South African mining is in decline. Norman Mbazima argues that if you mine out existing reserves without investing in finding new reserves and building new mines, output will inevitably shrink, as is already happening in South Africa.
Research conducted as part of Business for South Africa’s Economic Recovery Strategy (ERS) and led by Mbazima shows that between 2010 and 2018, employment in South African’s mining industry shrunk by 50,000, annual mining capex shrunk by 45%, and real output value in dollar terms is down by 10%.
There are few to no new mines being built in South Africa, because the quantitative investment case for new mining opportunities is not attractive.
According to senior mining CEOs, the lack of investment is mainly due to five factors: unstable electricity supply; logistical bottlenecks; regulatory uncertainty; a lack of cost competitiveness compared to other mining regions; and strained relationships with labour and mining communities. All these factors add to a ‘risk premium’ for investors.
Mbazima argues that regulatory reform and removal of the Mining Charter will create a much more certain environment for mining investment to take place, since legislation and accompanying stability commitments are much more permanent than regulations enshrined in a charter.