AMN - South Africa has a way to go despite positive signs – comment by Yolanda Torrisi

While loss-making gold operations in South Africa dragged down the country’s latest production figures, the nation’s better than expected result is a positive sign for the mining industry. Mining was once a powerhouse industry in South Africa, employing half a billion people but the southernmost African country still has a way to go to enable the industry to move things forward and improve economic prospects on the continent.

South Africa’s mining industry once made up about 20% of the nation’s gross domestic product, but these days that figure is about 7-8%. The legal mining industry’s share is about $45 billion to the informal mining industry’s still considerable $500 million. Some 100,000 people are now employed in the formal industry but efforts to improve production can be hampered by systemic issues and conflict.

The nation’s mining output fell 1.1% in March compared with March 2018 production, a much-healthier result than economists’ predictions of a 7.5% year-on-year fall. South Africa’s seasonally adjusted March quarter figures showed a 12.7% decline when compared with the December quarter of 2018.

Wealth and economic growth are being dragged down by a number of factors in Africa’s fifth largest nation, with results more than evident in the bottom line.

Investec has highlighted 71% of gold mining operations in South Africa were “marginal or loss-making at the end of 2018”. Rising prices, labour issues and reduced output have taken their toll in the nation of 55 million people, ahead of a carbon tax likely to further shrink profits for mining operations that are not in the red.

Earlier this month, South Africans returned former mining executive and trade union figure President Cyril Ramaphosa to power. His African National Congress grabbed a reduced 58% of the national vote but a growing 11% of the vote went to the Economic Freedom Fighters. EFFs party members have previously been critical of mining companies and black South African empowerment owners and business, with the smaller party’s support arguably reflective of opposition to mining among some members of the community.

Another factor in the nation is the ongoing uncertainties associated with Mining Charter reforms, particularly those associated with black empowerment transactions. The South African Chamber of Mines rightly challenged aspects of proposed reforms. However, businesses and project proponents must still prepare likely and future changes now, restructuring project ownership in order to move forward to production that might increase wealth in the nation, for shareholders and empowerment owners and the communities they operate in.

AngloGold Ashanti’s decision to close its last pit in South Africa is another factor likely to change the make-up of the industry. It could also change the relative importance of financial markets to resource investors and financiers if the miner shifts its primary market from Johannesburg to another resource market mainstay such as London or Toronto.

South Africa’s latest mining production figures are encouraging but there is a way to go to ensuring the industry can improve its contribution to economic wealth. Persistence and perseverance are likely to be in order as all parties work to move forward projects that could bring back wealth to the country and the continent.

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