Critical Juncture

South Africa’s mining sector at a crossroads, collaborative effort required.

- Ilan Solomons

The global mining industry has been struggling since the 2008 international financial crisis set off a chain of events resulting in contracted growth in important markets, such as China, and recession in others, such as Europe, leading to severe declines in commodity prices.

In South Africa, the decline was exacerbated by cost increases well above the inflation rate, including the cost of electricity, which has trebled over the past eight years. Wages and the cost of storage and materials have been rising by 10% a year over the past five years and steel costs have risen by 12% a year. All these factors have led to the significant loss of about 60 000 jobs in the South African mining sector from 2012 to 2015, according to the Chamber of Mines (CoM) of South Africa.

Nonetheless, CoM CEO Roger Baxter tells Mining Weekly that mining remains important to the country, noting that, despite its depressed state, it directly contributes 9% to the country’s gross domestic product (GDP) and this figure doubles to 18% of GDP when mining inputs are taken into account.

“Therefore, the industry continues to have great potential,” he asserts.

Baxter also points out that, despite South Africa’s long mining history, it still hosts a substantial proportion of the world’s commodity reserves and resources.

“Given the right conditions and with continued efforts to modernise production methods, the non gold mining sector could grow by between 3% and 5% a year, and the rate at which the gold sector is slowing down could be delayed significantly,” he states.