Mining matters, but it is losing out
The Minerals Council launches its annual facts and figures pocket book at the Investing in African Mining Indaba each year. “Making mining matter” used to be the council’s slogan. Lately it has changed this to “Mining matters”. The latest facts and figures on the industry demonstrate just how important the sector is in SA’s economic life. The Indaba highlighted again just how much more important it could be — if only SA could make it much easier and more attractive to invest in mining.
The thing about mining in SA is that relative to its size, it makes an outsize contribution to exports and to government revenues, especially in good times. And the thing about the commodities cycle is that even now, when times are not so good and prices of key export commodities such as platinum group metals and coal are well off their peaks, prices for gold and iron ore are still strong. If not for the continued power shortages and the collapse of freight rail and port services, SA could be earning much more by way of taxes and export revenues now. And if the investment climate were more appealing, SA could be looking to its rich resources for new mines that could earn the country multiples more into the future.
The mining sector accounted for just 6% of SA’s GDP last year. While that may look small, the Minerals Council’s economists point out it’s double the size of the agricultural sector and three times that of construction. More crucially, mineral exports account for more than 40% of SA’s total good exports. The sector employs more than 437,000 people and is one of only two where formal employment is now higher than it was before Covid-19 (the other is the government). And in 2023 the sector contributed about R135bn to the public purse, up from R126bn in 2022.
On the face of it, mining’s contribution to the economy has declined quite sharply over the longer term. But the Minerals Council’s economists have taken a deep dive into the numbers and it turns out that the decline is mainly because gold mining has fallen so sharply, as many of SA’s richest mines reached the end of their lives. So while overall mining output has declined by an average annual 0.4% since 1994, if gold output is excluded, the sector has grown by 1.3% a year on average. Even more to the point is that the mining sector has contributed a big chunk of SA’s economic growth. Minerals such as chrome and manganese have shown “stellar” growth since 1994, the council’s numbers show. SA has the world’s richest resources of minerals such as these, not to mention having the bulk of the world’s platinum group metals and many other riches besides. But it’s been woefully underexplored in recent years. And investment in the sector has languished, with the recent pickup mainly reflecting spending on renewable energy generation, which is mainly about simply keeping existing mines in business.
That mining matters so much to the economy, and to many people’s lives, makes it all the more tragic that SA is squandering the opportunities it has to grow the sector. You can’t mine without electricity and without transport. Load-shedding has taken a huge toll on the industry over 15 years. More recently, the collapse of Transnet’s rail system has seen SA lose tens of billions of rand in exports that could not be transported to market. A company such as Kumba has had to slash production for the foreseeable future, at a time when iron ore prices are still soaring.
SA’s failing infrastructure is hampering the ability of existing mines to contribute as they should to the economy. Its impossible bureaucracy and collapsed mining licence system is hampering the country’s ability to drive the exploration needed to find the new mines of the future. Important steps have been taken by the government, prodded and assisted along by business, to address SA’s electricity, logistics and crime scourges as well as its licensing regime. But progress is ultra-slow.
The Indaba highlighted the contrast between SA’s sluggish attempts to make itself attractive for investment and its neighbours’ much more proactive and speedy efforts to do so. Billions of dollars are going into new mining projects in Zambia, the Democratic Republic of Congo, Namibia, Botswana and other countries around us, which are being courted by international investors. SA, meanwhile, is back at the Indaba making many of the same promises as last year, with not that much to show for it. Other African jurisdictions are genuinely open for business; it’s not always clear whether SA is. SA has squandered commodity booms in the past. It stands to lose out again in the race for new projects.
IT TURNS OUT THAT THE DECLINE IS MAINLY BECAUSE GOLD MINING HAS FALLEN SO SHARPLY