The recent turbulence in the mining sector, which has seen thousands of workers on strike as well as tragic loss of life, has raised several questions about the role of mining in South Africa’s economy. Is mining still an important sector for South Africa, and what will the impact be on our economy if the mining sector continues to experience turbulent times?
The Economic Importance of Mining
You may not work in the mining sector, and like so many South Africans who are not involved in this area of the economy, may not realise just how important mining is to our economic output. Consider the following facts:
• According to Allan Gray, Mining contributes 60% to our foreign capital requirement. Without the revenue SA receives from the sale of minerals, we would be unable to import food, oil and other essential items affordably.
• South African mines employ 500 000 people directly and another 1 million people indirectly.
• Each person employed in mining supports 5 to 6 other people. From this perspective, we could argue that 10 million South Africans are directly or indirectly supported by South African mines.
Mines Running Under Capacity
Given the importance of mining output, it is distressing to note that mines in the following categories are running under capacity. Platinum mines are 35% under capacity, while gold mines are at just 50% of capacity. Iron Ore is the worst hit, running at an alarming 60% below capacity.
Mining output also affects the value of the Rand, which is still linked to the sale of minerals in the minds of international investors. Because the sale of minerals provides capital for South Africa, a sudden drop in mining output could cause the Rand to weaken further, causing inflation to rise. The foreign capital raised by the sale of minerals also allows us to fund our current account deficit and drives consumer spending – without this, other sectors of SA’s economy would soon begin to suffer.
How important is mining to SA?
