South Africa’s mining collapse

South Africa’s mining sector has experienced a steady decline in output over the past 20 years, and without a significant increase in exploration, the industry will continue shrinking. 

This means that mining, once the backbone of South Africa’s economy, is set to play a smaller role in the country’s fortunes in the future, with the industry a shell of its former self. 

It also means that South Africa does not benefit from commodity booms in the same way that it used to, with it having a smaller effect on the country’s finances and growth. 

Symmetry’s chief investment strategist, Izak Odendaal, explained that such a decline takes years to unfold and can then happen suddenly as mines reach the end of their productive lives and no new facilities are created to replace their output. 

Odendaal said many members of the mining industry have good reason to feel bullish about the sector’s prospects amid soaring precious metals prices. 

However, this may not be the case in South Africa, which remains one of the most difficult countries in which to operate a mine. 

“It has a long history of mining, which means there is a deep body of knowledge, but there are also memories of racial discrimination, worker exploitation and lax environmental management,” Odendaal said. 

“This complicates the current environment, leading to sometimes frosty relations between government, labour and the mining houses.” 

This dynamic has also contributed to the intense scrutiny and onerous regulations the sector faces when it comes to Black Economic Empowerment policies and other matters. 

Odendaal explained that this is a problem for an industry that craves regulatory certainty, given that a mine is a multi-decade investment.

This has been compounded by the collapse of key infrastructure in South Africa, particularly the country’s railways and ports. 

“Mines are electricity-intensive and cannot afford power outages when workers are kilometres underground,” Odendaal said. 

“By far the most economical way of transporting ore is by rail, but both the Saldanha iron ore and Richards Bay coal corridors operate below capacity.”

Another aspect of this is the rise of illegal mining, which has become widespread and begun to disrupt legitimate operations, forcing mining companies to invest heavily in security. 

No exploration, no growth 

South Africa’s difficult operating environment has ensured that South Africa’s mining sector is not an attractive industry for investment over the past 20 years.

This decline in investment may not be felt immediately, but as mines are decades-long investments, it is likely to bite in the future when the sector’s current mines reach the end of their operating lifespans. 

“Despite the country’s resource endowment, very little exploration activity is being done. This does not bode well for the development of future mines,” Odendaal said. 

Minerals Council CEO Mzila Mthenjane told the recent Indaba that exploration spending was only R781 million in 2024, a fraction of the 2006 peak of R6.2 billion. 

“There are things that can reverse the decline. A functioning cadastre, a fully online system where all mining rights applicable to a particular piece of land can be viewed, is necessary,” Odendaal said. 

“It will also allow a move away from paper-based processes that will reduce the risk of corruption around the awarding of mining rights.” 

Stats SA’s mining data tells a mixed story, offering little hope for sustained growth in South Africa’s most important export sector.

The December 2025 production numbers point to a negative final quarter, but, longer term, there is no trend, Odendaal said. Production levels have not grown over the past 15 years.

On the other hand, mining sales have jumped thanks to elevated precious metals prices. This is good for the trade balance, the fiscal balance and domestic financial markets. But for the country to truly benefit from higher prices, volumes should also rise.

There are signs that the mining environment is improving, with the government slowly taking action to make it more attractive to invest in South Africa. 

The Department of Mineral and Petroleum Resources is implementing a new cadastre, though it is well behind schedule. 

Electricity supply has improved substantially, but affordability is an obstacle, particularly for smelters. 

Transnet’s turnaround strategy is also bearing fruit, with volumes rising from a 2022 low of 149 million tonnes to a projected 181 million tonnes for the current financial year. 

This is still well below the 220 million tonnes it moved in 2015, and the 250 million tonnes target for 2030. As Transnet CEO Michelle Philips noted, that goal can only be achieved with private investment.

Last year, 11 private rail operators were granted access to Transnet’s tracks, though it will take time for wheels to hit the steel.