The road ahead for South Africa's mining sector
FTI Consulting has released a new report on South Africa’s mining sector at the Investment in Mining Indaba held in Cape Town, and the report lays down a comprehensive framework for the future of mining in the country. Growth, costs, risks, capabilities and licenses are the main pressure points as per the report.
The report lays down the significance of mining for South Africa, exemplified by the fact that the sector contributes more than 7% of South Africa’s total GDP and provides 465,000 jobs. In recent years, however, fluctuations in commodity prices and poor domestic economic conditions have affected the welfare of the mining sector.
Some degree of stability has emerged recently, although the sector is now poised at a pivotal stage of its development, as a variety of disruptive factors stand to affect its future. The scenario is similar to the predicament faced by the mining sector worldwide, and FTI Consulting has laid down a comprehensive framework to clarify the decisions ahead.
The first question to address, according to the firm, is that of growth in the future. At present, shifting consumer preferences, fluctuating commodity lifecycles and a transition to clean energy, among other factors stand in the way of growth for mining. Possible strategies to tackle this situation include consumer-led targeted markets, diversified portfolios, and a balance between domestic and export markets.
The second question is that of becoming cost competitive. Depleting reserves and rising costs of labour, electricity and water are significantly increasing mining expenditure. FTIs recommended solutions include digitalisation of mines, and “cost-driver management,” which involves the balancing of various cost-intensive factors.
Managing risks is the third question, given that South African mining is currently uncertain of future electricity or water supply in addition to volatility in the policy space. Lobbying in the policy space and power and water self-sufficiency and efficiency are FTI's solutions to these challenges.
The fourth question is that of building capabilities. The advent of technology is changing the mining landscape, in addition to upgrading the skill profile of labour required for mining. FTI recommends greater investment in exploration and tech capabilities, as well as a focus on consumer preferences and strategic collaboration to find balance in this complex scenario.
Lastly, FTI addresses the question of how to make a license to operate compelling for stakeholders. Mining companies are under pressure in the current environment, where sustainability and equality are at the forefront of an increasingly demanding set of consumer expectations. FTI recommends a steady Environment Social & Governance (ESG) reporting system as well as efforts to reduce carbon emissions across the supply chain to manage these expectations.
