JOHANNESBURG (miningweekly.com) – Notwithstanding the current turbulent nature of the South African mining sector, it would continue to play a significant role in the future growth of the global mining industry, PricewaterhouseCoopers (PwC) mining industry leader for Africa Hein Boegman said on Wednesday.

Speaking at the launch of the tenth edition of the advisory firm’s yearly industry report called Mine: A Confidence Crisis, he stated that the trend of slower growth in the international mining arena was expected to linger for the remainder of the year, with higher growth prospects returning in 2014.

He pointed out, however, that Europe would dampen any advanced-economy-led recovery, while emerging and developing markets, particularly China, would drive growth.

Boegman told Mining Weekly Online that South Africa would continue its central role in this global growth, as the country still had an abundance of platinum, gold, iron-ore and coal resources.

“So the fundamentals are there. It is about the ability to extract it economically and ensure a margin – and, in the process, earn much-needed revenue for the country,” he said.

The report revealed that the global mining industry was facing a crisis of confidence, while the sector’s net profit fell by about 49% to $68-billion last year, as lower commodity prices and higher costs hurt the bottom line.

The research found that the market had lost confidence that costs could be controlled, that new CEOs could deliver on promises, that commodity prices would not collapse and that resource nationalism would not overwhelm the industry.

Although the South African equivalent of the report would only be released in November, Boegman noted that the failing confidence in the international industry was likely to be more acute in the local mining sector, owing to wildcat strikes, high wage demands and rising input costs.

He added that investors were already turning their gaze to alternatives elsewhere in Africa, which offered the benefit of fewer labour regulations and cheaper labour.

Although the South African mining industry’s contribution as a percentage of the country’s total economy was declining, its contribution as a percentage of foreign revenue earned for the country was still positive, with no great replacements as yet.

Boegman expected the next six months to be challenging in the local mining sector. “My understanding is that wage demands in the next round of negotiations, which is about to start, is in the 50% range. This, combined with low margins and higher costs, is a concern.”

He warned that if the challenges in the mining sector persisted, countless jobs would be lost and the industry’s ability to earn foreign revenue for the country would be negatively impacted.

“All parties, including government, labour and mining companies know this and hopefully the balance will return and we will have some normality going forward.”

He said, however, that it would be difficult to predict when a turnaround would occur for the industry.

“I just know that if the past six months was to be repeated for too long, there is not going to be a lot left of the industry,” Boegman indicated, adding that it was a question of reaching a balance between the needs of all stakeholders, which he believed was inevitable, as the industry cycle progressed.

Meanwhile, PwC’s study found that mine management had started to transfer its focus to managing productivity and improving efficiencies, as opposed to increasing production volumes.

Boegman also pointed out that, although overseas companies had proven their ability to increase their efficiency, the above-mentioned challenges facing the local industry would make it more difficult for local firms to achieve this.