Improving commodity prices and upward trends in global demand, especially from major South African trading partners, are expected to reinvigorate the mining industry, enabling it to perform relatively well throughout 2018, the Department of Mineral Resources (DMR) states.
The DMR notes that, with regard to the disputes pertaining to the Mining Charter and the extended legislative process for the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, the DMR hopes that the court and parliamentary processes will conclude timeously.
“The Minister Mosebenzi Zwane and the department’s role is to support Parliament in ensuring that the Bill is finalised in line with prescribed processes. “The finalisation is in Parliament’s hands. The DMR has, throughout the National Council of Provinces process, provided the required support and will continue to do so. It is hopeful that Parliament will finalise the Bill in the next financial year.”
Additionally, the DMR is of the view that the 2017 Mining Charter will ensure black persons’ effective and meaningful participation in the ownership, management and control of South Africa’s mining industry. Moreover, it expects it to do so without adversely impacting on the industry’s competitiveness and sustainability. As such, “it is unfortunate that the Chamber of Mines has resorted to the courts; however, it is their Constitutional right to do so”.
The DMR emphasises that its focus remains on positioning South Africa as a globally competitive mining investment destination – one that is meaningfully transformed to ensure that all South Africans derive sustainable benefit from the country’s mineral wealth.
“South Africa’s mining industry has, over the past few years, experienced declining financial performance, primarily owing to a slump in commodity prices and increased cost pressures,” says the DMR. These pressures, combined with intermittent labour action, resulted in shrinking margins and impairment provisions.
The department comments that, although the global economy is still fragile, the recovery in industrial activity has coincided with increased global trade, which bodes well for the local mining industry.
While mining is on a downward trend from its peak decades ago – from a 20% contribution to gross domestic product (GDP) in 1970 to 8% in 2016 – the mining industry remains crucial to economic development, the DMR states.
The department attributes this regression to structural shifts in the configuration of the local economy, noting that, “primary and secondary industries are contributing far less to our GDP relative to the tertiary industry”.
Although mining’s contribution to GDP has declined by 0.2% a year for the past five years, the DMR insists that the significance of the role that mining plays “shouldn’t be underestimated”, with the mining industry’s gross value of production having been R424-billion in 2016.
Further, about 70% of the minerals produced in-country – in terms of value – are exported. “The remaining share is used almost entirely by other local industries as intermediate input,” the department notes.
The DMR adds that the mining sector remains crucial in terms of foreign exchange earnings for the economy and that, while the manufacturing sector generated greater export sales than mining during the past decade, the mining sector, as a net exporter, remains the most important earner of foreign exchange.
“Investment is regarded as a catalyst in the mining industry and is essential in stimulating long-run sector growth through improvements in productivity, which, subsequently, enhances job creation and overall economic growth.”
The department stresses that the economic outlook for the industry remains positive, underpinned by its production growth in the first and third quarters of 2017.
It adds that South Africa’s periods of increased production were facilitated by higher commodity prices, increased global demand, the stability in the supply of energy and relatively stable industrial relations. “During the third quarter of last year, prices of precious metals, of which South Africa is a significant producer, increased, owing largely to the higher gold price, positively impacting on the industry in light of its improved productivity.”
The DMR states that the 2018 Investing in African Mining Indaba, to be held in Cape Town from February 5 to 8, provides a platform for the department to set the developmental tone of the industry while promoting mining investment in the country. “It also introduces the international investment community to mining interests throughout Africa.”
Additionally, the event provides an opportunity for the DMR to disseminate valuable information that is critical for investors in large-scale and junior mining. “South Africa will showcase that the country is indeed open for business and remains an investment destination of choice for mining.”
The DMR, which is sharing an exhibition pavilion with the departments of Trade and Industry and Science and Technology, as well as relevant State-owned enterprises, notes that its stand will focus on dissemination of information pertaining to opportunities in the sector, as well the latest local mining and processing technologies.
While DMR representatives will attend all the events and panels, “special attention will be on corporate presentations”. Further, the department intends to host various sessions with African Ministers, CEOs and fund managers in the lead up to and during the event.