Johannesburg - The remnants of South Africa’s 160-year-old mining industry would prove difficult to rebuild as bad policy decisions and ideology haunt the industry, which accounted for more than 8 percent of gross domestic product just a few years ago.
Peter Major, a director for mining at Cadiz Corporate Solutions, said this week that poor policy decisions and rhetoric had resulted in more than 400 000 gold miners and 600 000 subsidiary industry people being put out of work in the past 20-plus years.
Read: 'Parts of SA mining sector in the ICU'
“The majority of the mining policy and legislative decisions, including black economic empowerment, were not thoroughly thought through,” Major said.
“Our mining industry got hit the hardest. But manufacturing, agriculture and clothing have been decimated as well. Much of what is left today are remnants.”
Highly “risk averse” investors have voted with their feet and many South African mining companies have gone global and spun off their local operations to reduce risk.
For example, Gold Fields hived off its ageing local mines into Sibanye Gold shortly after the Marikana massacre in mid-August 2012.
Lonmin, the UK producer of platinum group metals with operations in South Africa, took a knock with labour unrest at its Marikana mine, where more than 40 people were killed in violent clashes and its shares plunged.
Loss-making sector
Last year, BHP Billiton spun off its South African assets to form much of South32.
Anglo American said last month it would sell its iron ore and coal assets as it narrowed its strategy and portfolio to focus on just diamonds, platinum and copper.
Roger Baxter, the chief executive of the Chamber of Mines, said apart from depressed commodity prices, rising electricity costs, the increase in other cost areas and falling commodity prices had pushed the mining sector into loss-making territory.
Baxter noted that mining was the only loss-making sector of the South African economy in 2014, incurring an aggregate R10.6 billion loss after taxes and dividends.
“To be able to attract investment to sustain mines and even to grow the South African mining industry South African mines need to improve our global competitiveness.
“This will enable mining companies to raise cost-effective capital and attract investment from institutions, which are not constrained by geography or industry.”
Old Mutual mining and resources fund manager Ian Woodley said despite a shrinking industry, it was business as usual in South Africa’s gold, platinum and iron ore sectors.
Court case
“The biggest difference will be in the coal sector. At the moment South32, Glencore, Exxaro and Anglo American are the dominant players. None of these three are likely to buy all of Anglo’s coal assets, so it is possible that a fourth player in coal will enter the market,” Woodley said.
Abdul Davids, the head of research at Kagiso Asset Management, said the biggest issues overhanging the South African mining industry included the court case involving the “once-empowered, always-empowered principle” and the timing of the adoption of the Mineral and Petroleum Resources Development Act.
“For South African mining companies that are battling with low dollar commodity prices, the rand weakness over the last few months is likely to feed into higher cost inflation and pressure for higher wages as a result of the steep rise in inflation,” Davids said.
BUSINESS REPORT