Retrenchments and investment cuts come amid high unemployment and weak economic growth and as the country prepares for a crucial election
21 February 2024 - 13:43
by Felix Njini and Nelson Banya
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SA’s mines, which laid the foundation for industrial growth even after 1994, are cutting thousands of jobs and paying much less tax, muddying the domestic economic outlook months away from the May 29 national and provincial elections.
The country’s biggest mining investors are halting plans to spend billions of rand on new projects in response to a slump in profits due to myriad local challenges and weakening prices of commodities such as platinum.
The layoffs and investment cuts come against a backdrop of high unemployment and weak economic growth that loom large over the parliamentary vote, which is likely to result in the ANC losing its parliamentary majority for the first time in 30 years.
A rally in recent years in the price of commodities such as palladium, rhodium, coal and iron ore helped companies such as Anglo American Platinum, Sibanye-Stillwater, Kumba Iron Ore and Exxaro Resources make windfall returns — allowing them to partly paper over domestic constraints including load-shedding, the crisis at Transnet and crime.
But with prices plummeting since 2023, companies are in restructuring mode and cutting jobs.
“The challenge is now just to be able to operate, to be able to produce on a continuous basis,” said Eunomix Research CEO Claude Baissac.
“Unless there is a fundamental change of policy and state capacity, we are going to end up with a marginal mining industry, providing marginal jobs.”
The mining sector’s contribution to GDP stood at 6.2% in 2023 from 7.3% in 2022 and 8.3% a decade earlier, according to the Minerals Council SA. The sector employs about 477,000 people.
Loss making
Anglo American’s platinum and iron ore units in SA this week announced plans to cut more than 4,000 jobs and review agreements with about 780 contractors.
The restructuring, which includes postponing spending plans at some platinum shafts and closing a metals processing plant, aims to save Anglo R13bn.
About 15 of SA’s biggest mining companies, including Amplats, Kumba and Glencore, contributed R110bn in taxes and royalties in 2021, the bulk of about R360bn in corporate tax collected by the National Treasury, according to RMB Morgan Stanley analysts.
The analysts forecast that amount halved in 2023.
Sibanye, SA’s top employer in the mining sector, plans to cut about 4,000 jobs at its platinum mines. Smaller platinum producers and some coal producers have also announced job cuts.
About half the country’s platinum mines, some of which were the world’s deepest as well as being costly to operate, were loss-making at current prices, said Impala Platinum spokesperson Johan Theron.
“That means if nothing changes [in terms of prices], more than 50% of the industry will disappear in some shape or form over time,” he said. “Nothing is sustainable that is fundamentally loss-making.” Impala has said it may cut jobs and in 2023 asked workers to take voluntary exit packages.
Crisis at Transnet
SA’s 2023 coal exports hit the lowest level since 1992 because of the dire state of its railway network, operated by state-owned Transnet and hampered by a lack of wagons and spare parts, cable thefts and inadequate maintenance. For a while companies stockpiled their commodities hoping the situation would improve, but more recently they have been scaling down production and cutting jobs to cushion losses.
Anglo American’s Kumba, Africa’s top iron ore miner, had cut mining output for the next three years until rail capacity improved, CEO Mpumi Zikalala said on Tuesday. Kumba had about 7-million tonnes of the steelmaking ingredient stockpiled at its mines as of December.
“Clearly, for as long as there is no immediate solution to the electricity crisis, and rail and port infrastructure challenges, we will continue to lose jobs,” said the National Union of Mineworkers.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
SA’s mines are bleeding cash and jobs
Retrenchments and investment cuts come amid high unemployment and weak economic growth and as the country prepares for a crucial election
SA’s mines, which laid the foundation for industrial growth even after 1994, are cutting thousands of jobs and paying much less tax, muddying the domestic economic outlook months away from the May 29 national and provincial elections.
The country’s biggest mining investors are halting plans to spend billions of rand on new projects in response to a slump in profits due to myriad local challenges and weakening prices of commodities such as platinum.
The layoffs and investment cuts come against a backdrop of high unemployment and weak economic growth that loom large over the parliamentary vote, which is likely to result in the ANC losing its parliamentary majority for the first time in 30 years.
A rally in recent years in the price of commodities such as palladium, rhodium, coal and iron ore helped companies such as Anglo American Platinum, Sibanye-Stillwater, Kumba Iron Ore and Exxaro Resources make windfall returns — allowing them to partly paper over domestic constraints including load-shedding, the crisis at Transnet and crime.
But with prices plummeting since 2023, companies are in restructuring mode and cutting jobs.
“The challenge is now just to be able to operate, to be able to produce on a continuous basis,” said Eunomix Research CEO Claude Baissac.
“Unless there is a fundamental change of policy and state capacity, we are going to end up with a marginal mining industry, providing marginal jobs.”
The mining sector’s contribution to GDP stood at 6.2% in 2023 from 7.3% in 2022 and 8.3% a decade earlier, according to the Minerals Council SA. The sector employs about 477,000 people.
Loss making
Anglo American’s platinum and iron ore units in SA this week announced plans to cut more than 4,000 jobs and review agreements with about 780 contractors.
The restructuring, which includes postponing spending plans at some platinum shafts and closing a metals processing plant, aims to save Anglo R13bn.
About 15 of SA’s biggest mining companies, including Amplats, Kumba and Glencore, contributed R110bn in taxes and royalties in 2021, the bulk of about R360bn in corporate tax collected by the National Treasury, according to RMB Morgan Stanley analysts.
The analysts forecast that amount halved in 2023.
Sibanye, SA’s top employer in the mining sector, plans to cut about 4,000 jobs at its platinum mines. Smaller platinum producers and some coal producers have also announced job cuts.
About half the country’s platinum mines, some of which were the world’s deepest as well as being costly to operate, were loss-making at current prices, said Impala Platinum spokesperson Johan Theron.
“That means if nothing changes [in terms of prices], more than 50% of the industry will disappear in some shape or form over time,” he said. “Nothing is sustainable that is fundamentally loss-making.” Impala has said it may cut jobs and in 2023 asked workers to take voluntary exit packages.
Crisis at Transnet
SA’s 2023 coal exports hit the lowest level since 1992 because of the dire state of its railway network, operated by state-owned Transnet and hampered by a lack of wagons and spare parts, cable thefts and inadequate maintenance. For a while companies stockpiled their commodities hoping the situation would improve, but more recently they have been scaling down production and cutting jobs to cushion losses.
Anglo American’s Kumba, Africa’s top iron ore miner, had cut mining output for the next three years until rail capacity improved, CEO Mpumi Zikalala said on Tuesday. Kumba had about 7-million tonnes of the steelmaking ingredient stockpiled at its mines as of December.
“Clearly, for as long as there is no immediate solution to the electricity crisis, and rail and port infrastructure challenges, we will continue to lose jobs,” said the National Union of Mineworkers.
Reuters
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