The future of mining in South Africa
Mining has always made a significant contribution to South Africa, from its $349.42bn contribution to GDP in 2018 to its role as the base of Anglo American, the world’s largest producer of platinum.
However, both the industry’s platinum production and GDP contribution have been in decline for a number of years, and as the country struggles with depleting mineral reserves, trade union unrest and legal confusion, the South African mining industry has been dubbed a “sunset industry”, one in a perpetual decline.
The reality is less clear-cut, with a number of challenges and high-potential projects in the country’s future. Here are some predictions on the future of mining in South Africa.
Several of South Africa’s most important mineral commodities are being rapidly depleted. South African Market Insights reported in 2013 that the country’s reserves of platinum group metals (PGMs) were on course to be exhausted in less than 240 years, compared to projections of over 380 years until depletion in 1993.
South Africa extracted close to 94,000kg of PGMs in 2014, according to a study by researchers at the Hamburg University of Technology. In the same year, the sector contributed 1.7% to the national economy and employed more than 200,000 people.
Similarly, the country’s coal reserves were projected to be depleted in less than 120 years in 2013, compared to 190 years in 1993, as coal extraction spiralled over the period from 184 million tonnes (Mt) to around 256Mt. The increase in production aimed to address a decline in South African coal prices, which tumbled from $124.03 per metric ton in April 2011 to $49.09 in January 2016, according to Index Mundi.
While the country’s coal prices have since recovered to $91.29 (as of January 2019), the consistent increases in the rate of extraction since 1993 means coal may not be a reliable source of energy in the future, and the coal sector may struggle to ramp up production to fix future price collapses.
While gold has seen a significant increase in years-to-depletion predictions, up from 21 in 1993 to 38 in 2013, this recovery has been fuelled by a broader collapse in the South African gold industry. Extraction fell by three-quarters, from over 600Mt in 1993 to just over 150Mt in 2013, and South Africa has fallen from its position as the world’s leading gold producer in 2006 to eighth place, behind China, Australia, Russia and others, in 2017.
South Africa still boasts strong gold reserves, of 125.3t in the first quarter of 2019, according to Trading Economics, but issues of outdated infrastructure and inefficient operations that undermined gold production in the 1990s and 200s remain.
Employment, investment and legislation
The South African mining industry has consistently increased the size of its workforce, from 406,994 in 2001 to 453,543 in 2018. This has led to a parallel increase in the tax paid by mining companies to the national government, from $1.21bn in 2010 to $1.56bn in 2018, according to the country’s Minerals Council.
President Cyril Ramaphosa and mineral resources minister Gwede Mantashe, who both took office in 2018, have also worked to further expand the country’s mining industry and deliver benefits for its workers. Ramaphosa was one of only two heads of state to attend the 2019 Mining Indaba conference in South Africa as he tries to recast the nation as a country for new mining investment, working towards a target of attracting $100bn in investment by 2024.
Ramaphosa and Mantashe have also proposed a scheme to ensure 30% of companies are owned by black South Africans by 2023, ensuring local people see the benefits of a revitalised industry. They aim to increase the contribution of mining to the national GDP to 10%, up from its current contribution of 7%.
However, the number of employees is 11,124 lower than in 2017, and The National reported this year that 53,000 jobs were lost over the course of 2018, as South Africa struggles to maintain growth in an industry that many consider to be in decline.
Future expansions and improvement could be further undermined by the fractured nature of South Africa’s mining unions, with the more radical Association of Mineworkers and Construction Union (AMCU) often working against both mining companies and other unions, disrupting production. The group’s 15,000 employees in the gold sector went on a protracted strike in late 2018, following a failure to agree a wage deal with Sibanye-Stillwater, which had reached a deal with rival unions. The episode cost the company $70.7m in lost production, and divided all parties involved.
There is considerable interest from the government to rebuild the South African mining industry, but it remains to be seen if these projects can benefit those in the sector.
Safety and the environment
The country’s mining operations have become notably safer in recent years, with recent statistics showing a 10% decline in fatalities from 2017 to 2018, as deaths fell from 90 to 81. There was a similar fall in the number of accidents across operations, from 2,669 to 2,350 across the period, a decline of 12%, and a 35% drop in the number of deaths from occupational diseases, from 2016 to 2017.
2019 has also started strongly for occupational safety, with just five fatalities reported in the first two months of the year, compared to 14 in the same period in 2018. The government has also taken steps to tackle illegal artisanal mining, which accounts for the majority of mining in South Africa, by granting mining licences to thousands of miners in Kimberley, Northern Cape. These licences aim to address the unsafe and unregulated practices that typically accompany artisanal operations.
However, legal grey areas continue to undermine efforts to curb the environmental destruction of mining operations. The South African Human Rights Commission released a report in 2018 that highlighted an element of the Protected Areas Act that governs the granting of mining licences in the country, where the minister of environmental affairs and minister of mineral resources are empowered to overrule a law preventing mining operations from taking place in “protected environments”.
These “protected environments” have an unclear legal basis, as they are not defined and are separate from areas such as nature reserves and national parks, opening up the possibility for a minister to declare an area fit for mining with little justification. The law also does not mention whether local people have the right to appeal against licences granted on such lands by the government, effectively eliminating them from the decision-making process.
While several political parties have made a number of environmentally inspired pledges in the run-up to May’s general election, many deal with power generation, rather than mining, and none have proposed a reform to the country’s confused mining code.