Home » South Africa’s Mining Industry Faces Massive Job Losses as Metal Prices Plummet

South Africa’s Mining Industry Faces Massive Job Losses as Metal Prices Plummet

How the fall in platinum group metals prices is threatening one of the biggest sectors in the country’s economy

by Motoni Olodun

South Africa’s mining industry, one of the biggest sectors in the country’s economy, is facing a looming crisis as metal prices continue to fall amid weak global demand and rising production costs. According to the National Union of Mineworkers (NUM), around 10,000 mining jobs may be lost over the next two months, affecting thousands of families and communities.

The NUM said that it was shocked by the scale of the potential job cuts, especially considering the high levels of unemployment in South Africa, which reached 32.9% in the second quarter of 2023, according to Statistics South Africa. The union said that its members and workers had nothing to celebrate this festive season, as they faced an uncertain future.

The main reason for the crisis in the mining industry is the sharp decline in the prices of platinum group metals (PGMs), which include platinum, palladium, rhodium and gold. These metals are mainly used in catalytic converters that reduce harmful emissions from vehicles, as well as in jewellery and electronics. South Africa is the world’s top producer of PGMs, accounting for about 80% of global platinum supply and 40% of palladium supply.

However, the demand for PGMs has been hit by several factors, such as the slowdown in the global economy due to the COVID-19 pandemic, the shift to electric vehicles that do not require catalytic converters and the geopolitical tensions between major consumers like China and the US. At the same time, the production costs of PGMs have increased due to rising electricity and water tariffs, labour disputes, and security challenges.

As a result, the prices of PGMs plummeted in 2023, reaching their lowest levels in years. For example, the price of palladium, which reached a record high of over $3,400 per ounce in 2022, has dropped by more than 40% to around $1,200 per ounce in November 2023. The price of platinum, which was above $1,000 per ounce in 2022, has fallen by almost 20% to below $900 per ounce in November 2023. The price of rhodium, which was the most valuable precious metal in history at almost $30,000 per ounce in April 2021, has crashed by more than 85% to below $4,000 per ounce in November 2023.

These price declines have severely affected the profitability and sustainability of the PGM producers in South Africa, which have already been struggling with low margins and high debts. Several companies have announced plans to restructure their operations, which may involve closing some loss-making shafts, selling some assets, or reducing their workforce.

Some of the major PGM producers that have announced or implemented job cuts in 2023 include:

  • Anglo-American Platinum, the world’s largest PGM producer, said that it was considering cutting the workforce at two of its South African units, without giving further details.
  • Wesizwe Platinum, which is partly owned by a Chinese group, said that it was looking to cut 571 out of the 761 jobs at its Bakubung platinum project mine in the North West province, due to the lack of alternatives to improve efficiencies and profitability.
  • Sibanye-Stillwater, the country’s biggest mining sector employer, said that it was restructuring its PGM operations, affecting 4,095 full-time employees and contractors at three of its mining shafts in the North West and Limpopo provinces, due to the rising costs and falling prices of PGMs.
  • Impala Platinum said that it was offering voluntary job cuts to workers at its Rustenburg mining complex in the North West province, without disclosing how many jobs it expected to cut, as part of its measures to reduce costs and improve performance.

The job cuts in the mining industry have serious implications for the South African economy, which relies heavily on the sector for exports, tax revenues, and employment. According to the Minerals Council of South Africa, the mining industry contributed 8.2% of the country’s GDP, 27.6% of its total exports, and 19.4% of its corporate tax revenues in 2022. The industry also employed about 454,861 people directly and supported another 4.5 million jobs indirectly in 2022.

The mining industry has also been a key driver of the country’s economic recovery from the COVID-19 pandemic, which caused a 7% contraction in the GDP in 2021. The industry grew by 21.9% in 2022, thanks to the high commodity prices and strong global demand. However, the outlook for 2023 is much more uncertain, as the industry faces multiple challenges, such as the persistent power cuts by the state-owned utility Eskom, the water shortages in some regions, the deteriorating logistics infrastructure, and the regulatory uncertainty.

The government and the industry stakeholders have been trying to find solutions to the crisis, such as improving the electricity supply, enhancing the security of the mines, promoting beneficiation and downstream industries, and supporting the transition to a low-carbon economy. However, these efforts may not be enough to prevent further job losses and mine closures, unless the global demand and prices for PGMs improve significantly.

The mining industry is not only a vital part of the South African economy, but also a source of pride and identity for many South Africans, who have a long and rich history of mining. The industry has also been a catalyst for social and political change, as well as a platform for innovation and creativity. Therefore, it is important to preserve and protect the industry and to ensure that it remains competitive and sustainable in the global market. The industry has shown resilience and adaptability in the past, and it can do so again in the future, with the support and collaboration of all the stakeholders.

Source: BusinessTech


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