Stats SA’s latest GDP data for the final quarter of last year shows that capital expenditure in SA mining declined by 9.6% year on year in 2024, with the Minerals Council SA calling last year’s fixed investment data a “horror show”.
The decline last year comes after SA’s mining capex hardly grew in 2023 — the real, inflation-adjusted data showed an increase of only 0.1% year on year.
In line with the data, recent financial results point to SA mining companies reporting capex bills that are lower year on year, particularly in the platinum group metals (PGM) sector where prices remain persistently low.
Northam Platinum reported a 25% decline in expansionary capex for the year to end-December, while Impala Platinum’s expansionary capital was down 58% in the second half of last year.
Kumba, SA’s largest iron ore producer, reported a 9% decline in capex last year as low prices and inefficiencies at Transnet constrained its operations.
Minerals Council chief economist Hugo Pienaar said mining’s weakening investment figure should be seen in the context of the sector’s constrained profitability, with Stats SA’s gross operating surplus data indicating mining profits declined for the second consecutive year on an annual basis.
The figure plummeted by 18.5% in 2023 and declined by a further 1% in 2024.
Pressure on the domestic sector’s profitability was also reflected in National Treasury budget documentation last month, which showed corporate tax receipts from mining could be down 28% year on year in the 2024/25 financial year.
Weak investment in exploration remains a significant constraint on SA mining, with outlays on mineral exploration declining by 6.2% year on year.
For five consecutive years, the value of SA’s mineral exploration had been stuck between a “paltry” R1.1bn and R1.2bn in real terms, said the council.
“If SA is to ensure a future pipeline of primary mining extraction, the [sustained] low levels of exploration need to be turned around with urgency,” it said.
The struggle to boost investment in mining comes at a time when the sector is threatened by a challenging and uncertain global environment, particularly given the heightened scrutiny from the US in recent months.
As an export-driven industry heavily influenced by international commodity markets, mining is particularly vulnerable to the threats posed by geopolitical uncertainty and US President Donald Trump to global trade, GDP growth and inflation this year.
Minerals Council economist Andre Lourens warned that the potential trade war threatened by the Trump administration could affect the mining sector in the form of increased volatility in the rand and oil prices.
A weaker rand would erode local miners’ cost savings by making equipment, chemicals and other imported inputs more expensive, while higher oil prices would push up energy, transport and logistics costs.
Global trade disruptions could also affect demand for key SA commodities, particularly those reliant on China as a major export destination, such as copper and iron ore.
This backdrop supported the call for more business friendly regulations and policies, and improved network infrastructure to ensure that mining reached its full potential, said Pienaar.
After contracting in 2023, SA’s mining GDP grew by only 0.3% last year, reflecting the lack of investment and profitability pressures that continue to undermine the sector’s economic contribution.
Despite having no load-shedding over during the last nine months of the year, the meaningful improvement in the stability of Eskom’s power supply last year did not deliver the economic growth that some had hoped for, with SA’s real GDP growth weakening slightly to 0.6% in 2024.
Update: March 5 2025
This article has been updated.
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