Data shows mining SA output declines in May, while Mantashe punts problematic law
Data on Thursday showed that output in South Africa’s mining sector resumed its decline after a brief bump in April. Meanwhile, Minerals and Energy Minister Gwede Mantashe was punting the Mineral and Petroleum Resources Development Act of 2002 which is seen by many observers as a key reason for the fall of South Africa’s once towering mining sector.
First, the data that was unveiled by Statistics South Africa (Stats SA). It showed that on a year-on-year basis, mining production fell 0.8% in May after rising 3.2% in April. The May reading fell short of a Bloomberg consensus prediction of 2% growth over that timeframe, while the April expansion followed 14 consecutive months of contraction.
This signals the trend of decline is back on track – going against the grain of market expectations – and the month-on-month fall was a woeful 3.8%.
The silver lining in the data is that in the three months to the end of May, the numbers all add up to 3.1% growth on a seasonally adjusted basis. This, and base effects from February’s dismal numbers – when production tanked by 7.7% on an annual basis and 7.0% month on month – means that mining output may still make a positive contribution to the Q2 gross domestic product read.
“Though today’s outcome is not encouraging, statistical base effects from February’s sharp decline in output could see continued quarterly expansion in the mining sector’s gross value added in Q2 2023, which will be favourable for quarterly GDP growth.
“This is premised on expectations of better mining output in June, given the load shedding reprieve during that month,” Thanda Sithole, FNB Senior Economist, said in a note on the data.
So there’s that, and data on Tuesday showed the manufacturing sector rose 2.5% year on year after a 3.6% expansion in April, but economists have largely attributed this to base effects.
The economy did dodge a recession in Q1 when it eked out growth of 0.4% after contracting 1.1% in Q4 of 2022, and there are glimmers of hope that it still grew in Q2 of this year. But it’s hardly shooting the lights out, and, after a reprieve, rolling blackouts have ramped up again to Stage 6 this month, which is not a great start to Q3.
This brings us to the comments of Gwede Mantashe on Thursday, a senior figure in the government and ANC party which is largely responsible for the withering state that is behind this lacklustre economic performance.
The minister was addressing a review conference on the Mineral and Petroleum Resources Development Act (MPRDA) in Fourways, Johannesburg, and in his prepared remarks, he came out swinging on behalf of a piece of legislation that the industry, investors and other commentators have long seen as a formidable obstacle to investment in a sector that is demonstrably in decline.
In typical Mantashe fashion, neither he nor the ANC are going to take responsibility for this state of affairs. But the mining data and dearth of investment in the sector speak to governance failures, which the government and Mantashe, frankly, own.
The MPRDA, which came into effect in 2004, sought to address historical racial inequities in mine ownership and had some laudable goals, but in many ways has been a complete flop.
Cadre enrichment, policy confusion and a subsequent plunge in the exploration needed to sustain South Africa’s mining sector have been among its enduring hallmarks.
For example, the last time South Africa accounted for more than 5% of the mining sector’s global exploration budget was in 2004 – pointedly when the MPRDA came into force – and it has generally been downhill from there, falling below 1% in 2020 and remaining stuck there ever since.
Read more in Daily Maverick: Mantashe’s missed mining target — SA at less than 1% of global exploration spend
These trends are more than coincidental and make a mockery of Mantashe’s staged goal in 2019 that South Africa would climb back to 5% within three to five years.
Yet, here he was, blaming the industry and heaping praise on the MPRDA, which included the first Mining Charter setting out minimum thresholds for black ownership in the mining industry, which in many ways was the bedrock of the apartheid political economy.
“Despite government’s optimism that social partners in the mining industry will embrace these regulatory instruments as appropriate tools for transformation, it is regrettable that, 20 years after the enactment of the MPRDA, the industry has not fully embraced these regulatory instruments.
“This is evidenced by the sustained legal battles on transformation which depicts the industry’s resistance to the transformation agenda,” the minister said in his prepared remarks.
These remarks were devoid of crucial context.
The industry has gone to court over the understandable issue of “once empowered, always empowered”. In 2021, the Pretoria High Court ruled in favour of the mining industry on this matter.
Read more in Daily Maverick: High court sets aside key aspects of Mining Charter in setback for Mineral Resources Department
What it boils down to is this: the mining industry has long argued that once a company has met the threshold for black ownership of 26% as laid out in previous charters, or 30% for new mining right applications, that holds – even if the empowerment-holders subsequently sell their stake.
That’s sensible and helps to explain the decline in mining exploration and investment. And Mantashe, while he did acknowledge the vast improvements that have been made in living conditions and wages for mine workers, and the strides on the health and safety front, still seems stuck on state-enforced “transformation”, which also misses the point that the mining industry is scrambling on its own to transform.
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“It is against this backdrop that the department convened this summit to frankly engage with our social partners and ensure that we collectively identify legislative gaps that will further improve the implementation of our regulatory framework,” Mantashe said.
What “gaps” could still exist to “further improve” a regulatory framework that is failing?
The mining and exploration data all point to an MPRDA that has failed to reap the benefits of South Africa’s vast mineral wealth to benefit the wider economy and society.
If these “gaps” are filled with more of the same, expect the trajectory to continue, to the benefit of only a few who may be politically connected. DM