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Just published by the Minerals Council South Africa (previously the Chamber of Mines) is the latest edition of its Facts and Figures series. This is an updated and extended version of a facts and figures pocketbook – Mine SA 2017 – which was released just before this year’s Mining Indaba.

Arthur Tassell commentCompiled by the Minerals Council’s chief economist, Henk Langenhoven, and his team, Facts and Figures 2017 is a comprehensive statistical guide to South Africa’s mining sector and confirms that the industry, despite difficult times in recent years, remains the flywheel of the South African economy, contributing 6,8 % (R335 billion) of GDP in 2017 and employing nearly 465 000 people.

During the year, the industry paid R19 billion in taxes and R7,5 billion in royalties and disbursed R126 billion in wages and salaries. It accounted for 27 % (R307 billion) of South Africa’s total exports and 7,4 % (R630 billion) of the country’s total production of R8,6 trillion.

Interestingly, and somewhat in the face of common perception, some of these figures represent an improvement on 2016, with mining production being 3,4 % higher and employment 1,6 % higher. Gross fixed investment in mining grew to R80,9 billion compared to the figure of R67,6 billion recorded in 2016, reversing the downward trajectory seen over the past decade or so.

The report notes that the price of gold declined by more than 8 % between 2016 and 2017 while the platinum price declined by over 12 % over the same period. On the other hand, coal export prices improved by 17 % and iron ore prices by over 12 %.

According to the report, the two star performing commodities in 2017 were chromium and manganese, with production of the former increasing by over 14 % over the period and of the latter by an impressive 40 %.

A very worrying statistic from the report is the low level of exploration, with South Africa’s share of Africa’s total exploration spend in 2017 being a miserable 8,3 % compared to as much as 35,7 % in the early 2000s. The report indicates that the total amount spent in 2017 on exploration in South Africa was just over US$87 million, a precipitous decline from the US$403,6 million which was spent in 2007.

Discussing the gold sector, the report notes that South Africa was responsible for just 4,2 % of global gold production in 2017 – 136,8 tonnes out of 3 247 tonnes. Compare this with ten years ago, when South Africa’s production was 252,6 tonnes, representing 10,1 % of total global production of 2 497,8 tonnes. Over this period the total number of gold mining employees dropped from 166 064 to 112 200. Total gold sales in 2017 amounted to R82,7 billion.

Gold, of course, is now no longer the biggest sector within the South African mining industry. Both coal (with sales of R130 billion in 2017) and PGMs (R97 billion) contribute more. The PGM sector also has a bigger workforce than the gold sector, with 172 171 people employed in 2017.

On coal, the report notes that net investment in the coal industry has declined at a rate of 10 % a year since 2009 – from R7,3 billion to R3,8 billion in 2017. “The lacklustre performance of investment in this industry could not be more telling of the toxic regulatory environment in recent years,” it says.

After coal, PGMs and gold, the next biggest contributor to South Africa’s mining industry is iron ore, which recorded total sales of R49,3 billion in 2017. Production for the year was 74 643 tonnes, better than the 2016 figure of 66 456 tonnes but down on 2014’s 80 759 tonnes.

Overall the report paints a picture of an industry which is certainly growing in some sectors, as some of the figures above indicate. But there’s no question that mining could do a whole lot better. As Roger Baxter, CEO of the Minerals Council, noted in his presentation at the recent Africa Down Under Conference in Perth, Australia: “South Africa’s mining potential is huge. Even in the absence of a greenfields exploration boom in South Africa, mining investment could almost double in the next four years if the country was to return to the top 25 % of the most attractive mining investment destinations worldwide. This would result in another 200 000 jobs being created in the economy with 50 000 direct jobs created in mining alone … .”

The good news is that there are positive developments relating to South African mining. Baxter pointed to several of these in his presentation, noting that the administration of President Cyril Ramaphosa had implemented measures to tackle corruption and promote investment and that it had appointed the “respected Mr Mantashe” as Minister of Mineral Resources.

In themselves, these moves are not enough to arrest the decline of the industry but at least things are starting to move in the right direction. One senses that South African mining might after all have a bright future, a scenario that seemed unlikely just a year ago!

Arthur Tassell

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