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This year’s outlook for South African mining is bleak if the upheaval in the past six months that led to the restructuring of major mining companies is anything to go by.

Analysts forecast that the focus in mining this year will be on the platinum sector and relations between labour and the unions.

They expect the mining industry, which contributes 8.6 percent toward gross domestic product (GDP) and employs 1 million people (of whom 500 000 are directly employed), to shrink.

Jobs will be cut because of a lack of appetite from investors that has led to the restructuring of several operations.

Ebrahim Takolia, an executive lead for Mining Solutions at Deloitte Consulting, said just as gold producers were forced to assess all aspects of their cost structure and capital expenditure during the 1990s and early 2000s to survive as mining got deeper and more complex, “so too will platinum miners need to assess all aspects of their operating costs and capital expenditure”.

They will have to identify “the ‘nice to have’ vs ‘need to have’ items and (extracting) efficiencies wherever possible without compromising on safety and the long-term viability of the platinum reserves or the industry”, he added.

Takolia said this could include devolving activities and functions away from a head office set-up to mines, and with a greater proportion of services and functions being shared among mines.

The deeply entrenched issues that have surfaced in the mining sector over the past year have to be addressed if investor appetite for local mining is to be revived.

The labour unrest that rocked the mining sector and the country’s sovereign downgrades by two international ratings agencies was a blow to the sector and will continue to be a hot potato.

Communities, employees and mining companies have faced significant pressures from rising costs in the last five years, which has diminished the disposable income of communities and employees, and significantly reduced the margins of mining companies.

“As a result, employees and communities want more, and miners do not have, at present, more to give. The entrenched positions have… led to increased strike action and community dissatisfaction aimed at miners. This is expected to continue so long as the relationship between communities, employees and miners is adversarial,” Takolia said.

Ultimately, secondary industries including steel production will also decline, Saijil Singh, a lead analyst at international credit insurer Coface South Africa, said. “Unless something drastic is done, a number of mines will close and there will be no light at the end of the tunnel,” Singh said on Friday.

However, there is hope that there will be changes in the next five years.

Charles Kieck, the head of mining and project research at Pan African Research, said over the next five years the local industry should grow, from a slow start this year, to become once again a major metals producing country.

He said the commodity cycle “is also on our side”.

“After an expected slow start to the first half of this year, world growth should pick up to accelerate gradually over the next five years. The demand for our bountiful mining resources should grow rapidly and if government, labour and business maintain a win-win-win strategy, the South African people will be the biggest winner,” Kieck said.

There remains no simple solution to the historic challenges in the mining sector and yet it is evident by the events in the past six months that neither the government, labour nor business have solutions to the underlying problems.

The mining sector will be expected to make difficult choices as companies are not seeing the economic benefits of mining in South Africa because of rising costs.

“Slowly southern African countries are becoming more stable than South Africa,” Singh said, adding that some coal firms were investing in Mozambique rather than South Africa.

A number of mining companies have restructured their mines, including Gold Fields, which spun-off its South African assets and established a new company called Sibanye Gold in December.

Anglo American Platinum, the biggest platinum producer in the world, on Tuesday announced its plan to review its operations, raising the likelihood of slashing 14 000 jobs.

Harmony Gold announced earlier this year that it would close its Kusasalethu mine indefinitely following a strike in which two people were killed.