Investment in South African mining showing positive growth, says Chamber economist

23rd November 2007 By: Brindaveni Naidoo

The mining sector in South Africa has “turned the corner”, with positive growth in investment recorded in the first half of this year, chief economist of the Chamber of Mines Roger Baxter said at the fifteenth BME annual conference on explosives, drilling and blasting techniques, held this month.

Baxter indicated that total mineral sales in 2006 were R195-billion, with the platinum industry leading, followed by coal and then gold.

Coal, which he referred to as the ‘unsung hero of the economy’, is a significant sector, providing the basis for the country’s industrialisation.

While gold production had more than halved over the past 20 years, the sector remained a key contributor to the economy through exports, investment and employment.
Diamonds and iron-ore were the fourth- and fifth-largest sectors. He said that South Africa produces 60% of the world’s minerals and exports these to 100 countries globally. However, while it is indicated that mining makes up only 7% of gross domestic product in South Africa, he said that the current figure is actually about 18%.
“If one looks at the backward and forward multipliers and the ‘induced effect’, the actual overall quantum is one-fifth of the economy, and almost 12% of employment in this country is driven by mining. Mining accounts for 33% of all empowerment deals in the country over the past 11 years, which amount to some R91-billion in value,” averred Baxter.
He added that the mining industry is performing well globally, with the top 40 companies’ capitalisation trebling, as a result of the global commodities boom.

Developing economies are playing a greater role, with China’s booming economy adding momentum to Asia-Pacific growth, said Baxter.

“South Africa is only now enjoying the global commodity boom. “There was a disappointment in 2004 and 2005 when investment in South Africa’s mining sector declined; however, this picked up in 2006,” said Baxter.

The key stakeholders in the form of government, the Chamber of Mines and organised labour agreed that three factors had constrained investment in 2004 and 2005.

These included infrastructural constraints, regulatory constraints and currency volatility. “However, good progress has been made in addressing these issues and investment growth returned to posi- tive territory in 2006. High-level strategic engagement between the stakeholders continues to bear fruit. A key area of focus is improving health and safety in the industry, and the important milestones that have been set for 2014,” he said.

He added that while real fixed investment picked up in 2006, the impact of investment is not yet being felt in terms of higher mining production.

“But, over time, higher investment will enable an improvement in production. Higher production and prices should help improve the export performance of the industry,” concluded Baxter.