Ailing sector awaits Mining Charter
Mining took another beating at the start of the second quarter as the sector holds out on the new Mining Charter, expected to revitalise investment.
Mining took another beating at the start of the second quarter as the sector holds out on the new Mining Charter, expected to revitalise investment.
Claims of policy uncertainty have lingered around the charter, which had been due to be released this week.
But Mineral Resources Minister Gwede Mantashe has promised that the charter will be finalised by the end of June.
SA is estimated to have the world’s fifth largest mining sector in terms of economic value. In 2017, mining contributed 8% to SA’s GDP. Mining production fell 4.3% year on year in April, the second consecutive fall, after a decline of 8.4% in March.
The Department of Mineral Resources has concluded its public engagements on the charter and has begun the process of drafting a revised document, the department’s deputy director of legislative drafting, Mthokozisi Mtshali, said in Parliament on Tuesday.
Once the latest draft has been finalised, it will be released for public comment.
This is expected to turn around the sector’s fortunes.
“Policy uncertainty, specifically around the incoming charter, is holding back business, confidence and so investment and growth,” said Investec chief economist Annabel Bishop.
Uncertainty in the sector has influenced investment decisions, Chamber of Mines chief economist Henk Langenhoven said, adding that the contractions in mining were worrying.
On Tuesday, the IMF warned that the lack of policy certainty in mining posed a threat to SA’s outlook. While the sector had the capacity for expansion, so far it had not been conducive to investment, said the IMF.
SA’s economy suffered its biggest quarterly shrink in almost a decade in the first quarter of 2018, with mining, manufacturing and agriculture all recording significant declines. Mining slipped into a recession in the first quarter for the first time since 2015.
FNB Senior Economic Analyst Jason Muscat said the fall in mining output was not surprising given persistent uncertainty around potential changes to the Mining Charter, along with growing concerns of a global trade war and relatively weak commodity prices.
He said with four months of data released for the sector, “it is going to take an extraordinary turnaround of fortunes for the industry to contribute positively to growth this year”.
“The primary sector, which includes mining, manufacturing and agriculture, and was a big contributor in 2017, isn’t expected to have a big impact this year. While stronger global demand and firmer international commodity prices are expected to support production and exports in 2018, this has been offset by “a generally difficult operating environment”, Muscat said.