Professional services firm KPMG’s lead of mining in South Africa Jacques Erasmus says South Africa’s once mighty and economy-dominating mining industry is, at present, in dire straits and is fraught with crisis and increased investor scrutiny.
It is an industry beset by a myriad of challenges that include, and are not limited to; an uncertain regulatory framework, weaker commodity prices, increased working costs, constrained infrastructure, high labour costs coupled with poor levels of productivity and strained labour-management relations.
“It’s no wonder then that the industry has underperformed every other sector for a fourth consecutive year and investment into the local mining industry projects remains lower than average. And, unfortunately, such challenges are confronting the industry at a time when investors are focusing on increasing attention on the prospects of the African continent,” says Erasmus.
Despite the fact that South Africa is not in the best place from an economic perspective, and is fraught with political issues and industrial challenges, there is still room for optimism about the future and opportunities in the country’s mining sector, he proffers.
“As a country, we shouldn’t be distracted from the fact that the long-term economic fundamentals of the industry are still strong,” says Erasmus, adding that mining has been the key engine propelling the development of civilisation for thousands of years and mining is still most important in this technically advanced global community.
However, he says there needs to be a strong sense of consciousness that the industry – particularly in South Africa – is unlikely to become any more stable over the next few years. The industry certainly won’t become any more certain or stable unless there is continued open and honest dialogue between stakeholders – particularly the companies, labour and government – regarding the sustainability of mining in South Africa.
Towards being fit for purpose
Companies (generally) can no longer afford to be focused on the bottom line, but rather need to conduct their business with purpose and, become a vehicle of change that benefits society – both now and into the future.
This is particularly true for mining companies, where the extractive sector has a horizon of between thirty and fifty years, placing mining companies in a unique and important role in the corporate sector, as they – more than any other sector – are in the long game.
Though with this longevity comes responsibility and mining companies should become best in class – as they hold the greatest long-term prospects of employment and nation transformation of all industries.
Therefore, sustainability and the well-being of the communities around mining sites should be at the centre of mining companies’ thinking, which can be demonstrated by conducting business that not only concentrates on the business plan and earning returns, but also with a public purpose that is aimed at creating value for all stakeholders.
In essence, looking at purposeful, long-term, committed and secure community changing engagement – and not project mentality – that will not only deliver substantial commercial and positive savings, but improve the value of the business within the investor and shareholder community is what needs to be sought, says Erasmus.
Bringing social responsibility full circle
Social responsibility in mining communities remains a top of mind issue in most circles, yet the constraints in social development are seldom as a result of, a lack of will or money.
Through KPMG’s working experience with mining companies in the local industry, we know that by facilitating empowerment and ownership, enhancing relationships with communities and gathering data to monitor and evaluate the effects of social initiatives, could accelerate the rate of empowerment of these communities.
Achieving this though will take open communication, frequent engagement, information sharing, understanding power dynamics and, having firm actionable goals.
Despite the current economic state of the mining industry and the numerous challenges surrounding this, even the toughest analysts are confident that the industry will come out on the other side of this crisis.
However, for the industry to bounce back sooner rather than later there needs to be change. “Now is the best moment possible when mining companies can decide the tone of the future decide if they will change the world for permanent good, not on the back of failures, but on the determination of executive leadership,” Erasmus concludes.