/ 5 February 2024

Mining industry sees light at end of the tunnel

Mining Output
The mining industry has struggled in the face of energy and logistics constraints, but signs of progress have stirred cautious optimism. (Michele Spatari/Bloomberg via Getty Images)

South Africa’s mining industry may be “on the cusp of a turnaround”, according to Minerals Council chief executive Mzila Mthenjane

He was briefing the media on the state of the industry ahead of the 30th Mining Indaba, taking place in Cape Town this week. 

His slightly more positive assessment comes off the back of easing energy and logistics constraints, which have hamstrung the industry’s growth — stirring tensions between miners and government. The Minerals Council has also welcomed the government’s announcement of its chosen service provider for its new cadastral system, an important step towards clearing the country’s mining rights backlog.

 The mining rights administration system “lists available mining or prospecting rights, properties under a mining or prospecting right and the expiry of currently held rights and the ownership thereof”, according to Engineering News

Speaking at Monday’s briefing, Minerals Council chief economist Hugo Pienaar noted that over the next 12 to 18 months the frequency and severity of load-shedding should let up. Moreover, there are signs that South Africa’s logistics constraints — which cost the industry an estimated R50 billion in 2022 — may also start to subside, albeit at a slower pace.

Mineral export revenue declined by more than 11% year-on-year in the first 11 months of 2023, as bulk commodity exporters contended with Transnet’s deteriorated rail infrastructure, according to the council’s analysis.

The Transnet-induced logistics crisis was the main target of the industry’s ire at last year’s Mining Indaba. 

The enmity between the Minerals Council and Transnet made headlines ahead of the 2023 event when a letter by the organisation’s president Nolitha Fakude was leaked to the press. In the letter, Fakude called for urgent action to arrest Transnet’s decline. Included in these interventions was the Mineral Council’s call for the removal of then Transnet chief executive Portia Derby

Derby has since resigned from Transnet. She was followed by Nonkululeko Dlamini, the group’s former chief financial officer, as well as freight rail chief executive Sizakele Mzimela.

Mthenjane said relations between the Minerals Council and Transnet have improved. 

The private sector has worked closely with the government to arrest Transnet’s decline through the national logistics crisis committee. Late last year, President Cyril Ramaphosa’s cabinet approved the Freight Logistics Roadmap. Among the interventions set out in the roadmap is the concessioning of rail corridors to the private sector.

Pienaar noted that the industry will closely watch Ramaphosa’s State of the Nation address, which he will deliver on Thursday, for any signs that the government will grant Transnet a bailout. Any confirmation of a bailout will come from Finance Minister Enoch Godongwana, who will table the country’s budget later this month.

Despite the country’s fiscal dilemma, Godongwana has not counted out granting a bailout to Transnet, which reportedly asked the treasury for a more than R100 billion cash injection. In December 2023, the treasury announced that it has agreed to grant Transnet a R47 billion guarantee facility, earmarked to support the beleaguered state utility’s recovery.

The industry will also look for more details about the new cadastral system, which will still take some time to come into effect. 

Speaking during the Mining Indaba’s opening ceremony, Minister of Mineral Resources and Energy Gwede Mantashe said that to set the system right, the government has given itself 12 months to get it up and running.

All this suggests that any real turnaround for the industry will only come in 2025. Mthenjane seemed to confirm this, noting that 2024 will probably be dedicated towards stabilising the industry as opposed to expansion.

Notwithstanding ongoing uncertainty about the health of the global economy, which will have a bearing on demand for commodities, 2024 will also see South Africans heading to the polls. The run-up to the elections — which could see the ANC’s support slip considerably — may stir greater disquiet among the private sector, which has held out from investing amid harsh economic conditions and policy uncertainty.