As COP30 in Belem looks for ways to eliminate fossil fuels, South Africa has already charted its own course. In July, South African President Cyril Ramaphosa touted his country’s Northern Cape as “the forefront of the clean energy revolution.”
But a preliminary study presented at the People’s Summit — a parallel event organized by NGOs and civil society — warns the region risks becoming a “sacrifice zone.” Environmental experts use the term for areas burdened by pollution, and at risk of resource extraction or industrial projects.
The researchers say, in these areas, unfair taxation plays a significant role in multinationals profiting while leaving local communities behind.
Taxation and climate
“We wanted to show how taxation and climate are deeply connected,” Jaco Oelofsen, of the Cape Town based NGO Alternative Information & Development Centre (AIDC), told DW. He adds the findings seek to link climate discussions in Brazil with the United Nations tax convention negotiations in Nairobi, Kenya.
The study is part of a forthcoming report from the AIDC, the Brazil’s Justica nos Trilhos, and the Philippines-based Asian People’s Movement on Debt and Development. It argues the scramble for transition minerals reinforces long-standing extractive patterns in the region.
The organizations presented three case studies — from South Africa, Brazil and Philippines — illustrating “how mining and gas companies benefit from tax incentives, enable potential tax evasion and illicit financial flows, and raise broader questions about development and climate justice,” Oelofsen said.
Special Economic Zones
The Northern Cape is South Africa’s largest and driest province, shaped for more than a century by mining booms that enriched a handful of powerful companies, most famously the diamond industry.
Communities with high unemployment rates still shoulder the toxic legacy of extraction. In Kagung, northern South Africa, residents report respiratory illnesses linked to manganese dust and blasting debris. Abandoned dumps and asbestos residues still litter parts of Namaqualand, threatening fragile ecosystems and public health.
The South African government’s revival plan hinges on two Special Economic Zones (SEZs), both promising investment, jobs, and a central role in South Africa’s hydrogen and critical minerals strategy.
They also offer generous tax breaks — including a reduced 15% corporate income tax rate, VAT exemptions, and payroll incentives — with little public accounting of the true cost, according to the study.
A future port at Boegoebaai is slated to host a deep-water facility and green hydrogen export hub, anchored by petrochemical giant Sasol.
Yet Sasol — one of 57 companies responsible for 80% of global carbon dioxide emissions, according to the Carbon Majors database — said in early 2025 it was not shuttering coal-based production even as it invests in hydrogen for export markets.
However, this week, Sasol told DW in a written statement “it is not expanding coal-based production in South Africa,” and “it is fully compliant with the South Africa’s air-quality standards as of April 2025 and is committed to cutting greenhouse gas emissions by 30% by 2030.”
Royalties and tax losses
Tax justice researcher Oelofsen told DW: “We need to ask whether countries should be subsidizing fossil fuel companies or funding mining operations geared purely toward export.”
“And just as importantly, whether these corporations are being taxed appropriately — especially when so many are structured through, or effectively based in, tax havens.”
Unlike Boegoebaai, the Namakwa SEZ overlaps with an existing operation: the vast Gamsberg zinc mine owned by India’s Vedanta Zinc International.
Vedanta faces a troubling environmental track record abroad, including cases in Zambia and India.
Its local expansion — framed as a path to “redress past injustices” — raises concerns about oversight, community impact, and the rationale for granting additional tax incentives to already-planned private investments, according to the study.
DW asked Vendanta how the company intends to address the environmental impacts for which it has been criticized, but has so far received no response.
Beyond the environmental issues, both Vedanta and its partner Frontier Rare Earths channel their South African investments through Mauritius and Luxembourg, jurisdictions with low withholding taxes on royalties and dividends, says the report.
While not illegal, such structures heighten the risk of profit shifting and tax losses — a critical issue as Global South nations push for a UN tax convention to curb illicit financial flows.
Mining giant Vale faces scrutiny
In Brazil, studies led by the Instituto Justiça Fiscal showed the Swiss subsidiary of mining giant Vale allegedly was central to a mining tax strategy to reduce the company’s tax burden in Brazil. Vale alone has reportedly caused a total loss of R$ 1.83 billion (€306 million) in local mining taxes.
For years, Vale allegedly sold iron ore to its own subsidiary in Switzerland at prices below market value. From Switzerland, the ore was then resold to China at a much higher price, allowing the company to avoid taxation on the product’s real value.
But no ship ever passed through Switzerland. In 2024, the company confirmed it maintains subsidiaries in Switzerland, without explaining why, given that China remains by far the main buyer of Brazilian iron ore.
Jaco Oelofsen told DW this is not the structure described in the case of South Africa’s Northern Cape, but there are “mining companies in South Africa that outsource their marketing and sales to a related entity based in a tax haven.”
“But that offshore company often provides no real services at all. Its main function is to shift profits away from higher-tax jurisdictions like South Africa and Brazil and into places with little or no taxation.”
Separately, Vale has faced allegations linking its mining operations to environmental destruction in Brazil’s Minas Gerais state and serious human rights violations.
Edited by Cai Nebe
