Rough reality: Association of Mineworkers and Construction Union president Joseph Mathunjwa addresses striking mine workers in this file picture. He now says more retrenchments are looming and blames challenges in the industry on SA’s leadership, who are ‘caught up in selfish interests’.Picture: REUTERS
Rough reality: Association of Mineworkers and Construction Union president Joseph Mathunjwa addresses striking mine workers in this file picture. He now says more retrenchments are looming and blames challenges in the industry on SA’s leadership, who are ‘caught up in selfish interests’.Picture: REUTERS

High input costs and the fluctuating rand are weighing on mining and the Association of Mineworkers and Construction Union (Amcu) has warned of more retrenchments across the sector because of the government’s lack of focus.

The mining and manufacturing sectors put in resilient performances in the second quarter, but recorded a decline in June, according to Statistics SA data released on Thursday.

"There is no doubt that this decline is largely explained by a combination of the uncertainty regarding commodity prices and the strengthening of the rand exchange rate against the dollar," said Chamber of Mines chief economist Henk Langenhoven.

Seasonally adjusted mining production increased 0.6% in the second quarter of 2017 but fell marginally by 0.8% year on year in June while manufacturing production increased 1.5% in the second quarter of 2017, but decreased 2.3% in June.

With the Chamber of Mines and Mineral Resources Minister Mosebenzi Zwane at loggerheads over the controversial Mining Charter, Langenhoven said uncertainty, coupled with volatile commodity prices and the exchange rate, could have a devastating impact.

"Any additional uncertainties, like the potential 20% electricity price increase or the legal and regulatory uncertainty pertaining to the draft Mining Charter detracts from the sustainability of the sector. The latest announcements of mine closures and further potential closures are serious signs of this."

Amcu president Joseph Mathunjwa has blamed the challenges in the mining sector on the country’s leadership which he said was "caught up in narrow, selfish interests of jostling for power", while diverting attention from real issues such as the spiralling unemployment challenge.

He said that while external factors played a role in the mining industry’s decline; it was in the government’s interest to curb the job losses.

He told reporters at a briefing on Thursday that the worst was yet to come.

"We’ll not be surprised when we see Sibanye Platinum, Lonmin, Impala and other mining houses follow suit because it is the basis of capitalist thinking and the root of exploitation."

Nedbank economist Busisiwe Radebe said: "Longer-term prospects remain less certain due to the difficult environment and policy uncertainty stemming mostly from business-unfriendly decisions made by the mineral resources minister."

Radebe said the operating environment was challenging as cost pressures were elevated against the backdrop of generally flat mineral prices.

Investec economist Kamilla Kaplan said the commodity price rebound had weakened while operating cost pressures remained elevated.

She said policy uncertainty about the Mining Charter "will continue to dampen business sentiment in the mining industry and so both fixed capital expenditure and employment growth in the sector".

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