AMN - Patience and perseverance key to South Africa recovery - comment by Yolanda Torrisi

A report by Chamber of Mines’ chief Economist Henk Langenhoven on South Africa’s position in global mineral production and its immediate future challenges.

There is a gloomy picture being painted by Statistics South Africa data on mining production, which states that production for the 12 months to the end of October fell 4.6 per cent.

As at October (10 months for the 2016 year), the sector’s production declined by more than 5%. In the past 12 years, the sector has contracted by nearly 25%.

It was only iron ore and coal production which increased in October relative to September last year.

All other mineral groups declined by between 5-10%.

The platinum group metals recorded growth of 2.2% in 2016.

Mining production growth is predicated on growth in international markets. South Africa exports 50% of its minerals to Asia. Little to no growth jump is forecast for China and Japan. However, growth in the US is expected to rise to 2% and the EU is expected to grow 1.6% through to next year, hence bringing some improvement to demand. South Africa exports 20% of its mineral production to the EU and 10% to the Americas.

The biggest challenge for South Africa is keeping production costs down. Meanwhile, unemployment continues to rise. Employment in South African mining has dropped from 488,746 to 457,585 and overall has declined from 6.4% to 5.3% in the last 12 months.

All indications are that commodity prices are bottoming out this year and mild worldwide growth would lift prices over time. It is also true, however, that the exchange rates of commodity exporters usually strengthen (all other things being equal) when their export prices improve, which may neutralise some of the expected revenue growth.  

The minerals recovery is going to take more patience and perseverance.

- Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com