South African mining production drops in May as Mantashe enforces problematic law

South African mining production drops in May as Mantashe enforces problematic law

First, the data revealed by Statistics South Africa (Stats SA). It showed that on an annual basis, mining production fell 0.8% in May after rising 3.2% in April. The May reading was below Bloomberg’s forecast for 2% growth over that time frame, while the expansion in April followed 14 consecutive months of contraction.

This suggests the downward trend is back on track – contrary to market expectations – and the month-over-month decline was a dismal 3.8%.

The silver lining in the data is that in the three months through the end of May, all numbers add up to 3.1% growth on a seasonally adjusted basis. That, and the underlying effects from the dismal February figures – when production fell 7.7% y/y and 7.0% m/m – means that mining production may continue to make a positive contribution to the second quarter GDP reading.

low mining sa

“Although today’s results are not encouraging, the statistical base effects from the sharp decline in production in February may see a continued quarterly expansion in the mining sector’s gross value added in the second quarter of 2023, which will be beneficial for quarterly GDP growth.

“This is based on expectations of an improvement in mining production in June, given the delay in load shedding during that month,” Thanda Sithole, chief economist at FNB, said in a note on the data.

So there you are. Data released on Tuesday showed that the manufacturing sector rose 2.5% year-over-year after expanding 3.6% in April, but economists largely attributed that to underlying effects.

The economy avoided a recession in the first quarter when it grew by 0.4% after contracting by 1.1% in the fourth quarter of 2022, and there is a glimmer of hope that it is still growing in the second quarter of this year. But it’s barely turning off the lights, and after a respite, outages have escalated back to Stage 6 this month, which isn’t a great start to the third quarter.

Mantashe Comments

This brings us to comments on Thursday by Guide Mantashe, a senior figure in government and the ANC who is largely responsible for the deteriorating state behind this lackluster economic performance.

The minister was addressing a review conference of the Mineral and Petroleum Resources Development Act (MPRDA) in Fourways, Johannesburg, and in his prepared remarks came out swinging on behalf of legislation that industry, investors and other commentators have long had. It is seen as a huge hurdle to investing in a sector that is clearly in decline.

In typical Mantasha fashion, neither he nor the ANC would be held responsible for this situation. But mining data and a dearth of investment in the sector speak to governance failures, which the government and Mantashi frankly own.

The MPRDA, which went into effect in 2004, sought to address historical racial disparities in mine ownership and had some laudable goals, but in many ways it was a complete failure.

The enrichment of cadres, the political disorientation, and the subsequent immersion in the explorations necessary to maintain the mining sector in South Africa were among its enduring features.

For example, the last time South Africa accounted for more than 5% of the mining sector’s global exploration budget was in 2004 – clearly when the MPRDA came into effect – and it’s generally been downhill from there, dropping to less than 1% in 2020 and still going. stuck there ever since.

Read more at The Daily Maverick: Mantashe – SA’s missed mining target is less than 1% of global exploration spending

These trends are more than coincidental and make a mockery of Mantashe’s interim target in 2019 that South Africa will return to 5% within three to five years.

Here, however, he was blaming the industry and praising the MPRDA, which included the first mining charter setting minimum limits for black ownership in the mining industry, which in many ways was the bedrock of the political economy of apartheid.

“While the government is optimistic that the social partners in the mining industry will adopt these regulatory tools as appropriate tools for transformation, it is unfortunate that 20 years after the enactment of the MPRDA, these regulatory tools have not been fully embraced by the industry.

“This is evidenced by the ongoing legal battles over transformation that depict industry resistance to the transformation agenda,” the minister said in his prepared remarks.

These notes were devoid of crucial context.

The industry has taken to court on the understandable issue of “once enabling, always enabling.” In 2021, the Pretoria High Court ruled in favor of the mining industry on the matter.

Read more at The Daily Maverick: The Supreme Court sets aside key aspects of the mining charter in a setback for mineral resource management

What this boils down to is this: the mining industry has long argued that once a company meets the black ownership threshold of 26% as laid out in previous charters, or 30% for valid new mining applications, that remains true – even if then enablers sell their stakes. .

This is plausible and helps explain the decline in mining exploration and investment. And although Mantach acknowledges the huge improvements in the living conditions and wages of miners, and the great strides on the health and safety front, he still seems stuck in the state-mandated “turnaround,” which also misses the point that the mining industry is scrambling on its own. to shift.

Read more at The Daily Maverick: AFTER THE BELL: The ANC missed the company’s ESG memorandum

“It is against this backdrop that the ministry convened this summit to communicate candidly with our social partners and ensure that we collectively identify the legislative gaps that will further improve the implementation of our regulatory framework,” said Mantasche.

What “gaps” could still exist to “further improve” a failing regulatory framework?

All mining and exploration data points to the MPRDA failing to reap the benefits of South Africa’s vast mineral wealth for the benefit of the wider economy and society.

If these “gaps” are filled in by more of the same, expect the course to continue, in favor of only a few who might be politically connected. DM


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