Job losses are set to continue at South African mining companies as the sector faces significant headwinds from an inconsistent electricity supply, water shortages, and deteriorating logistics preventing them from getting their products to market.
Mining analyst Peter Major told Business Day TV that the government must realise that unemployment and poverty will rise if it does not address these problems quickly and adequately.
Major was speaking about the release of third-quarter production data from Anglo American Platinum (Amplats) and Kumba Iron Ore.
For the third quarter, Kumba’s production declined by 12% compared to the year before, while Amplats’ plunged by 9%.
Major said the biggest factor contributing to these numbers is the economic environment in which these miners operate.
Mining companies rely heavily on economic growth to drive demand, which raises prices for their commodities.
However, South African mining companies have been unable to capitalise on rising demand and high prices due to an inability to get their commodities to market as Transnet’s rail and ports have become bottlenecks.
For example, iron ore prices have risen the past two quarters in a row, yet Kumba’s sales guidance for the third quarter fell over 10% as it cannot get its iron ore to market.
Kumba now has a stockpile of 9 million tonnes of iron ore across its operations that it simply cannot transport to the coast to export.
In the first half of the year, Transnet’s deteriorating performance cost Kumba R6 billion in lost sales and pushed the company to defer R2 billion in investments in South Africa.
Major said there is no point in expanding production if you cannot get your commodities to market and warned that Kumba may retrench workers.
On the other hand, Amplats experienced a five-day water stoppage at its Rustenburg operations, which caused its production and sales to decline 9% in the third quarter.
Major said these companies are as reliant on Eskom, Transnet, and local governments for water supply as the average citizen in South Africa.
While they can mitigate the effects more successfully, they will not be able to do so for much longer.
“Unfortunately, like most things our government has been trying to run, it has been unable to do a proper job,” Major said of Transnet.
“With all these infrastructure problems, the government has to realise if they do not get it right and help companies, there is going to be worse unemployment and poverty.”
“Government cannot create wealth. Only people and companies can. So, the government has to help companies and people, or unemployment will go up.”