The Minerals Council of South Africa has called for lower electricity tariffs and a friendly regulatory environment for the mining sector, saying this will help provide some respite to dwindling employment.
South Africa is a big producer of coal, platinum group metals (PGMs), gold and manganese, among other commodities. However, employment across the industry has been declining, with producers impacted by operational constraints and low commodity prices.
According to StatsSA, employment in the SA mining sector declined by 6926 workers to 472 153 in the second quarter of 2024. The Minerals Council has now called for an improvement to the South African regulatory environment to complement ongoing improvements in the operating framework.
“This raises the need for a mining-friendly regulatory environment, including the fast-tracked implementation of the online mining cadastre that includes processes to, among others, remove the double-granting of exploration and mining rights,” said Hugo Pienaar, chief economist for the Minerals Council.
He also said the Government of National Unity (GNU) needed to “guard against any measures that have the potential to postpone a recovery” in mining production and employment.
These included elevated costs of electricity, at a time when Eskom had applied for an increase in electricity tariffs of more than 36% from April next year.
“Such an increase will be untenable, both for energy-intensive sectors such as mining, and households,” said Pienaar.
According to the Minerals Council, the mining industry, although boosted by relative economic stability under the GNU and declining inflation, continues to be buffeted by industry specific constraints such as low commodity prices, which are likely to continue to weigh on mining jobs.
PGM prices, for example, were low, while demand from automakers remained uncertain. The impact of low prices on the PGM sector was affecting the SA mining industry the most.
“Given that the PGM sector is by far the biggest employer in mining, (accounting for) roughly183 000 jobs out of total mining employment of 479 000 in 2023, the ongoing uncertainty about future vehicle demand for PGM remains a big concern,” explained Pienaar.
Bulk commodity producers also continued to be affected by Transnet’s rail and port inefficiencies, although some mining CEOs had noted an improvement. The Minerals Council also noted some improvements in service by Transnet, but described it as slow, adding that this sluggish pace meant “coal and iron ore mining companies will not be expanding capacity and adding to their workforce any time” soon.
On the positive side, load-shedding had dissipated, with Eskom notching up sustainable supply since late March this year, while the outlook for power supply also remained positive.
Moreover, the rate of increase for headline CPI inflation moderated to 4.4% year-on-year in August.
Along with an improved inflation outlook, this had provided room for the SARB to reduce the policy interest rate by 25 basis points in September.
“We expect more rate cuts in the next 12 months. Investor, business and consumer confidence increased in the third quarter of 2024, following the formation of the GNU,” he said.
A further improvement in business and investor confidence was “necessary for higher levels of fixed investment”, which would propel the economy and boost production as well as employment across the sector.
