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More than 200 days of power cuts last year and blackouts every day so far in 2023 have dented confidence, as has the poor performance of the state transport utility and a plethora of other problems. Pledges to enact reforms to spur the economy have come to little, said Neal Froneman, chief executive at Sibanye Stillwater.
“There is much more that we can invest in and the rest of South African businesses can invest in if the climate was different, if we had power, if we had clear policies and if it was more environmentally friendly,” Froneman said in an interview last week. “Business investment in South Africa is on strike until things improve.”
Corruption, crime and mixed messages from government ministers as to how quickly the country will transition to cleaner energy has also drawn criticism from a range of business leaders. Investment has been confined mainly to keeping existing businesses running rather than expanding their operations.
Mining accounted for 4 percent of gross domestic product in 2022, employed about 476 000 people and generated R878 billion of exports, according to the Minerals Council South Africa, a lobby group representing most mining groups operating in the country.
Largely as a result of the problems Froneman laid out, economic growth is anemic with economists surveyed by Bloomberg forecasting expansion of 1,2 percent this year. Unemployment at 32,9 percent is among the highest across more than 80 countries tracked by Bloomberg.
“Investors are very negatively disposed toward South Africa,” Froneman said. “They’ve lost faith and they’ve lost trust in the government.”
Vincent Magwenya, spokesman for South African President Cyril Ramaphosa, referred queries to the Department of Mineral Resources and Energy.
While the department didn’t immediately respond to queries Gwede Mantashe, the mining and energy minister, acknowledged the impact that the blackouts and transport issues are having on the industry in a speech to the Investing in African Mining Indaba conference in Cape Town on Monday.
Mining companies, among the nation’s biggest electricity users, are scaling down some activities. The outages probably cut South Africa’s output for platinum-group metals by 10% in 2022 and this year production could fall by a fifth, Froneman said. South Africa accounts for about 70% of the world’s platinum output and almost 40% of all palladium, metals which are used in auto-catalysts that curb vehicle emissions.
Sibanye, which was carved out of Gold Fields in 2013, employs about 85 000 people including those working at its US operations. Since its formation, Froneman has diversified the company through buying platinum, nickel and lithium operations in Zimbabwe, Europe and the US Mining companies are now at risk of closing some unprofitable shafts in South Africa, which would lead to job cuts, he warned.
“Some shafts are very marginal and I think load-shedding could tip them over,” the CEO said. – Bloomberg
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