Op-Ed: Let’s get mining under way – again – by Dirk De Vos (Daily Maverick South Africa – February 27, 2017)

https://www.dailymaverick.co.za/

Despite a century and a half of mining, South Africa still has the largest mineral reserves of any country. Yet, for some time now, South Africa has performed poorly as a mining destination.

The Fraser Institute makes an effort to quantify and rate different jurisdictions and it puts South Africa’s attractiveness near the bottom. The poor ratings are more significant for South Africa than they are for many other poorly rated jurisdictions because for the most part, although South Africa has abundant mineral reserves, they occur in relatively low-grade ores that are often only found deep underground.

South Africa has some of the deepest mines anywhere in the world. This means two things: significantly higher amounts of capital must be invested to build new mines, and mines must be operated over significantly longer periods of time.

On this measure, our mining sector has been going backwards. A paper produced by Graham Schwikkard of Datta Burton & Associates, a management consulting firm, shows that capital expenditure in mining is now half what is was in 2008.

On a measure that plots capital expenditure against depreciation, South African companies are now running down their assets. Basically, we are going backwards in absolute terms – we are seeing disinvestment.

On a relative basis, South Africa’s mining sector has been in decline for some time. According to Jim Rutherford, a non-executive director of Anglo American, South Africa’s mining industry is now just 4.4% of all global mining shares which is down from 18% in 2000 and had once stood at 47% in 1980. South Africa largely missed out on benefiting from the last commodity boom driven by Chinese demand and there is every likelihood that we’ll miss out on the next one.

For the rest of this article, click here: https://www.dailymaverick.co.za/article/2017-02-27-op-ed-lets-get-mining-under-way-again/#.WLW902_yvIU

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