South Africa’s mining sector delivered sterling performance in the past year, despite several local and global challenges, and all stakeholders received much-welcomed value, according to the PwC's SA Miner 2022 report.
The report released yesterday gives an analysis of the mining results, and other factors including the economic context, infrastructure-related challenges in the sector, and industry and market analysis.
Minerals account for more than half of South Africa’s export revenue. In 2021, the two largest export categories –precious metals and stones as well as ores, slag and ash – contributed 43.2% of total export revenue.
Mineral fuels including coal accounted for a further 8.3% of export revenue, the report said.
According to the report, the industry’s financial performance exceeded expectations on most fronts.
"Distributions to shareholders more than doubled to R190bn, Capital expenditure grew 36% and taxes paid increased by 14% as South African mining companies in aggregate maintained profitability at last year’s high levels.
"Growing demand for commodities saw record rand prices for the platinum group metals basket, iron ore, and coal, while most other South African commodity prices remained at relatively high rand levels," the report found.
Speaking at a presentation to unpack the findings of the report, PwC’s Africa Energy, Utilities, and Resources Leader Andries Rossouw said: "We've had a fantastic year. If you can reverse to the highlights, and not as much in terms of improvement on the prior year, but really performing in line with the prior year, it was a very strong financial performance".
Rossouw said the coal mining industry was not performing at optimal level as some mines had to shut down because of a lack of storage capacity.
"They have to cut back on production because they don't have a market to deliver to. That's a real shame when we are faced with record prices when the world needs our resources to be delivered to them," he said.
He said South Africa stood to benefit from demand growth, but whether South Africa and other resource-rich countries will benefit to the full extent will depend on their ability to address bottlenecks in supply and mine-to-market infrastructure.
"There is an obvious need to invest in the right skills, infrastructure, energy and water, and in general, creating an enabling environment for exploration, mine development, production, and sales. Realising the full potential benefit of our resources and creating long-term sustainable outcomes will depend on our ability to mine cost competitively and to integrate various value chains profitably,” Rossouw said.
According to Rossouw, the demand for commodities was real, and therefore, there was likely to be some pressure on demand going forward.
Rossouw said from an infrastructure point of view, the infrastructure deficit impacted the ability to benefit from the high commodity prices.
"We know that from an explored rail point of view, gold is almost 20% down on where it could have been the year before, and that's because we just couldn't get to Richards Bay.
"Due to the transit freight rail constraints, and fairly similar set up for our manganese exporters, (there was) lots more trucking than what should be the case. That's bad for roads. We need to work on solutions that are clear, public and private sector collaboration will be key for our ability to address these concerns and to really allow the industry to benefit," he said.
PwC South Africa Energy, Utilities, and Resources Assurance Partner Vuyiswa Khutlang said the remaining available cash resources left mining companies with interesting capital allocation decisions.
"Strategies will include expansions and new development, acquisitions, strengthening of local infrastructure and host communities, as well as market development and investments up and down the value chain. Execution of these strategies will require disciplined long-term sustainable mindsets,” she said.
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