Government failing SA mining industry – Peter Major

The government’s failure to address glaring issues affecting South Africa’s mining industry is holding the industry back, said Peter Major, Mining Modern Corporate Solutions director.

The mining industry recorded its thirteenth consecutive month of year-on-year decline in February, according to StatsSA.

This decline came after a record high for mineral production in 2022 and a 3.3% mining production increase in January.

However, this upward trend was short-lived as seasonally adjusted mining production contracted by 4.9% in February and 5% year-on-year.

Eight of the twelve mining divisions declined in February, with coal and diamonds being the most significant negative contributors.

Coal production declined by 12.6% year-on-year, while diamond production declined by 45.3%.

A downward trend

Major said the reasons for the industry’s poor results are “well-known issues that have to be addressed by a competent government that is serious”.

He told CNBCAfrica that South Africa’s electricity crisis and transport logistics are among the most significant problems preventing the country’s mining industry from growing.

Unfortunately, there is not much the individual can do about these problems, and it comes down to the government, which must coordinate the “big issues” in a country.

Major emphasised the importance of looking at trends to determine where something is going – “trends are your friends”.

For example, South Africa’s electricity availability has been going downhill for over a decade. Since trends don’t change easily, one can assume that, without significant intervention, this downward trend will continue.

Another problem is South Africa’s troubled state-owned railway company, Transnet, which mines rely on to transport their products to harbours for export.

Due to various reasons ranging from corruption, technical failures, theft and vandalism, two-thirds of South Africa’s railroads have been closed, and the government cannot protect the third that is left.

Were it not for these problems, South Africa’s mining industry could thrive.

Metal prices have seldom been as high as they are at the moment, the country is one of the world’s largest metal and mineral producers, and the industry constitutes a significant part of South Africa’s GDP.

However, these problems and the government’s failure to address them have resulted in South Africa producing coal and getting it to the harbour at the same rate the country did 25 years ago, said Major.

He also pointed out how unusual it is for a country that is growing to see a decline in production, which reveals an unwillingness to strive for better.

There have been no changes in these “trends” for 10 or 15 years, which shows South Africa “willed” these trends to continue downward.

“We should be aiming for top 10 in everything. We used to be top three, top one, in many things. So it shows we can do it if we want to,” he said.

“We’re bad now because we want to be bad and because we don’t want to be good – that’s all it is. And we’re putting policies in place that entrench that.”

Bright side

Despite the overall decline in mining production, South Africa saw an increase in three mining divisions in February.

Iron ore production was up 30.6% year-on-year, gold production increased by 1.7%, and platinum group metals production increased by 0.2%. 

However, Major warned that while iron ore production might be up, sales still declined, which reflects the country’s ineffective harbours and transport problems.

Despite Major’s critiques, he said South Africa has the power to turn the industry around.

“We can start tomorrow. We can start today. All we need are policy changes. If the government would change a few policies, the individuals, the companies and foreign investors would all do the rest.”