The value of South African mineral production achieved a record high for the second consecutive year in 2022, but underlying mining’s considerable contribution to the country’s economy and its citizens, warning lights are flashing for the sector because of constrained transport logistics, faltering energy supplies and almost zero net investment, industry organisation Minerals Council South Africa points out.

The council has published its ‘Facts and Figures Pocketbook 2022’, which indicates that the country’s mineral production achieved a record high of R1.18-trillion in 2022, up from R1.1-trillion in 2021, which was the first time the industry topped the trillion rand mark.

It notes that production value was driven by strong commodity prices, giving the domestic economy higher taxes to bolster the fiscus, increase employment and improve wages.

The mining industry is noted to be one of very few sectors in the prevailing economic climate that is adding jobs.

During 2022, the sector created 15 500 more jobs, lifting total employment to 475 560, according to the yearly publication.

“Once again, the mining industry has shot out the lights when considering its financial performance and contribution to the economy in 2022.

“However, we remain concerned about the worsening constraints in rail and port logistics, which means we have yet again forfeited the benefits of high commodity prices and demand, as well as inadequate electricity supply,” says Minerals Council CEO Roger Baxter.

The Minerals Council posits that taxes paid to government have helped save the country’s fiscus from dangerous debt metrics exacerbated by the Covid-19 lockdown and economic contraction.

Mining company tax in 2022 was R74-billion (R81-billion in 2021) and royalties increased to R14-billion from nearly R12-billion.

Mining’s contribution to gross domestic product (GDP) grew by 4% to almost R494-billion, keeping its percentage contribution to GDP at 7.53%, compared with 7.56% in 2021.

“Transport logistics and energy are two of the most critical issues the Minerals Council is dealing with at a Presidency, Ministerial and Transnet board level. We are in a partnership with the Transnet board to urgently resolve bottlenecks on the four bulk mineral export channels. We are [also] in constant talks with [State-owned utility] Eskom to find solutions to our energy crisis,” says Baxter.

The Minerals Council estimates the opportunity cost resulting from rail and port constraints to have increased to R50-billion in 2022 from R35-billion the year before when delivered tonnages are measured against targeted tonnages.

If the rail network was operating at nameplate capacity, with a few minor enhancements, South Africa would realise R151-billion more in bulk mineral sales, it points out.

The Minerals Council estimates production will fall by about 6% in 2022 compared with the year before.

The gravity of the situation is borne out by the volume of mining production falling to below pre-Covid-19 levels owing to structural constraints, leaving the industry unable to respond to higher commodity prices, it warns.

While export values grew to R878-billion in 2022 from R856-billion in 2021, it was purely because of commodity prices improving by 70% year-on-year, the Minerals Council outlines.

Export volumes were said to be stagnant, growing by just 0.2% in the 12 months to October 30, 2022, compared with the same period the year before.

Of concern for the longer term is the lack of investment in the mining sector, which points to constrained growth in the future and declining production if this trend is not reversed, says the Minerals Council.