Hein Boegman, PwC’s African mining leader, on the past year and why the industry can be optimistic looking forward

2014 has been a tough year for mining companies, with the five month platinum strike having seriouslyaffected productivity and profitability in the industry, as well as the economy of the country. Nonetheless, thereis still value in South Africa’s mining industry, and companies have managed to maintain relatively strongbalance sheets with stable liquidity, says Hein Boegman, PwC’s African mining leader. Vicky Sidler reports.

The industry has seen significantdecreases in profitability,declining market capitalisationand regulatory uncertainty. Inaddition, miningriskslocal cost pressures andinternational demand weaknesseshave resulted in shrinking marginsand wide ranging impairmentprovisions, which have been drivenup 145% to R49 billion and haveresulted in a 19% contraction in thesector’s capital expenditure (capex)for the year to R57 billion.In spite of this, Boegman states: “Themining industry still adds significantvalue to the South African economywith regards to GDP contribution,employment, tax and exportrevenues. Leadership will be requiredfrom all stakeholders to ensurelong-term optimisation of the industryas opposed to the threat of instantgratification claims by stakeholders.”The significantdecrease inprofitability ofthe industryfuelled thecontractiontrend in marketcapitalisation ofSouth Africanmining stocks.This decreaseis in line with international miningcounterparts who are also strugglingwith higher costs and lower prices.A weakening rand tended to shieldthe South African mining industryfrom the decline with rand pricesremaining relatively flat.THE REAL COSTOF LABOURAccording to PwC’ssixth edition of ‘SAMine’, a series ofpublications thathighlights trends inthe South Africanmining industry, oneof the biggest risks…

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