Since the end of the COVID pandemic, the mining industry has been facing significant headwinds that have impacted both mining houses and the South African economy.
With more disruption on the horizon and unclarity regarding the Government of National Unity (GNU), what does the future hold for this key economic driver?
Significant losses
A SABC article points out that the Minerals Council says the mining industry has seen job losses of around 130,000 in the last 30 years.
The Council has also revealed that mineral exports fell by R100 billion in 2023 compared to 2022.
The annual review shows that mineral royalties paid by mining companies also dropped from R25 billion in 2022 to R14 billion in 2023.
CEO of the Minerals Council, Mzila Mthenjane, addressed a media briefing, saying that greater investment into the industry is required to help the sector grow so that it can create jobs.
“The decline in recent years of mining output performance because of infrastructure constraints is a tragedy that is manifesting in undesirable employment losses. The industry currently employs 480,000 people and has the potential for growth. Through investment and growth, it only leaves it to our imagination in terms of the possibilities for job creation and [alleviating] poverty. Therefore, it is critical for the sustainability and uninterrupted contribution of the mining industry to the economy that exploration is revitalised.”
Continued bloodbath
At the same briefing, the Council pointed out that the jobs bloodbath in South Africa’s mining industry is likely to worsen in the upcoming months, the Minerals Council has warned. This after data from Statistics South Africa painted a bleak picture of the state of jobs across the mining industry.
An IOL article points out that the 2024 first-quarter mining sector employment numbers declined for the first time in six quarters amid stubborn headwinds in the operating framework. The South African mining sector lost 3000 jobs, or 0.6%, in the quarter to the end of March 2024 to 479,000 compared to the December 2023 employment data. A reversal of fortunes is now afflicting employment prospects in the South African mining sector, with job losses escalating, especially in the first quarter of 2024.
Image By: Sibanye Stillwater
Intense battle
The IOL article points out that South African mining companies have been at loggerheads with workers’ unions over worsening retrenchments.
Hugo Pienaar, the chief economist for the Minerals Council, said: “Despite the much-needed relief provided by the absence of load curtailment since April 2024, these sectors are likely to remain under pressure for the foreseeable future. This implies a risk of additional mining sector job losses in the next several quarters.”
The article adds that Sibanye-Stillwater and Impala Platinum, among other large miners, have been laying off workers, while Anglo-American said earlier this year that it could retrench nearly 4,000 employees from its South African platinum group metal (PGM) operations.
The Council said the quarterly decline was “indicative of the operational and profitability pressures currently experienced in important subsectors” of the mining industry.
The article points out that the Council said the industry was grappling with low commodity prices, especially for the PGM sector. Bulk commodity miners, on the other hand, mainly coal and iron ore, “continue to be undermined by Transnet rail and port inefficiencies” which appear to be taking longer to fix.
As a result of these and other constraints, there are likely to be more job losses in the next few months. Labour union Cosatu had already escalated the mining sector jobs bloodbath to the Presidency before the May election.
Key decreases
The IOL article points out that StatsSA attributed the quarterly job losses to employment “decreases in gold and PGM” mining.
Despite the quarterly fall in employment figures for the mining industry, jobs created across the sector yearly showed a 0.6% increase or firmed by 3000.
Gross earnings paid to employees in the mining industry during the quarter to March 2023 reflected an annual increase of R2 billion, or 4.4% in March 2024, compared with March 2023. There was, nonetheless, a quarterly decrease of R858 million, or -1.8%, in March 2024 compared to December 2023.
“This was mainly due to decreases in gross earnings in coal, diamonds and chrome mining,” added StatsSA.
Another report released by StatsSA yesterday showed that the total income for the mining industry in 2022 amounted to R906.7bn. Again, that year PGM ore mining accounted for the largest share of income at R373.2bn, representing 41.2% of total industry income. PGM was followed by coal and lignite mining and iron ore, which earned R198.9bn and R119.2bn, respectively.
The article adds that, earlier in June, the Minerals Council said costs for South African mining companies rose by 7.2% in April. Costs for gold, coal and platinum group metals were highlighted as having the largest cost increases.
André Lourens, an economist with the Minerals Council, said “high inflation rates for electricity, water, coke, petroleum, transport and storage significantly pressured mining inputs.”
Labour-related costs for the mining industry surged 7.2% while finance costs were 11.8% higher. Machinery and equipment costs rose 7% during the month under review.
Image By: Sibanye Stillwater
Is the GNU destined to fail?
What will life for the mining industry look like under the GNU?
The Democratic Alliance held extensive talks with the African National Congress over key ministries the party would take over under the GNU. There was plenty of speculation that the DA targeted two main ministries: Public Enterprises and Minerals and Energy.
This would end an era for Gwede Mantashe, who had a firm hold on Minerals and Energy for a significant period. While he initially did a good job, there have been persistent (unsubstantiated) rumours that he caused the problems within the Department. There are also (unsubstantiated) rumours that Shell wants to pull out of the country because the company was not given the right to drill for oil off the South African coast.
Pravin Gordhan has already announced that he is eager to move on and retire. Again, while he initially did a good job as the Minister of Public Enterprises, there were significant calls from the Economic Freedom Fighters for his removal during the height of the Energy Crisis.
The DA has an opportunity to change the outlook of these portfolios and improve economic growth. Will this be an easy task?
Reform is needed
Come what may, reform is necessary. Interventions need to be implemented to prevent extensive job losses in the industry and the possibility of liquidations becoming an increasing reality.
Addressing the Logistics Crisis will be a good starting point. Again, this will not be an easy task. However, with significant mining representation on the new board of Transnet, hope springs eternal.
We live in interesting times.
