Mining sector set to lose nearly R100bn
• Minerals Council SA estimates the national Covid-19 lockdown could slash this year’s production by up to 10% of the 2019 figure
SAs mining industry could lose up ’to R80bn in revenue and the workforce another R16bn in forgone wages to the country’s lockdown to curtail the spread of Covid-19. The Minerals Council SA estimates that 2020 full-year production would be up to 10% below that of 2019 after the government closed the economy on March 27 and has only gradually reopened key sectors since then.
SA’s mining industry could lose up to R80bn in revenue and the workforce another R16bn in forgone wages to the country’s lockdown to curtail the spread of Covid-19.
The Minerals Council SA estimates that 2020 full-year production would be up to 10% below that of 2019 after the government closed the economy on March 27 and has since gradually reopened key sectors.
Based on the value of production in 2019 of R730bn, the council says it estimates the decline would result in the value of mineral output this year falling to R650bn.
Using a ratio of salaries to production and the R136bn salary bill of 2019, it estimates that wages would fall to about R120bn.
“However, this depends on each company’s specific circumstances,” it said.
The coronavirus lockdown has prompted analysts to warn of SA facing its worst economic contraction in a century.
LIMIT DAMAGE
The lifting of the extreme conditions of the lockdown will result in 8-million people returning to work across the economy from the start of June.
However, business has urged the government to reopen the entire economy as quickly as possible to limit the damage extending the lockdown is having on the economy.
Business for SA (B4SA) has argued that opening the economy more quickly could limit the drop in GDP in 2020 to 10.3% from its earlier estimate of up to 17%.
The mining industry has had a “compensation effect” from the weakening of the rand against the dollar by about 20% during the lockdown, Minerals Council SA CEO Roger Baxter said.
The troubles that had beset the industry and economy, including expensive and erratic electricity supplies from stateowned power utility Eskom, and a sovereign debt downgrade, have remained unresolved during the lockdown, said council president Mxolisi Mgojo. “These issues are still standing. The fact is they are probably worse because the ability for the state to find the resources to deal with some of those issues has become more acute.”
The council’s chief economist, Henk Langenhoven, previously told Business Day calculations of the true financial impact on the industry and the wage bill are extremely difficult because each company is bringing employees back at different rates and have various wage schemes during the lockdown.
The council’s members represent 90% of SA’s annual mineral output.
The SA mining industry employs about 455,000 people.
Since the end of April, mining companies with underground mines have been allowed to recall half their staff, with the latest government regulations permitting full operations from June 1 under strict conditions around health and safety.
Opencast mines have been able to operate at full production levels from the end of April.
THE DIFFICULTY OF SENDING WORKERS UNDERGROUND IS COMPOUNDED BY SOCIAL DISTANCING AND SANITISING WORKPLACES
The return of hundreds of thousands of workers entails careful screening at labour collection points; transport with full social-distancing; another screening at the mines, testing if necessary; then isolation and medical care, if needed.
The difficulties of sending tens of thousands of workers underground for shifts is compounded by the need to keep adequate distancing between employees and sanitary working environments, making the process slow.
The council has already noted that the jobs of about 10% of the industry’s workforce, equating to 45,000 people, are at risk from the negative economic consequences stemming from the lockdown.
The Treasury has forecast that SA could lose as many as 7-million jobs, which will push unemployment to more than 50% from its rate of about 30% now.