Africa-Press – South-Africa. South Africa’s mining sector is arguably one of the country’s most important economic drivers, but it has stagnated and declined over the past few decades.
Luckily, the sector’s stagnation can largely be attributed to policy, regulatory and bureaucratic obstacles, rather than geological exhaustion.
This means that lifting these constraints could go a long way in unlocking the mining sector’s potential and lead to far faster economic growth for South Africa.
This is according to the Bureau for Economic Research’s (BER) Robert Botha, who explained that, for over a century, the mining sector has served as the driver of South Africa’s economy.
Historically, this sector, founded on South Africa’s impressive mineral endowment, has fuelled the country’s industrialisation, urbanisation and capital accumulation.
“Once the primary engine of the economy, the sector’s economic contribution has stagnated, allowing the notion to take hold that South African mining is a sunset sector,” Botha said in a recent research note.
“However, we argue that by lifting these binding constraints, it can be a sunrise sector.”
The stagnation of its mining sector has seen South Africa miss out on successive commodity price booms, with the sector now roughly 12% smaller than it was in 1994.
However, Botha argued that the sector remains a cornerstone of the national economy, still contributing billions to South Africa’s GDP every year.
Aside from its economic contribution, he explained that the mining sector also functions as a vital economic engine through significant multiplier effects.
“The Minerals Council estimates an employment multiplier of ten, meaning every direct mining job supports ten additional opportunities in other sectors,” Botha explained.
“This foundational role underscores the industry’s importance in sustaining domestic investment and broader industrial activity.”
In addition, mining is the primary anchor for the country’s external trade balance, accounting for more than 50% of all merchandise export earnings.
“This trade surplus provides a critical cushion for the current account, helping to offset structural deficits caused by the importation of machinery and refined fuels,” he said.
However, despite its great economic contributions, the local mining sector is not close to having reached its full potential.
Botha pointed out that South Africa possesses one of the world’s most significant mineral endowments, with a theoretical value of between $2.5 trillion and $4.7 trillion.
Despite this, the country has missed out on multiple commodity price booms due to binding constraints on the local mining sector.
Luckily, Botha believes the solution to the mining sector’s woes lies largely in policy changes that are well within the country’s power to address.
How to save the mining sector
In his research note, Botha made several recommendations to arrest the decline of South Africa’s mining sector and unlock its full potential.
One such recommendation is reducing policy uncertainty, with Botha saying that the sector is currently entangled in a cycle of regulatory uncertainty and friction that has severely compromised its global competitiveness.
He explained that South Africa’s current mining legislative framework and disputes have created a high-friction environment.
Botha said this friction is starkly illustrated by the Fraser Institute’s Policy Perception Index (PPI), which showed that South Africa fell to 70th place out of 82 jurisdictions by 2024.
“In contrast, regional peers like Botswana have ascended to the 20th position globally, demonstrating that the African operating environment is not a barrier to success,” he said.
“Rather, specific domestic policy choices and the moving of Black Economic Empowerment goalposts have served as the primary deterrents to long-term investment.”
“To unlock the sector’s potential, the diagnostic suggests that the state must move away from adversarial legislating and toward a differentiated regulatory approach.”
“Without addressing the disconnect between policy formulation and industry reality, South Africa’s vast mineral wealth will remain sterilised by the very framework intended to promote its development.”
The decline in South Africa’s PPI score can be seen in the graph below, courtesy of the BER.
For More News And Analysis About South-Africa Follow Africa-Press
