South Africa’s battered and bruised mining sector is entering a new era of decline, and that will have serious consequences for the wider domestic and even the global economy.

This is among the depressing takeaways from the annual Joburg Mining Indaba, organised by Resources 4 Africa, which took place on 4 and 5 October.

Anglo American CEO Duncan Wanblad told the conference via video link from London: “For quite some time now, the mining industry – and business more broadly – has made a case for meaningful change on the things that hold us back in South Africa. But this moment is different: we are at a crossroads. Do we carry on over the cliff, or do we turn a corner, for the better?”

Taking a wrong turn, or tipping over the edge of the precipice, will not just be a blow to South Africa. The world needs to draw from its rich minerals endowment.

More mining

Wanblad noted in his remarks that more mining, not less, was required to address the existential challenge of climate change.

The green energy transition was simply not going to happen without “green” metals and minerals.

These include platinum group metals (PGMs) and manganese, and South Africa accounts for most of the world’s known reserves of both. Copper is also crucial, and the Northern Cape is widely regarded as having much of this waiting to be discovered.

Wanblad also pointed out that a growing world population would require more mining to maintain a rising standard of living. And more mouths would need to be fed, which in turn would require mined fertiliser and minerals.

This is a massive opportunity for South Africa, but it is being squandered by the usual suspect: state failure. 

Gold bullion bars cast at the Rand Refinery in Germiston. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

A common theme at the indaba was the trifecta of woes that business has partnered with the government to resolve: crime and corruption, the power crisis, and logistics. This recent partnership, though hopeful, has yet to bear really tangible results and so things muddle along.

“This is critical because the operating context in South Africa remains very challenging,” Wanblad said. “The increased input costs that businesses face, coupled with national challenges ranging from load shedding [to] poor performance in logistics impact the profitability and sustainability of our business, the mining sector and South Africa at large.

“Billions of rand of economic output are being forgone every single day. And we will never know the amount of investment that companies within and outside South Africa are choosing not to make in South Africa as a result of our very real challenges.”

Sibanye-Stillwater CEO Neal Froneman is heading the crime initiative for the private sector and said he was simply forced to take action because of the scale of the problem.

Sibanye has had a surge in attacks on its security personnel this year. 

There is still no functional mining cadastre in South Africa to enable exploration and policy remains in disarray.

In recent years, South Africa’s mining sector had some bright spots, compliments of the commodity cycle. PGM prices two years ago mostly soared to record highs, whereas coal prices last year surged in the wake of Russia’s invasion of Ukraine.

But PGM and other commodity prices have since tumbled, whereas the costs for the mining sector globally have risen steeply.

“Revenue in rand terms (in South Africa’s mining sector) decreased by 5% between June 2023 and June 2022. PGM revenue decreased by 33%, followed by iron ore, which decreased by 22% and coal by 12%,” accountancy firm PwC said in its annual report on South Africa’s mining sector, released to coincide with the conference.

Miners operate a raiseborer for slot raising underground at the South Deep Gold mine. (Photo: Felix Dlangamandla / Daily Maverick)

The result has generally been sharply lower profits, which in turn means less revenue for the cash-strapped Treasury, which raked in a windfall from the mining sector over the past few years.

It also means smaller dividend flows to investors – a turn-off for investment – a lower contribution to GDP, and less capital expenditure for projects and community development.

And now the spectre of job losses in the mining sector haunts an economy with an unemployment rate of more than 32%.

Froneman told Daily Maverick in an interview on the sidelines of the indaba that lay-offs were now “inevitable” in the PGM sector because of collapsing prices and soaring costs – a dramatic turn of events for a sector that was posting record profits just two years ago.

The commodity cycle could yet throw the South African mining sector a lifeline.

But if progress is not made to address the challenges of energy, logistics and crime, many operations will still sink beneath the waves. DM