The chemicals business is a significant part of the story, of course, which is part of where the problem has been. Infrastructure is the other huge issue, along with environmental concerns and what that could mean for costs in the future.

Every cent spent on the Secunda liquid fuels refinery is being impaired as quickly as it is being invested in capex. This means that earnings per share (which includes impairments) is probably a better metric than headline earnings per share (the usual approach, which excludes impairments).

With earnings per share down by between 29% and 43% for the six months to December, it’s not difficult to see why the share price has taken such strain.

South Africa isn’t a compelling story

Cashbuild

We have yet more data points this week that serve as a strong reminder that our economic story is becoming increasingly problematic. At consumer level, we can look to Cashbuild for clues to the South African mindset. Without a feeling of security about the country’s future, people don’t spend money on improving properties.

There’s not much Cashbuild can do about a structural drop in demand. HEPS for the 26 weeks to 24 December 2023 fell by between 15% and 25%, which has driven the share price 19% lower year to date. The rally towards the end of 2023 made little sense and its chasers have been punished.

Barloworld

We can also consider the mining industry, where Barloworld experienced a 2% revenue decline in Equipment Southern Africa for the four months to 31 January. Barloworld is a great barometer for the level of investment in mining, as it sells the capital equipment that mines need to increase production. Of course, a mine will only invest in higher production when commodity prices look good and infrastructure is supportive of selling those commodities.

Recently, neither one of those situations has applied in South Africa. Commodity pricing certainly isn’t the fault of the South African government, but the infrastructure decline certainly is. It’s quite the little miracle that Barloworld’s revenue only declined by 2% in that part of the business. For context to why the situation locally is such a missed opportunity, Barloworld Mongolia (which is also a mining-focused business) grew revenue by 20%.

DRDGold

As a final point in this section, DRDGold plays in the roughest sandpits when it comes to this industry. The company is focused on the mine dumps on the outskirts of Johannesburg, where it comes right up against the dark underbelly of illegal mining.

The picture is bleak when a company’s official earnings report notes that it is grateful for no serious instances of violent crime in the period under review.

If that isn’t enough to worry about, delays in water usage licences nearly ruined the period for DRDGold as it couldn’t bring new reclamation sites on stream. Instead, it had to scratch around in legacy and clean-up sites to find some gold. It was saved by a strong gold price.

There are some bright spots

If the gold price was enough to save DRDGold and its low-margin tailing business, then you can imagine how well the traditional gold miners might have done in this period. Although it’s never a guarantee (like at Gold Fields where production fell year on year and it didn’t capitalise on the gold price), the good news is that Pan African Resources has certainly made hay while gold is shining.

Gold production was up 6.7% for the six months to December. Thanks to the production efficiencies that come with this, all-in sustaining costs per ounce came in lower – despite all the inflationary pressures on costs.

Combined with a strong gold price, the result can only be wonderful. And indeed it is, with a 46.1% increase in HEPS. Net debt has increased, though, with the company investing heavily in the Mogale Tailings Retreatment project. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.