Major blow for one of South Africa’s biggest employers

 ·6 Feb 2024

The latest data from the Minerals Council South Africa shows that the mining sector’s contribution to GDP crashed 12% in 2023 due to the electricity and logistics crises that have hit mining companies hard.

Despite this, the council said that the mining sector is still pulling its weight and fulfilling its end of the “social bargain” by contributing to job creation and higher tax revenues.

Broadly, a “social bargain” is an acknowledgement that mining companies benefit from the country’s natural resources and, in return, have a responsibility to contribute to the development of the communities in which they operate. This includes providing jobs.

According to the council’s Facts & Figures 2023 booklet, South Africa’s mining sector saw an increase in jobs and delivered a higher contribution of taxes for the fiscus in 2023.

Data from the report shows that the sector added more than 7,500 jobs in 2023, employing more than 477,000 people in total.

The industry also contributed R135.3 billion to the country’s fiscus, with wages increasing to R186.5 billion, which the council said “supported livelihoods in a weak domestic economy characterised by high unemployment.”

“It is gratifying that the mining sector again delivered a crucial contribution to the South African economy despite the significant constraints caused by unprecedented electricity load curtailment, debilitating rail and port failures and pervasive criminal activities during the year,” said Mzila Mthenjane, the CEO of the Minerals Council.

The mining sector in South Africa faced a tumultuous 2023, with the council saying that its expectation is that mineral sales will post its first calendar year decline since 2015 and the largest annual fall since the global financial crisis in 2009.

In 2023, the South African mining sector saw:

  • Mineral sales falling by more than 13% in the first ten months of 2023;
  • The direct contribution of mining to South Africa’s gross domestic product (GDP) fell by 12% to R425.6 billion, and its percentage contribution to GDP dropped to 6.2% from 7.3%;
  • Mineral exports fell by more than 11% to R781.6 billion;
  • PGM sales saw a 33.3% annual decline to R199 billion;
  • Total estimated coal sales declined 22% to R192.2 billion;
Source: Minerals Council South Africa

Mthenjane said that “electricity load-curtailment that was a particular constraint on deep-level mining in the precious metals industry, debilitating rail and port failures that adversely impacted the bulk commodities sub-sector, pervasive criminal activity, the devastating loss of life late in the year… [and] the commodity price cycle turned against PGM and coal miners,” were some of the biggest contributors to the sector’s woes.

As a result, towards the end of 2023 and the beginning of 2024, many mining companies announced restructuring processes.

“Fast-tracking structural reforms in the energy and logistics sectors, agreeing inflation- and productivity-related wage increases, implementing reasonable electricity tariff hikes, and improving municipal service delivery are crucial to the competitiveness of the industry,” says Hugo Pienaar, chief economist at the Minerals Council.

The council said it remains “cautiously optimistic” for 2024, hoping for “less intense and frequent load shedding, progress on the mining logistical front, an improved mine safety performance, and a downward trend in criminality around mine sites.”

Read: South Africa spends R500 million to fight illegal mining

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