HUGO PIENAAR: What the numbers really say about mining’s future

As we move to the nitty-gritty policy deliberation phase of the government of national unity (GNU), it is an opportune time to displace perceptions about mining in SA being a sunset industry with important data-driven caveats. The often-heard narrative is that mining production has been in decline, the sector’s GDP contribution has shrunk and the industry has shed jobs over several decades.

On production, the recent performance and the long-term trend for total mining output support the narrative of an industry in decline. Between 1994 and 2023, measured in inflation-adjusted (real) terms, mining production declined an average of 0.4% annually. This is overwhelmingly the result of a deep, structural decline in the gold mining industry.

Since 1994 gold production has shrunk an average 5.8% annually. Put differently, SA went from producing 580 tonnes of gold a year in 1994 to less than 97 tonnes in 2023. A nuanced view of the domestic mining industry needs to strip the collapse in gold output from the overall mining production number. Fortunately, Stats SA releases the total mining production figure with and without gold.

Once gold is removed from the overall number we find that non-gold mining production expanded an annual average 1.3% since 1994. This reveals a far better mining sector performance, though it is still only half the 2.6% average growth in non-mining GDP (at basic prices) since 1994.

Outsize impact

It is instructive to look at the growth in non-gold mining output before and after the global financial crisis in 2008.

After posting decent output growth that averaged 2.8% between 1994 and 2007, non-gold mining output growth slumped to zero in 2008-23. This compares with non-mining GDP growth of 1.4% over the same period. The global and domestic crises of the past 15 years have had an outsize impact on mining, which explains the underperformance. These include the following:

• The decline in global GDP during 2009 induced by the global financial crisis.
• The Marikana massacre in August 2012.
• The prolonged strike in the platinum group metal (PGM) sector during 2014.
• Multiple years of load-shedding/curtailment, culminating in record power outages during 2022 and 2023.
• Transnet’s operational problems, which continue to curtail bulk commodity exports, especially coal and iron ore. 

Despite these significant headwinds, some mining subsectors achieved stellar growth since 2008, even outpacing the performance in the non-mining sectors. Chrome has been the star performer, with output increasing by an annual average of 6.4% since 2008. On average, production of manganese increased 3.9% a year during the same period.

Employment in the mining sector mirrors the production trends. Overall industry employment declined from 611,000 in 1994 to about 480,000 during 2023. Once again, the effect on the gold sector is particularly stark, with employment plunging from 392,000 in 1994 to fewer than 94,000 last year.

In the non-gold mining sector, employment actually increased, from 219,000 to 386,000 during the corresponding period. Though the job gains in the non-gold sector were unable to compensate for the haemorrhaging in gold, these figures again highlight a more nuanced picture of the mining sector than the general downbeat perception.

Improved safety

Turning to mining’s GDP contribution, the technically correct measure to use is nominal figures. These take account of relative price movements in different sectors of the economy, and volumes. Measured in this way, mining’s GDP contribution rose from an average of just below 5% in 1994-2007 to slightly above 6% since 2008.

A discussion on mining would be incomplete without a reference to safety, the industry’s first priority. The safety record has improved dramatically over the years, with record low fatalities in 2022.

This overall snapshot speaks to an SA mining industry that has undergone a dramatic transformation away from gold being dominant to a far more diversified sector. SA is the world’s leading producer of platinum and chrome. We also produce a range of other minerals, including coal, iron ore, manganese and copper. Mining is far safer than before, and senior management in the industry is notably more diverse along race and gender lines than at the dawn of democracy.

Coming back to mining economics, the numbers suggest that with a more conducive policy and general operating environment mining has the potential to thrive. The absence of mining load-curtailment since April is a crucial first step towards unlocking the sector’s potential. This needs to be sustained, with the next step a razor-sharp focus on expanding electricity transmission infrastructure. A fully functional cadastre system, hopefully from the second half of 2025, will go some way to reigniting anaemic mining exploration, creating a pipeline of future production.

Another crucial pillar for mining to reach its full potential is for the seventh administration to continue to work closely with Transnet to implement its turnaround plan to lift total exports to 170-million tonnes in 2024/25 (from less than 152-million in 2023/24), and to support the deep reforms in the logistics sector. This includes realistic rules of the game to facilitate private sector participation.

The incoming administration should build on these initiatives and expand the focus to include, for example, prioritising municipal water infrastructure. If the GNU can show success on these fronts, far from being a laggard mining has the potential to be an important contributor to higher levels of real GDP growth.

• Pienaar is chief economist at the Minerals Council SA.