Essential and Resilient
Despite an extremely challenging year, South Africa’s mining companies performed on all fronts, explore more in the 12th edition of the SA Mine 2020.
Despite an extremely challenging year, South Africa’s mining companies performed on all fronts. Stakeholders benefited from the improved profitability with mining companies strengthening their social licence to operate in supporting their employees and communities in which they operate.
Certainly one of the biggest challenges the South African economy has had to face since the global financial crisis is the scourge of the COVID-19 pandemic. In South Africa as well as in other African countries, mines have been permitted to carry on activities to a large degree during national lockdowns, emphasising the importance of the industry to the economy in creating value for stakeholders, developing and supporting communities and laying a stable foundation for future growth.
Ten-year historical financial information (R ‘billions)
Mining companies continued to enjoy the gains in commodity prices, assisted by a weaker rand. The improved profitability resulted in increased gains and distributions to shareholders, a near doubling of taxes paid to governments and strong balance sheets. These gains were achieved despite higher operating costs and decreased production mainly in the quarter 2 due to the national lockdown. The mining sector again outperformed the JSE All Share Index and even outperformed the global mining index.
The pandemic highlighted the absolute need to build back better. Mining will play a key role in that recovery. Liberalisation of the energy market to ensure reliable and cost competitive electricity is essential for mining and potential beneficiation opportunities. We believe hydrogen can play a transformative role in this regard. Progress in the regulatory environment should continue with a need to streamline processes and improve transparency for existing and potential investors. The mining tax environment should be considered as a whole, with an opportunity to incentivise exploration expenditure. Enabling infrastructure, supporting supply chain and mine-to-market logistics would provide immediate recovery benefits and enhance long-term sustainability. Investment can only be attracted to South Africa if the mining industry can be cost competitive with its global peers.
The mining sector demonstrated its resilience during the past year. It was key in providing support during the pandemic and will be an essential part of the strategy to rebuild South Africa.
Companies and investors have increasingly been recognising the importance of prioritising environmental, social and governance (ESG) matters on the corporate agenda.
Our report identifies four key ESG focus areas that should be top of mind for any company that wants to build back better and ensure a just transition to a new economy and enhance their social licence to operate. These are: 1) supply chain resilience; 2) measuring impact; 3) climate-related risks; and 4) resource efficiency. We have analysed the published reports of the mining companies considered in this publication to assess the degree to which they are ESG issues into decision making.
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Africa Energy, Utilities and Resources Leader, PwC South Africa
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EU&R Centre of Excellence, PwC South Africa
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