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:
- 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%
- 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 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.