ASHLEY NYIKO MABASA: Mining industry’s shifting dynamics hold risk but also offers reward

South Africa’s mining sector expanded just 0.5% in the third quarter of 2025, highlighting growing concern about the industry’s outlook.

Growth was well below the country’s average GDP growth of 0.8% over the past 10 years and also weaker than South Africa’s population growth of 1.3%, meaning output effectively dropped on a per-capita basis.

The subdued performance is a reflection of rising geopolitical risk and a structural slowdown in demand for platinum group metals (PGMs), which both continue to weigh on the sector’s medium-term prospects.

Though it has registered four consecutive quarters of expansion, the Suith African economy has generally underperformed, with several key industries experiencing a tumult. That was driven by several factors, including US tariffs and an existential crisis in the domestic ferrochrome sector. However, the most acute pressure stems from the accelerated displacement of internal combustion engines (ICEs) by electric vehicles (EVs) in key export markets, which directly affects demand for PGMs.

The PGM industry was further affected by the demerger of Anglo American’s platinum division, which now operates as Valterra Platinum. The move triggered a foreign direct investment outflow of R73bn, the largest of its kind since 1985. Global EV market concentration has surged to 20%, up from negligible levels in 2010, reshaping the outlook for catalytic converters.

Permanent shift

The data points to a permanent shift: if China meets its target of 60% new EV penetration by 2030, and the EU achieves a full transition by 2035, electric drivetrains are projected to eclipse traditional engines by 2034.

Analysts warn this crossover will precipitate a secular decline in PGM demand of about 5% annually through to 2035. The effect of this transition is already visible in bellwether markets such as Norway, where EV market share reached 96.9% in January, heavily damping global appetite for South Africa’s key mineral exports.

Nonetheless, monetary policy has offered a favourable outlook for the sector. The South African Reserve Bank and the National Treasury have signalled lower interest rates for 2026, aligning with an inflation target of about 3%. That is an important boost for the industry and is expected to encourage inflows of foreign direct investment. The present strength of the rand, now trading at about R16.63/$, its strongest level since January 2023, further strengthens that position.

The rand’s appreciation is partly a consequence of the dollar’s continued weakness; it has fallen 10.8% against a basket of currencies since the start of 2025. In the first half it recorded its worst performance since 1973. For South Africa and other emerging markets, particularly those with dollar-denominated debt and commodity exports, a weaker dollar provides a crucial tailwind.

Geopolitics will remain a key factor for South Africa’s critical minerals in 2026. Still, the immediate focus must shift to stabilising domestic infrastructure. The completion of the mining cadastral system, planned for September 2026, and the ongoing stabilisation of Transnet are vital levers for the mining supply chain, building on the improvements seen in 2025.

Global demand for minerals essential for defence, the energy transition, data centres and semiconductors has created supply gaps with significant security and economic implications. That is an opportunity the South African mining sector must seize in 2026.

New phase of competition

As the US and China race to secure access to Africa’s critical minerals and rare earth elements, South Africa must navigate this new phase of competition. While American companies are reorganising to engage in commercial mining, the US remains far behind China in establishing a strong presence in Africa’s mining sector, a dynamic highlighted by projects such as the Lobito Corridor — the 1,300km railway and logistics project linking Angola’s port of Lobito to the mineral-rich copperbelt of the Democratic Republic of the Congo and Zambia.

For vertically integrated businesses such as the Glencore-Merafe chrome venture, a resolution to the high cost of electricity is critical. The minister of electricity & energy, Kgosientsho Ramokgopa, has signed a memorandum of understanding (MoU) with the ferrochrome industry to reduce tariffs. That continues the use of negotiated pricing agreements, which were approved by the National Energy Regulator of South Africa (Nersa) in October 2023 to support energy-intensive industries.

Nersa is processing an application for an interim tariff adjustment for smelters. Simultaneously, the government is developing a complementary mechanism to support more competitive pricing, which is expected to be finalised in 2026. Should the interim tariff be approved, smelters have committed to suspending Section 189 retrenchment processes and bringing about 40% of their furnace capacity back online while the long-term solution under the MoU is developed. These are factors firmly within the government’s control.

To unlock the sector’s potential, which could push GDP growth above the 1.3% population growth rate and help reduce unemployment (presently at more than 34%), the mining sector must look beyond policy. External objectives can be met through analytics and AI to reduce asset downtime and augment human capability. Redesigned operating models, which are integrated and human-centric, can lock in sustainable improvements. Furthermore, adopting renewable energy can stabilise costs and reduce risk, while transparent engagement with investors on costs builds confidence and secures access to favourable financing.

Finally, while miners have boosted capital expenditure and eased back on shareholder payouts — a clear shift towards a growth mindset — they must not neglect their social licence to operate. Miners that approach community support as an opportunity, not merely an obligation, can build trust and strengthen reputations, which is vital for winning approvals and funding. Systematic engagement with communities throughout the mining lifecycle, including during closure, will be a critical mechanism for addressing the issue of illegal mining.

• Mabasa, an executive manager in the office of the deputy mineral resources & petroleum minister, is co-chair of the Brics Youth Council.