Despite an extremely challenging year, South Africa’s mining companies performed on all fronts. Stakeholders benefited from the improved profitability with mining companies strengthening their social licence to operate in supporting their employees and communities in which they operate, according to PwC’s ‘SA Mine 2020’ report released on Tuesday.
Undoubtedly one of the biggest challenges the South African economy has had to face since the global financial crisis is the scourge of the COVID-19 pandemic. In South Africa as well as in other African countries, mines have been permitted to carry on activities to a large degree during national lockdowns, emphasising the importance of the industry to the economy in creating value for stakeholders, developing and supporting communities and laying a stable foundation for future growth.
Mining companies continued to enjoy the gains in commodity prices, assisted by a weaker rand. The improved profitability resulted in increased gains and distributions to shareholders, a near doubling of taxes paid to governments and strong balance sheets, said the report.
These gains were achieved despite higher operating costs and decreased production mainly in the quarter 2 due to the national lockdown. The mining sector again outperformed the JSE All Share Index and even outperformed the global mining index.
The pandemic highlighted the absolute need to build back better. Mining will play a key role in that recovery. Liberalisation of the energy market to ensure reliable and cost competitive electricity is essential for mining and potential beneficiation opportunities.
PwC believes hydrogen can play a transformative role in this regard. Progress in the regulatory environment should continue with a need to streamline processes and improve transparency for existing and potential investors. The mining tax environment should be considered as a whole, with an opportunity to incentivise exploration expenditure. Enabling infrastructure, supporting supply chain and mine-to-market logistics would provide immediate recovery benefits and enhance long-term sustainability. Investment can only be attracted to South Africa if the mining industry can be cost competitive with its global peers.