The past few years have been characterised by volatility and disruption — from macroeconomic risks and geopolitical upheavals to inflation and higher interest rates, coupled with China’s tentative economic recovery. That is not to mention fragmented supply chains and the dual crises of energy and climate.
Such is the reality we face, and against this backdrop nations and mining companies must not only adapt but also enhance their agility and resilience. Our collective obligation is to strengthen the mining industry, ensuring its resilience throughout the cycles and safeguarding the extent of our contributions to communities and countries as a whole and, of course, returns for shareholders.
And let us not lose sight of who actually owns these companies — ultimately it is pension holders, millions of public sector workers, employees and community trusts here in SA.
The landscape for mining has undoubtedly shifted over the past 18 months, requiring new approaches in response to changing circumstances. We are acutely aware of the immediate challenges before us. We must think and act strategically to endure through these cycles.
In many ways Anglo American has faced a perfect storm amid the global volatility. Unusually, we see the confluence of several effects, such as platinum group metals (PGMs) and diamonds being at the bottom of their cycles, coupled with the logistics issues hampering Kumba Iron Ore and the vagaries of Eskom’s energy supply, all happening at the same time in a portfolio like ours.
Nonetheless, we must be resilient. In response, we have taken a series of measures to get back on track, resetting our plans to ensure we meet them, reliably and repeatedly. There may be some short-term pain in doing that, but it’s the right thing to do for long-term value creation.
Cycles are just that — they will come and go. But the combination of applying the right capabilities and decisions to the high-quality mix of assets will prevail and deliver competitive advantage over the long run.
The last few years serve as a prime example of mining’s ups and downs. Amid the global economic turmoil caused by the pandemic, mining emerged relatively unscathed, thanks to the leadership shown by the industry to ensure mining’s role as the engine of many economies was able to continue — and to do so safely.
This resilience led to a significant boon for a mineral-rich country such as SA. The numbers tell a story, and these numbers remind us of the extent to which the mining industry contributes.
In 2021, the R70bn that the mining industry in SA paid to the fiscus in company taxes and royalties was 70% higher than in 2020. In 2022, that figure rose to R88bn (company taxes of R73.6bn and royalties of R14.2bn).
What’s more, the government’s extension of its social grants programme, including the social relief of distress grant during the Covid-19 pandemic, was largely made possible by the mining sector’s financial contributions.
As the cycle moves and commodity prices fall, those contributions will decrease markedly, so it is in everyone’s interest for mining to be more resilient to help moderate the volatility in financial contributions.
The landscape has now shifted markedly. In 2023, we saw a rapid decline in certain commodity prices as interest rates soared to dampen rampant inflation, and economic growth faltered. PGMs, nickel, lithium and cobalt have all decreased sharply, to name but a few.
Concurrently, mining companies have been facing their own set of challenges, fuelled by declining ore grades and sharply increased input costs. Margins evaporate quickly in these circumstances, so something has to give to ensure that these companies remain viable and investable. We are all aware of the pain in SA’s PGM industry right now.
What matters is the industry and government’s ability to navigate these challenges to ensure the industry does survive and prosper, although smaller, direct workforces are a reality the industry is contending with right now.
This is the immediate crisis the mining industry faces, especially here in SA. How do we help protect the dignity of those who will be adversely affected by the necessary reconfigurations of many SA mines?
Of course, the ramifications go further than just those who are employed directly by the mining industry. There are many businesses — large, medium and small — that are entwined in the mining supply chain and employ people and contribute to economic activity.
They, too, are affected by the difficult period of workforce contraction that mining is facing now to be sustainable for the long term. There are no simple solutions to this intricate web of economic and social dependencies, but the need for a comprehensive, compassionate response has never been more critical.
It is a call to action, not just for those within the mining industry, but for all of us as we confront the reverberations that ripple through the economy. Through numerous programmes and interventions, the mining industry has long committed itself to thinking outside the box to spur wider economic activity.
One good example is the formation of the Impact Catalyst — an innovative partnership model for fostering economic activity beyond mining. This is led by Anglo American and Exxaro, along with the Council for Scientific and Industrial Research, the Mine Water Co-ordinating Body and World Vision, as well as the Industrial Development Corporation. This approach provides comprehensive and scalable benefits for stakeholders across mining communities.
Following the successful launch and several pilot projects in Limpopo — spanning broad sectors from agriculture and tourism to technology — work has begun in the Northern Cape to expand community access to broadband and other communication technologies. This includes projects focused on economic development, education, health, municipal infrastructure and early childhood development.
Of course, this does not fill every need, but it does demonstrate the industry’s efforts to fuel economic growth beyond mining. As we reflect on current pressures on our industry, we understand the value in working together to help configure new mechanisms for employment and economic activity. We know we can achieve so much when we work together towards a common goal.
• Wanblad is CEO at Anglo American.
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