South Africa votes 30 years after Mandela’s victory but mining challenges persist

South Africa goes to the polls on May 29 after three decades of democracy but even a transformed mining sector faces persistent challenges, the industry says.

South Africa has produced some of the world’s mining heavyweights including Anglo American (LSE: AAL), Sibanye-Stillwater (JSE: SSW; NYSE: SBSW), Gold Fields (NYSE: GFI; JSE: GFI) and Impala Platinum (JSE: IMP; US-OTC: IMPUY). Post-apartheid reforms have dramatically reshaped the industry, which provides among the country’s best-paid industrial workers and has promoted women.

But countrywide unemployment around 40%, persistent power blackouts, a murder rate of 46 per 100,000 people compared with 6.3 in the United States, and government corruption weigh on the industry. The ruling African National Congress’s (ANC) policies promoting Black empowerment have diminished international confidence. Impala and Sibanye-Stillwater expanded to North America. Anglo faces a takeover bid. The nation celebrates Nelson Mandela but struggles to rekindle what he inspired.

“While aiming for growth, the mining industry has an unrelenting focus on transformation and inclusion as we strive to address our legacy,” industry association Minerals Council South Africa CEO Mzila Mthenjane said in an April 25 statement. “We acknowledge the significant strides in the transformation of management, inclusion of women in all aspects of mining, and improved health and safety, but we have more to do.”

The ANC, led by President Cyril Ramaphosa, faces the potential loss of its parliamentary majority in the upcoming elections – a first since apartheid ended. Polling suggests ANC support could fall below 50%, possibly requiring a coalition government. Forming a government with smaller, unpredictable parties might result in inconsistent policies and economic direction, complicating decision-making for companies.

Layoffs

Meantime, the mining erosion continues. Impala Platinum said Friday it will lay off up to 3,900 workers or 9% of its workforce. Sibanye-Stillwater said this month it could lay off 4,022 workers. The companies mainly cite sagging platinum metals group prices for the cuts. Platinum and palladium prices plummeted by about 38% and 63%, respectively, in 2023.

In December, Anglo American shares dropped the steepest since March 2020 after it said its subsidiary, Kumba Iron Ore, would reduce production over the next three years due to limited rail transport capacity to the port. Transnet, South Africa’s state-owned freight rail and port operator, faces challenges in transporting minerals and other commodities to export markets due to shortages of locomotives, cable theft and vandalism of its infrastructure.

Despite these challenges, miners’ basic wages are 17% higher than those in similar roles in manufacturing and construction. Before 1994, discriminatory laws blocked Black mineworkers from managerial roles and women from operational roles while keeping wages low.

Historically disadvantaged South Africans (HDSAs) now comprise 83% of the workforce, with management roles held by nearly 59% of HDSAs, approaching the Mining Charter’s 2018 target of 60%. Female participation has risen from 3% in the early 2000s to 19% last year.

According to the council’s data, the mining sector was one of the few industries to expand employment last year, adding 7,600 jobs and employing over 477,000 people, which accounts for 4.7% of formal employment.

Policy shortcomings

This year also marks the 20^th anniversary of the Mineral and Petroleum Resources Development Act (MPRDA), a law driving transformation and enabling Black-owned mining companies. It has been critical for redressing historical imbalances, according to Otsile Matlou, a mining lawyer at legal firm ENS in Johannesburg.

However, good legislation alone is insufficient without competent administration, he said in a blog this week. Shortcomings include regulatory uncertainty, administrative errors resulting in the double granting of rights and the unlawful refusal of legitimate mining applications, which have troubled the industry’s potential and growth.

“The MPRDA has brought us so near, yet so far – a bittersweet reflection,” he said on legal intelligence platform Lexology.

An October report by consultant PwC warned South Africa’s mining industry is severely declining. Mining profits were still far above pre-pandemic levels, but dropped by nearly half in the last financial year. The total net profits of 29 major mining companies fell to US$5.5 billion in their latest financial year-end statements from US$10.6 billion in 2022.

PwC also warned that South Africa’s gold mining industry could have less than 30 years of viability, and its iron ore industry might last only another 13 years without further investment.