EDITORIAL: Why SA mining is still not quite turning a GNU corner

For most mining companies the past 12 months have not been easy. Iron ore and gold miners benefited from higher prices for their commodities but SA’s coal and platinum group metals (PGMs) miners had to contend with huge price decreases. Coal prices dropped by about 40% and palladium, which together with rhodium accounts for about 60% of the PGM basket price, is down 36% in rand terms.

Over the past six months the electricity supply situation has improved, but the industry is still grappling with a drastic deterioration in rail services, which has seen many miners of bulk commodities such as coal and iron ore cut back on production.

The result has been large-scale job cuts. The industry shed more than 7,000 jobs in the second quarter alone and some mining companies have delayed capital projects.

Still, this week at the Joburg Indaba mining bosses and investors seemed rather upbeat about the industry’s prospects.

Maybe this was because, the night before the conference started, many of the CEOs attended the launch of phase 2 of the collaboration between the government and business, which many hope will achieve similar results in fixing rail and port services as was achieved for electricity during phase 1.

The market-friendly election outcome and the subsequent establishment of the government of national unity (GNU), months without load-shedding, glimmers of hope that SA’s economy can grow by 2% or even 3% in the near future, and signs that Transnet is at least not performing any worse than last year all contributed to the sense of optimism for an industry that has had little to smile about this year (unless you are a gold miner, of course).

But the good vibes were not strong enough to win over the reality of many factors that are still impeding growth in mining.

The poor performance of Transnet’s rail and port services has hit miners hard and continues to do so. After railing a record 226-million tonnes in 2017/18, Transnet Freight Rail (TFR) volumes began slipping as issues such as a lack of infrastructure maintenance, crime and a shortage of locomotives took their toll. By 2022/23 TFR volumes collapsed to 149-million tonnes. This year it hopes to improve to 170-million tonnes, but the government and business partnerships want to see 193-million tonnes — a target which CEO Michelle Phillips admitted it was not yet on track to meet.

Mining leaders also called for the government to be more proactive in reviving mining exploration, saying that the R400m fund for junior miners launched earlier this year was a drop in the ocean of what was needed to get investors back. Deteriorating network services, a shambolic cadastral system that would see new mining applications being stuck in bureaucratic and administrative purgatory for years, crime, corruption and uncertainty all contributed to SA’s share of global exploration spending dropping to below 1% from a peak of 5% in 2003.

Now that electricity supply challenges are easing, affordability has become the number one concern. SA desperately wants to see more investment in mineral beneficiation and a revival of the faltering smelting industry, but with Eskom wanting a tariff increase of 36% next year this becomes a pipe dream.

At the close of the conference mineral resources minister Gwede Mantashe said the government and industry needed to “talk about a tax holiday for beneficiation”.

This is one idea, but the mining industry needs more than this to turn the good vibes into better days.