The Outlook for the South African Mining Sector

Mining Indaba Conference 2017

Mining | Economic & Financial Consulting

February 8, 2017

South African mining operations

This week, Cape Town will be playing host to thousands of additional visitors. Mining company representatives, investors, government ministers and officials from across Africa and providers of support services to the mining sector will converge on the Mother City for the 23rd Investing in African Mining Indaba. Later in the week their number will be swelled further as politicians, representatives of civil society and the media arrive to attend the State of the Nation address.

While it may no longer dominate the South African economy to the same extent that it did a few decades ago, the mining industry remains a key source of direct and indirect employment, export earnings and tax revenues. The number of mining companies listed on the JSE is now less than half of what it was in 1994 and South Africa has slipped from its once leading place in the production of gold to a situation in which it now accounts for only 5% of worldwide supply. Mining accounts for 5% of non-agricultural formal sector employment in South Africa, with each direct job in the sector leading to two additional indirect jobs being created in the wider economy.

Furthermore, the health of the mining industry in South Africa has a considerable impact on other countries across the continent where the extractive activities are an important component of the economy. South Africa is a source of significant investment across all of these countries and is a base for many of the legal, financial, engineering and other support services needed for the successful development and operation of their mining projects.

So what is the mood of the industry as it gathers for one of its most high profile events of the year?

On the back of weak demand, low and volatile commodity prices, and depressed levels of economic growth in key markets, the atmosphere at last year’s Mining Indaba was subdued and many conversations revolved around the topic of restructuring. Attendance were levels significantly lower than the previous year. Since then prices for many of the key commodities have firmed and there are signs of increased demand. Many commentators are questioning whether the bottom has been reached. Or indeed whether the prospects for the sector have already improved and the industry can now look forward to a sustained period of higher prices and an improved balance between supply and demand.


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John Lisle

Managing Director, Head of Economic & Financial Consulting, South Africa