public share. The formula held. The rent was not captured.

The pattern has not shifted. In 2024, Anglo American Platinum generated R19.8-billion in earnings before interest, taxes, depreciation and amortisation (Ebitda) and paid R3-billion in taxes and royalties while distributing R19-billion to shareholders. In 2025, under its new Valterra structure, Ebitda surged to R33-billion, 67% increase in operating profitability, yet taxes and royalties rose only modestly to R4-billion, reducing the public share of Ebitda from roughly 15% to 12%.

The public share of the profits declined, even as profitability expanded sharply. This does not imply illegality. It reveals something else: South Africa’s mining fiscal regime does not automatically escalate public benefit when margins surge. Windfalls are distributed efficiently to shareholders while the public’s share of its own wealth declines and, effectively, is never seen again.

Had South Africa applied even a modest windfall escalator during its three major commodity booms of the past three decades, it could plausibly have accumulated between R150-billion and R300-billion in additional public wealth, funds that might today be stabilising mining towns, capitalising a sovereign wealth fund, or financing a just transition.

That is more than a missed opportunity. In a country facing deep spatial inequality and municipal fragility in mining belts, it becomes a systemic risk, one that leaves communities exposed to depletion of our collective wealth, while accumulation of that same wealth continues elsewhere.

In resource economics, finite mineral wealth should be converted into other forms of capital as it is depleted. Even by the conservative standards of mainstream resource economics, the Hartwick rule, South Africa is failing to convert mineral depletion into lasting public wealth.

Yet South Africa has no sovereign wealth fund capitalised by mineral rents, no formula-based windfall escalator, and no binding, rules-based revenue share for host communities.

Instead, we have institutionalised a model that manages the fiscal proceeds of extraction without ever restructuring the power dynamics that inform who ultimately benefits.

Three reforms

If the President is serious about confronting inequality structurally, then mineral rent governance must enter the debate. Three reforms would shift the architecture without destabilising the sector.

First, windfall capture should be formula-based and automatic. When profitability exceeds a defined threshold, an escalator activates. This is not punitive taxation; it is stabilisation design. Extraordinary profits trigger extraordinary public savings. The rules are transparent. Investors know them in advance. Political discretion is removed.

Second, a mining community revenue share should be a condition of extraction, fixed, rules-based, and transparently audited. This would not fragment national equity or undermine the social wage. It would recognise that harm and depletion are spatially concentrated. Allocations should flow through conditional grants with independent audits, public dashboards and strict reporting requirements. Community benefit cannot remain discretionary or symbolic.

Third, South Africa needs a ringfenced, professionally managed sovereign wealth fund capitalised by mineral rents and windfall receipts. Its mandate should be clear: reinvest depleted natural capital into diversified productive assets, industrial capacity, renewable energy, human capital in mining regions, and stabilise revenue across cycles

The alternative is the broken development loop South Africa knows all too well:

• Minerals are extracted and exported;
• Revenue enters the fiscus;
• Funds are consumed or absorbed into general expenditure;
• Structural capacity in mining regions remains unchanged; and
• When capital moves or prices fall, communities remain, with fewer options than before.

The Springs gold rush earlier this month, where residents dug soil in desperation, was not an isolated spectacle. It was a signal. When formal extraction does not translate into durable opportunity, informal extraction emerges. When mineral wealth does not anchor local economies, inequality reproduces itself spatially and structurally, and the failure to deal with this core reality leaves spaces for criminal syndicates to exploit the desperation of communities.

This is why mining must remain central to the mainstream inequality debate.

Budget 2026 stabilises the fiscus. It improves infrastructure. It reassures investors. But it leaves intact a model in which the state facilitates extraction without a parallel architecture to convert extraordinary rents into extraordinary public value.

If South Africa wishes to align its fiscal practice with its inequality rhetoric, if it wishes to move beyond trickle-down assumptions dressed as infrastructure reform, then mineral rent governance must become transparent, explicit, formula-driven and institutionally anchored.

Minerals are finite. Communities are not.

As Stiglitz has warned, inequality is not an accident of markets but the outcome of rules. If we continue to extract without rewriting those rules, we are not developing; we are deciding who inherits and who is left behind. DM