Mining output in South Africa is on a steep downward decline, with production 13% below the level seen in the 1980s.
This was revealed in a presentation by Minerals Council of South Africa chief economist Hugo Pienaar at the Mining Indaba this week.
Pienaar explained that mining was not only the backbone of South Africa’s economy in the past but still matters today.
The sector employs over 477,000 South Africans and pays the government over R140 billion in tax and royalties annually.
In recent times, mining has been able to smooth over the country’s deteriorating finances as the commodity boom in 2021 and 2022 enabled the government to extend the Covid grant and balance its budget.
However, this boom is long gone, and a near-perfect storm of load-shedding, logistical bottlenecks, declining commodity prices, and rising labour costs has hit the mining industry.
The latest data from the council shows that the mining sector’s contribution to GDP crashed 12% in 2023 due to the electricity and logistics crises that have hit miners hard, Pienaar said.
In particular, platinum group metals (PGMs) miners have been hard hit with steadily declining prices for their commodities.
Platinum mining shafts in South Africa are among the world’s deepest, oldest and most expensive to run, exacerbating the impact of declining PGM prices.
These miners have also been hit by high labour costs, which, when combined with electricity, make up most of their costs.
This has led many to discuss the need to restructure their unprofitable operations in South Africa.
Some miners have already begun restructuring their operations, potentially impacting between 4,000 and 7,000 jobs in South Africa.
PGM miners and others have also cut their production to reduce costs and because they cannot export their commodities due to deteriorating rail infrastructure and port backlogs.
And so, while South Africa’s mining output had declined since the 1980s, it started to accelerate again in 2010.
Since 1994, mining output has been declining by 0.4% on average each year, with more valuable commodities such as gold and platinum declining or remaining stagnant.
Chrome and manganese production has increased strongly, by 8.2% and 8.4% annually since 1994.
This has not been able to offset the sharp decline in gold production, which is down 85% since 1980.
The long-term decline in mining output is shown in the graph below.