The SA mining sector went through several trials and tribulations in 2023.
These include unprecedented electricity load-curtailment that was a particular constraint on deep-level mining in the precious metals industry, debilitating rail and port failures that adversely impacted the bulk commodities sub-sector, pervasive criminal activity, and the devastating loss of life late in the year that set back the progress to improve the industry’s safety performance.
In addition, the commodity price cycle turned against PGM and coal miners. Against this backdrop, overall real mining output declined by around 0.5% in 2023.
Despite these headwinds, it is gratifying that the sector again illustrates the crucial contribution of the mining sector to the South African economy and the broader society. Just as one example of this, provincial data released by Stats SA in 2023 showed that mining was the largest sector in four of the nine provinces during 2022.
These provinces are North West, Limpopo, Mpumalanga and the Northern Cape, with mining contributing between 20% and 30% to the GDP of these provinces.
According to Stats SA’s Quarterly Employment Statistics, outside of the community, social and personal services sector, mining is the only major sector in South Africa where the level of formal employment in Q3 2023 was higher (+6.3%) than the pre-COVID-19 period in Q4 2019.
Amid a weak commodity price environment, elevated input costs and the other constraints on doing business in South Africa, the PGM sector is a case in point. The coal industry was also weighed down by a sharp (-55%) downward price correction from the highs in 2022, as well as Transnet rail woes that curtailed export volumes.
Transnet logistical issues also adversely impacted the iron ore and chrome sectors. Thankfully, in the case of iron ore, well-supported prices in the second half of the year shielded the sector.
While input costs remained elevated, the gold industry benefited from record-high (nominal) prices of more than $2,000/oz.
With 2023 in the rear-view mirror, let me end on a cautiously optimistic note for 2024. Global inflation seems to have turned the corner, and policy interest rates are expected to follow inflation lower as we move through the year.
