It’s difficult to quantify, but it’s bad, particularly because of the chronic uncertainty.
There are few times in the history of South Africa that its economy has been at the mercy of its politics as it is now. After 9/12/2015, the day of former finance minister Nhlanhla Nene’s sacking, the economy has somewhat followed the lead of political developments. With the mining sector playing such a pivotal role in the economy, it too is somewhat at the mercy of the political uncertainty surrounding the economy.
The severe depreciation of the rand after Nene’s sacking led to an aggressive tightening of monetary policy from the Reserve Bank as inflation threatened to spiral. But it also gave some reprieve to mining companies as it cheapened the rand price of the commodities they mine. So, in that sense, ‘Nenegate’ could have been viewed as a blessing in disguise for the local mining industry. At least in the short term.
Cadiz Corporate Solutions’ mining analyst Peter Major says it’s difficult to explain exactly how much politics hurts the mining sector, comparing it with the effect gangrene has on one’s body. “If it’s just in your toe, people can’t see it, but if it’s your whole foot then you will soon have to have your foot cut off so then they’ll see it,” says Major.
“And if you keep letting gangrene grow it goes up to your leg, and then you end up in a wheelchair. And then, if you don’t take care of it, it goes passed your leg and into your body and you end up in quarantine.”
Major refers to Sibanye Gold’s Aquarius Platinum mine – where there were 37 work stoppages due to community protests in the last financial year, only three of which were related to mining – as a prime example of how politics can affect the industry. In his view, communities see on television that protesting is the best way to get their demands met.
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