The prevailing global recession and credit crunch are exerting heavy pressure on the country’s mining industry, its key export earner, says Industrial Development Corporation (IDC) strategic business unit head Abel Malinga.

South Africa’s exports are 
highly concentrated on commodities such as platinum, gold and coal. 
“These commodities constitute about 75% of the country’s mining exports and, except maybe for gold, these commodities have 
experienced significant price falls since their peaks in 2008.”

Most of the country’s commodities are exported to developed economies, such as Europe and the US. However, these economies have been hardest hit by the recession. In fact, the World Bank predicts a contraction of 2,2% in the global economy this year.

“Nonetheless, Europe is still our biggest trading partner, 
accounting for 38,1% of the country’s exports, with the US and Japan following. It is, however, 
a given that these markets are shrinking, with some recovery expected only by 2010 and a possible full recovery by 2013,” says Malinga.

But he hastens to add that it is “encouraging that South Africa has managed to increase its exports to Southern African Devel-opment Community (SADC) countries”. He notes that some exports being directed to SADC countries would have been 
absorbed by European markets had it not been for the economic 
squeeze.

Malinga stresses that South Africa needs to “aggressively push” exports to India, China and Brazil. 
“These are major developing economies, and South Africa is exporting less than 1% of its commodities to Brazil, for instance.”

He notes that Africa, in general, and South Africa, in particular, are facing a number of challenges with respect to the development of mining projects. 
“We need to focus on strategic investment, whereby we do not only develop the mining project, but also use investment to develop 
sufficient and sustainable infrastructure.

“About 80% of the continent relies on primary industries, such as agriculture and certain mining activities. 
“The continent needs to build its infrastructure and diversify its markets to develop a sustainable economy even after the life- of-mine.”

Malinga says a further challenge is that the recession has been accompanied by a credit crunch, making it increasingly difficult to source funding for new mining developments.

“This has severely influenced the funding of mining projects on the continent. 
“Investors, whether domestic or foreign, are struggling to obtain 
credit from banks and other insti-
tutions.

“Banks only supply funding once a project has reached the bankable feasibility stage. However, before a project reaches that stage, it needs a lot of money and support to take it from discovery to a bankable stage. 
“This is where organisations such as the IDC play a vital role in the development of projects.”

Currently, the continent’s 
economy is still experiencing a lack of equity and flexibility in its funding structures. 
“The IDC is trying to move 
beyond these restrictions, making it an ideal partner for development in Africa,” Malinga concludes.

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