{"id":811752,"date":"2025-02-18T08:00:00","date_gmt":"2025-02-18T06:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=811752"},"modified":"2025-02-18T07:30:20","modified_gmt":"2025-02-18T05:30:20","slug":"dark-clouds-gather-over-south-africas-most-important-industry","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/811752\/dark-clouds-gather-over-south-africas-most-important-industry\/","title":{"rendered":"Dark clouds gather over South Africa’s most important industry"},"content":{"rendered":"\n

South Africa\u2019s mining industry remains one of the country\u2019s most critical sectors, but it faces mounting challenges that threaten its stability, growth, and ability to create jobs.<\/p>\n\n\n\n

Mining contributes significantly to the South African economy, accounting for around 6% of the country\u2019s nominal GDP in the first three quarters of 2024.<\/p>\n\n\n\n

Stats SA data further reveals that the sector is also a crucial source of employment, with approximately 471,882 formal jobs in Q3 2024.<\/p>\n\n\n\n

The mining sector is also a key driver of tax revenue and foreign exchange earnings, making it crucial for the country’s well-being.<\/p>\n\n\n\n

However, domestic and global factors have led to prolonged stagnation and decline in South Africa’s mining sector.<\/p>\n\n\n\n

Stats SA data showed a decline of 1,785 jobs in the quarter and a cumulative loss of nearly 10,000 jobs throughout the year.<\/p>\n\n\n\n

The decline in employment was driven largely by retrenchments in the platinum group metals (PGMs) sector, which was affected by sustained low metal prices.<\/p>\n\n\n\n

Despite some job creation in primary chrome mining, the broader trend is one of contraction, raising concerns about the future of employment in the industry.<\/p>\n\n\n\n

The South African Revenue Service (SARS) has noted a sharp decline in the mining sector’s Company Income Tax (CIT) revenue.<\/p>\n\n\n\n

This downturn is primarily due to falling commodity prices, eroding the gains made during the previous two years of elevated prices.<\/p>\n\n\n\n

Additional factors such as weak global growth, persistent power outages, and severe logistical disruptions have exacerbated the industry’s financial struggles.<\/p>\n\n\n\n

The Minerals Council South Africa, representing 90% of the country\u2019s mineral production, has highlighted several constraints inhibiting the sector\u2019s growth. <\/p>\n\n\n\n

CEO Mzila Mthenjane pointed to high crime levels, regulatory hurdles, steep electricity tariff increases, and deteriorating water infrastructure as key challenges.<\/p>\n\n\n\n

He noted that despite some progress in 2024, actual mining production remains below pre-COVID levels, demonstrating that deep structural issues persist.<\/p>\n\n\n

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The Minerals Council South Africa CEO Mzila Mthenjane<\/em><\/figcaption><\/figure><\/div>\n\n\n

ArcelorMittal South Africa\u2019s challenge<\/h2>\n\n\n\n

ArcelorMittal South Africa\u2019s recent decision to shut down its long steel operations exemplify the fragility of the mining industry and its interdependence with other key sectors.<\/p>\n\n\n\n

This move directly threatens around 3,500 jobs, but the broader impact on the steel supply chain could see up to 100,000 jobs lost.<\/p>\n\n\n\n

ArcelorMittal CEO, Kobus Verster, has attributed the closure to global market pressures, high domestic production costs, and failed government policies to protect the industry.<\/p>\n\n\n\n

He pointed out that competitors benefiting from subsidies and export taxes have a cost advantage of up to 40%, making it nearly impossible for ArcelorMittal to compete.<\/p>\n\n\n\n

Thungela Resources CEO July Ndlovu has also criticised South Africa\u2019s regulatory and licensing processes, calling them slow and unpredictable compared to other mining jurisdictions.<\/p>\n\n\n\n

He emphasised the need for streamlined licensing, investment in logistics, and stronger efforts to combat illegal mining. These factors, he argued, are crucial for the sector\u2019s long-term sustainability.<\/p>\n\n\n\n

The broader mining sector has also suffered from deteriorating logistics infrastructure due to years of mismanagement and under-investment.<\/p>\n\n\n\n

Transnet\u2019s inefficiencies, particularly in rail freight, have compounded the sector\u2019s challenges. Mining companies are forced to transport minerals by road, which is expensive. <\/p>\n\n\n\n

The Reserve Bank estimated that transporting coal to Richards Bay via rail costs around $11 per tonne, while trucking costs companies roughly $70 per ton.<\/p>\n\n\n\n

South Africa\u2019s largest iron ore producer, Kumba Iron Ore, previously said that it had\u00a0lost<\/a>\u00a0R6 billion from Transnet inefficiencies.<\/p>\n\n\n\n

Meanwhile, Eskom\u2019s load-shedding and rising electricity costs have increased operational expenses, further eroding profitability. <\/p>\n\n\n\n

While some progress is expected on the energy front as new generation units come online, rail and port logistics improvements remain slow and uncertain.<\/p>\n\n\n\n

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ArcelorMittal CEO, Kobus Verster<\/figcaption><\/figure>\n\n\n\n

Some optimism for 2025, but many risks remain<\/h2>\n\n\n\n

The mining sector is navigating an increasingly complex global environment. At the start of 2025, the Minerals Council South Africa has outlined hopes for a more robust recovery.<\/p>\n\n\n\n

Resolving key infrastructure issues, improving governance at the municipal level, and ensuring a stable electricity supply will be key to this. <\/p>\n\n\n\n

Transnet\u2019s freight rail performance is expected to improve, with projected volumes rising to over 170 million tonnes, compared to an estimated 160 to 165 million tonnes in 2024\/25. <\/p>\n\n\n\n

However, global uncertainties, including geopolitical tensions and potential trade disruptions from the return of United States protectionist policies, pose additional risks.<\/p>\n\n\n\n

Commodity prices will remain significant in determining the trajectory of South Africa’s mining sector over the next year. <\/p>\n\n\n\n

While gold prices are expected to remain strong due to global economic uncertainty, trade wars and slower global growth could adversely affect industrial metals.<\/p>\n\n\n\n

If global trade weakens, industrial metal prices could remain depressed, further impacting the mining sector\u2019s profitability and tax contributions.<\/p>\n\n\n\n

Despite these headwinds, stakeholders remain cautiously optimistic that structural reforms and targeted investments could help stabilise and eventually rejuvenate South Africa\u2019s mining industry. <\/p>\n\n\n\n

However, the sector risks continued declining without decisive action to address domestic bottlenecks and improve competitiveness.<\/p>\n\n\n\n

Should this decline continue, it will have severe consequences for employment, revenue generation, and economic stability in South Africa.<\/p>\n\n\n\n

Mining at a glance after 2024<\/h2>\n\n\n\n
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<\/p>\n","protected":false},"excerpt":{"rendered":"

One of South Africa’s most important sectors is facing mounting challenges that threaten its stability, growth, and ability to create jobs. <\/p>\n","protected":false},"author":92,"featured_media":811801,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[8377,2319,853,1809,17456,21727,17489],"class_list":["post-811752","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-arcelormittal","tag-mining","tag-south-africa","tag-stats-sa","tag-the-minerals-council-south-africa","tag-the-south-african-revenue-service-sars","tag-thungela-resources"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/811752","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=811752"}],"version-history":[{"count":21,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/811752\/revisions"}],"predecessor-version":[{"id":812036,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/811752\/revisions\/812036"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/811801"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=811752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=811752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=811752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}