Founder: Turnaround Talk
Happy 2024! Turnaround Talk wishes all BRPs prosperity and ample success during the year.
The mining industry has been a major driver of the South African economy for many years. While boasting the most diversified economy on the continent, South Africa is still heavily dependent on a strong mining sector to ensure economic growth. However, the sector is facing a decline mainly driven by three significant events which have impacted the industry significantly.
The three significant events
South Africa was introduced to loadshedding in 2008, and mining operations were expected to significantly decrease their energy consumption in order to manage the distribution of electricity to the rest of the country. This directive was manageable as the country was in the early stages of the practice and nowhere near the Energy Crisis that we know today. The progression of loadshedding into the Energy Crisis all but brought the sector to its knees; however, it found a way to cope.
The second significant event was the COVID-19 pandemic. A labour-intensive process that cannot be conducted remotely, mining operations were quickly granted the mantle of essential services, which allowed workers to avoid protective isolation. However, the massive labour forces needed to be rotated with only a few workers on-site at a time. This had a significant impact on productivity and, ultimately, profitability.
The third significant event is the ongoing Logistics Crisis. Again, this is not a new crisis, as Transnet battled with operational inefficiencies when I was a mining journalist in 2007. However, like the progression of loadshedding into the Energy Crisis, the Logistics Crisis has grown into a crippling beast that is applying significant external pressure.
This critical sector is facing a turning point with an uncertain future. Unfortunately, we begin the year highlighting a sad state of affairs.
Image By: Sibanye-Stillwater
More Section 189 discussions
The News24 article points out that diversified commodities miner Sibanye-Stillwater has retrenched 575 employees from its Kloof 4 shaft following a Section 189 consultation process that commenced in September.
In a process that affected almost 2 400 employees, 550 accepted voluntary separation or early retirement packages. The group has also cut another 348 employees from across other gold operations, but a total of 1 057 employees accepted transfers to fill vacant positions at its other gold operations in South Africa. The cuts also affected 581 contractors, with some employees and contractors to be temporarily retained during decommissioning.
The article adds that the move follows sustained losses at the operation near Carletonville, one of the world’s deepest mines. The company said previously the process followed “unsuccessful attempts to address productivity issues and other operational constraints at the Kloof 4 shaft, including seismicity and cooling constraints.”
Key acquisition
The News24 article points out that Sibanye-Stillwater acquired Kloof in February 2013 when Gold Fields unbundled most of its SA gold mines to the new company, along with five other marginal mines in Gauteng and the Free State provinces.
“While the decision to close or restructure operations is never taken lightly, the closure of Kloof 4 shaft was necessary to curb ongoing financial losses,” CEO Neal Froneman said in a statement. He added the consultation process “encouragingly achieved this required outcome while also reducing the number of retrenchments.”
The article adds that an incident that caused significant damage to the infrastructure during July contributed to the closure of the operation, with the move coming despite high gold prices, with the precious metal currently fetching almost $2 100 an ounce, having risen 17% in the past year.
Sibanye-Stillwater has also been cutting costs in in its platinum operations as it struggles with a downturn in prices. The group has also increased borrowings to fund operations and acquisitions to diversify away from the PGMs.
Ongoing pain
The article points out that a consultation process that affects 4 095 employees at its Marikana platinum mines has been ongoing since October, while Sibanye-Stillwater has initiated a similar process at its Stillwater Mine, East Boulder Mine, the Columbus Metallurgical Complex and Columbus offices and other locations in the US.
Image By: Canva
These may result in more than 300 job losses, which Sibanye-Stillwater said is required to operate sustainably in a low-price environment. The price of platinum has fallen more than 14% so far in 2023, while palladium has lost almost 45%.
The article adds that Sibanye, valued at about R60 billion on the JSE, had about 64 000 employees in its SA operations as of 2022, with about 24 500 gold employees and 36 800 PGM employees. The group’s shares were up more than 1% in early afternoon trade on Monday but have more than halved in the past year.
The results of pressure
Siege engines such as catapults, trebuchets, and cannons have changed the course of battles on multiple occasions. Continuous bombardment until a wall or army breaks is devilishly effective.
This is, in essence, what is happening to the mining sector. Enough pressure has been applied to the mining sector, and it is now beginning to buckle. It is sad that major mining companies like Sibanye, Seriti and other major coal miners have had to enter Section 189 discussions. This may lead to massive job losses in a year where the ANC can ill afford a significant increase in the Unemployment Crisis.
But it is not only the ANC that will be impacted. The South African economy, while the most diversified on the continent, is not diversified enough for any of the other sectors that drive the economy to plug the hole that will be left by a crumbling mining sector. Urgent intervention is needed. The Logistics Crisis needs attention, and the Department of Minerals and Energy needs to ascertain if there is significantly decreased commodity demand or if the mining sector is facing a similar situation as the agricultural (fruit) sector where there is demand, but customers are looking elsewhere because of our bottlenecks.
We need answers, and we need them soon.
