Africa Exco Mining

The state of mining in South Africa – Opportunity lost or light at the end of the tunnel?

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How does South Africa, once the world’s most attractive mining destination, lose its spot on the podium? Could the answer lie in the midst of South Africa’s threatening call for nationalisation; the severe labour unrest; poor maintenance of infrastructure; the high levels of perceived corruption at government level and an increasingly tricky Broad-Based Black Economic Empowerment (BBBEE). Are the recent downgrades from Ratings agencies and, local mining companies moving their operations off-shore to what are perceived to be more stable operating environments evidence of a mining industry in decline?

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Cost of Labour The 2012 labour unrest, wildcat strikes and poorly orchestrated wage negotiations put South Africa on the map as not only having a highly volatile labour force in the mining sector, but also pinned the country as having a Gordian knot type situation between unions and government. Jurgen Beier, Canadian Mining Leader for Deloitte says, “labour costs in South Africa continue to be problematic. Even before Marikana, South African labour costs were viewed as being high, largely based on poor productivity and less automation in relation to other leading mining countries.”

One of the reasons South Africa was perceived to be an attractive destination in the past was due to the low cost of labour. Organised labour has consequently become more demanding in their remuneration expectations and the country now faces a situation where semi-skilled mining workers earn a higher base income than the majority of university educated graduates. Taking into account the severe health and safety risks, remote and isolated locations and the need to subdue the nationalisation debate, perhaps the higher wage demands can be justified?

Download the full article . . . .  The state of mining in South Africa – Opportunity lost or light at the end of the tunnel

Contact Tony Zoghby (African Mining Leader – Deloitte) at tzoghby@deloitte.co.za or Abrie Olivier (Southern African Mining Leader – Deloitte) at aolivier@deloitte.co.za for a more detailed discussion. We welcome you to visit the Deloitte Southern Africa Mining website and the Deloitte Mining Advisory Services website.

About the author

David Graham

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