Mining output pure gold
FOURTH QUARTER: POSITIVE, DESPITE SHARP FALL OF 4.2% IN DECEMBER LAST YEAR
Unreliable power, theft undermine explore investment.
Mining output was positive in the fourth quarter of 2023, despite a sharp decrease of 4.2% in December compared to a 2.7% increase in November compared to October.
However, the mining sector should still make a positive contribution to overall gross domestic product in the fourth quarter as mining production increased by 2.5% compared to the third quarter.
But South Africa’s total mining output declined by 0.4% in 2023, after the 7.2% contraction recorded in 2022. Annual output only increased by 0.6% most recently, following the previous month’s 6.9% expansion.
“The December outturn was weaker than our expectation of an increase of 3.0%, compared to a year ago and much lower than the consensus forecast of 4.9%,” Jee-A van der Linde, senior economist at Oxford Economics Africa, says.
The largest positive contributors to the yearly increase were platinum group minerals that increased by 9.4% and contributed 2.8 percentage points, coal that increased by 5.8% and contributed 1.3 percentage points and chromium ore that increased by 19.9% and contributed 0.7 percentage points.
Van der Linde says the mining industry, from a revenue-generating perspective, has found it more challenging to produce meaningful growth recently. “Regulatory uncertainty, a lack of reliable electricity supply, logistical infrastructure inefficiencies and theft, among other factors, undermine South Africa’s attractiveness for mining exploration investment.”
During his address at the 2024 African Mining Indaba, President Cyril Ramaphosa highlighted mining’s significance for the economy and acknowledged the shortcomings the industry faces.
He also reiterated what government is going to do to tackle these challenges, as he did the year before. “However, the reality is that the operational performances of Transnet and Eskom that are salient role players in the mining industry, continued to deteriorate over the past year, with the odds of an improvement still slim.”
Even so, there was positive movement on the policy front and signs of willingness from government to increase private sector participation in the overall economy, Van der Linde says.
The department of mineral resources and energy’s recent announcement that SA’s mining cadastral system will be in place within one year will help clear the huge backlog of mining and exploration applications and could spur fresh foreign investment.
Moreover, Van der Linde says, government’s Freight Logistics Roadmap clearly outlines increased cooperation between the private sector and the state, which should help boost confidence within the sector.