Orion Minerals

After six years of running businesses outside of South Africa including, inter alia, gold exploration in Mozambique, a listing in Australia and a 16 Mtpa industrial minerals business in Oman, I returned to South Africa in June 2018.

My travels have been both productive and enlightening, with some 111 destinations now chalked up.

AUTHOR: Dean Cunningham, director at Micofin

Over time, what has been consistent in my experience of working overseas, is the global perception of South Africans in the workplace as strong, deliberate, focused, hardworking, diligent and technically competent.

This article first appeared in Mining Review Africa Issue 12 2018

In my absence, there have been some notable changes in the country:

  • Political reshuffling at the top with great potential to steer us in the right direction;
  • A stagnant economy and a volatile currency, hinting at a lack of direction and sustainability.

Fortunately, our new president, Cyril Ramaphosa, appears to be saying and doing the right things: leading from the front, replacing ministers and engaging with competent experts in strategic sectors.

Importantly, underpinning this critical juncture is a renewed sense of optimism among the South African population – we can make it work.

Taking stock of South Africa in 2018

Looking holistically at the economy it is clear that key sectors remain under pressure with construction arguably leading the pack – multiple companies now face the prospect of business rescue and market caps continue to shrink.

This is compounded by an ailing mining sector which continues to stray from its former, world-renowned glory. Evidence of this is clear:

  • Gold production was just 140 t in 2015 from historical highs of 1 000 t in 1970;
  • Diamond production is on a similar decline; and
  • Platinum faces tremendous headwinds as the scrapping market continues to make inroads into the supply chain. At this point, the platinum sector seems to reflect the gold sector 20 years ago as it faced the inevitability of restructuring, downsizing and significantly reducing costs.

Although this seems to paint an overly pessimistic picture, there are still opportunities in key commodities, most notably: coal, chrome, manganese and iron ore/steel.

In order to see these come to fruition, however, we would need to see continued (and often difficult) structural changes in the mining sector.

The most contentious among these are on the cost side – electricity prices have soared and labour-intense operations drive an unsustainable wage structure.

While the latest iteration of the Mining Charter has offered some long-anticipated policy certainty, we still need to contend with the fact that, from an international investment perspective who are spoilt for choice, our domestic projects look relatively risky with low return profiles and extended processes.

Despite its integral historical role, employment in the mining sector has been consistently low relative to other sectors over the past ten years.

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