SOUTH Africa’s coalition government could receive crucial financial relief ahead of October’s budget thanks to soaring platinum prices and higher mining royalties, according to Old Mutual Investment Group.
The fragile alliance between the African National Congress and Democratic Alliance faces mounting pressure to balance competing party interests without resorting to tax rises or spending cuts that might destabilise the partnership.
However, South Africa’s position as the world’s dominant platinum group metals producer offers potential salvation. Platinum prices have reached their highest levels since August 2014, continuing a strong second-quarter rally driven by increased demand and constrained supply.
Meryl Pick, portfolio manager at Old Mutual Investment Group, told Reuters that the platinum price surge had a potential to generate a “windfall” for the government of national unity. She drew parallels with 2021, when mining tax revenues exceeded projections by 100 billion rand, significantly reducing the fiscal deficit.
Old Mutual analysts expect prices to remain elevated, citing slower electric vehicle adoption in Western markets, sustained hybrid car demand, and limited mining supply following years of underinvestment. Both platinum and palladium are essential for emissions control in fossil fuel vehicles, said Reuters.
The commodity boom has lifted South Africa’s broader markets, with the MSCI index gaining over 32% this year—double the emerging markets average, the newswire said. Some economists caution the rally may not persist amid global economic uncertainty.
