Top four issues affecting SA mining: KPMG

Wayne Jansen, KPMG's Global Head of Mining.

Wayne Jansen, KPMG's Global Head of Mining.

KPMG will bring together key stakeholders at a special session at the Mining Indaba on Tuesday 4 February 2014. Here Wayne Jansen, KPMG’s Global Head of Mining, elaborates on the four major issues affecting the South African mining industry at present:

LABOUR                    

  • Strike actions continue – government intervention is positive
  • Strife between unions (NUM/AMCU)
  • Decreasing productivity (increasing pay!) has an impact on our global competitiveness
  • Production contracted with 3.2% across all metals and minerals in 2012
  • With PGMs contracting by 13%
  • Gold contracting by 12%

COMMODITY PRICES

  • Prices 30% down across metals/minerals sector since Q2 2011
  • Over the last year, the devaluation of the rand has aided the mining industry
  • Over the past 10 years, the rand averaged R7.37/$. The rand fell to a five-year low in late trade to be bid at R10.81 to the dollar on 10 January 2014 (46% lower than the 10-year average)

INFRASTRUCTURE

  • Infrastructure development is critically important for South Africa’s economic growth. In late October 2013, Eskom announced that two coal-fired power stations, Medupi and Kusile, would begin to contribute electricity to the grid in H2 14. 
  • South Africa missed the last super cycle, and failed to capitalise on high commodity prices – are we ready for the next upswing?

FOREIGN DIRECT INVESTMENT

  • Another significant factor that impedes growth is the difficulty in attracting foreign direct investment for both greenfield and expansion projects.
  • Foreign direct investment (FDI) flows into South Africa decreased by 24% between 2011 and 2012, according to the United Nations Conference on Trade and Development (UNCTAD).
  • Investors’ share of the pie has been shrinking over the last decade – government and employee shares have been growing. 

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