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Decline in South African Mining Signals Alarm for Economy

Investment Lag in Greenfield Projects Threatens South Africa's Mining Future

by Adenike Adeodun

The South African mining industry’s growth is faltering, with a significant drop in investment in new greenfield projects and its contribution to the national economy halving over the past two decades, according to the latest report from Minerals Council South Africa.

The report, ‘Facts and Figures 2022′, reveals that the mining sector’s investment has primarily focused on maintaining existing operations, as evident in the 30% increase in gross fixed capital formation investment in brownfield growth. In stark contrast, the net fixed capital formation in mining has averaged just 4% from 1993 to 2022.

This investment pattern indicates a troubling trend, as the industry requires a major upturn in net fixed investment to replace depleted mines with new discoveries. Mining is the only sector in South Africa’s economy that has averaged a negative growth rate of 0.4% since 1994, lagging behind other sectors’ positive growth.

According to a report by Mining Weekly, the industry’s continued viability hinges on new greenfield investments, as the current focus on brownfield investment in existing lease areas is unsustainable for long-term growth. Despite these challenges, mining remains a trillion-dollar industry for the second consecutive year in terms of production value.

The sector’s direct contribution to South Africa’s GDP was 1.9% higher at R483.3 billion, with direct payments to the fiscus totaling R99.1 billion. However, the Minerals Council points out that mining could have contributed 35% to 50% more to the fiscus with improved logistics and electricity security.

According to Mzila Mthenjane, the new CEO of the Minerals Council, the industry’s decline should alarm the nation, given its potential value to the economy. The council is actively collaborating with business peers, the government, and stakeholders to find sustainable solutions to the industry’s infrastructural and logistical constraints while addressing security concerns.

Mthenjane emphasizes the crucial role of mining in supporting the wellbeing of South Africa’s economy and its people, advocating for the inclusion of the private sector in resolving these challenges. He asserts the importance of an efficiently functioning cadastre and an incentive framework to promote mining exploration, which is urgently needed.

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