EDITORIAL: Blackouts and rail woes cloud mining sun
Production has declined year on year for 12 consecutive months, Stats SA data shows
16 March 2023 - 05:00
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When mineral resources & energy minister Gwede Mantashe addresses mining conferences, he sometimes makes the point of saying that mining is a sunrise industry, not the sunset industry many South Africans imagine.
How much sadder then that the industry’s sun has not been rising nearly as fast as it could, and should, have in recent years. That’s evident again in the latest data from Stats SA that shows mining production has now declined year on year for 12 consecutive months.
The month-on-month figures show a happier picture, with mining output up by a much better than-expected 4.4% in January, after it was up 1.3% in December. Encouragingly too, the sharpest increases during the month were in some of SA’s largest export earners, especially iron ore. Gold and coal had good months too, though the important platinum group metals posted a decline.
The bottom line however is that SA’s mining industry is producing substantially less than on the eve of the Covid-19 pandemic in early 2020. Though production bounced back quite well from the hard lockdown, it has been on the decline for much of the past 18 months. But with key commodity prices reaching all-time highs during that period, the contrast between the industry’s output and the value of its sales could hardly be more striking. Stats SA’s numbers show that the industry is still bringing in multiples of the revenue it was earning three years ago, despite prices being well off their peaks.
How much more could SA have gained from its mining industry if the industry were able to produce more, and to export more? That’s really the issue, in the case of a sector which has come to the rescue of the economy and the public purse in a major way over the past two years or more. As the Minerals Council has pointed out, the industry paid over almost R74bn in company taxes and R14bn more in mining royalties to the taxman in 2022.
Law enforcement
It’s an industry that accounts for almost 8% of the economy and 40% of exports, as well as for almost 480,000 jobs. Its potential to deliver that sunrise for SA is enormous. But unless it can get the electricity it needs to sustain consistent levels of production, and the rail capacity it needs to deliver its exports to market, its potential will continue to be constrained. Fortunately, the industry is pressing ahead to build as much as 6,000MW of its own clean power to cut its dependence on Eskom. It’s trying too to work with Transnet to fix SA’s logistics, as well as to try addressing the crime and security issues derailing it.
But those crime and security issues are weighing more broadly on output and investment not just in the mining industry but in construction and manufacturing as well as other key sectors of the economy. To get meaningful growth, government will have to turn around SA’s dysfunctional law enforcement system.
Eskom and Transnet have been the big industries weighing on mining lately. In addition government has yet to sort out other long-standing failures such as the dysfunctional mining-exploration system and the absence of a new mining charter.
In mining, as with the economy as a whole, each new set of official figures comes as a fresh reminder of the economy’s constant failure to deliver on its potential.
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.
EDITORIAL: Blackouts and rail woes cloud mining sun
Production has declined year on year for 12 consecutive months, Stats SA data shows
When mineral resources & energy minister Gwede Mantashe addresses mining conferences, he sometimes makes the point of saying that mining is a sunrise industry, not the sunset industry many South Africans imagine.
How much sadder then that the industry’s sun has not been rising nearly as fast as it could, and should, have in recent years. That’s evident again in the latest data from Stats SA that shows mining production has now declined year on year for 12 consecutive months.
The month-on-month figures show a happier picture, with mining output up by a much better than-expected 4.4% in January, after it was up 1.3% in December. Encouragingly too, the sharpest increases during the month were in some of SA’s largest export earners, especially iron ore. Gold and coal had good months too, though the important platinum group metals posted a decline.
The bottom line however is that SA’s mining industry is producing substantially less than on the eve of the Covid-19 pandemic in early 2020. Though production bounced back quite well from the hard lockdown, it has been on the decline for much of the past 18 months. But with key commodity prices reaching all-time highs during that period, the contrast between the industry’s output and the value of its sales could hardly be more striking. Stats SA’s numbers show that the industry is still bringing in multiples of the revenue it was earning three years ago, despite prices being well off their peaks.
How much more could SA have gained from its mining industry if the industry were able to produce more, and to export more? That’s really the issue, in the case of a sector which has come to the rescue of the economy and the public purse in a major way over the past two years or more. As the Minerals Council has pointed out, the industry paid over almost R74bn in company taxes and R14bn more in mining royalties to the taxman in 2022.
Law enforcement
It’s an industry that accounts for almost 8% of the economy and 40% of exports, as well as for almost 480,000 jobs. Its potential to deliver that sunrise for SA is enormous. But unless it can get the electricity it needs to sustain consistent levels of production, and the rail capacity it needs to deliver its exports to market, its potential will continue to be constrained. Fortunately, the industry is pressing ahead to build as much as 6,000MW of its own clean power to cut its dependence on Eskom. It’s trying too to work with Transnet to fix SA’s logistics, as well as to try addressing the crime and security issues derailing it.
But those crime and security issues are weighing more broadly on output and investment not just in the mining industry but in construction and manufacturing as well as other key sectors of the economy. To get meaningful growth, government will have to turn around SA’s dysfunctional law enforcement system.
Eskom and Transnet have been the big industries weighing on mining lately. In addition government has yet to sort out other long-standing failures such as the dysfunctional mining-exploration system and the absence of a new mining charter.
In mining, as with the economy as a whole, each new set of official figures comes as a fresh reminder of the economy’s constant failure to deliver on its potential.
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