South Africa’s mining industry, despite contributing nearly R200 billion annually to the fiscus, has declined from 12% to 5.8% of GDP and lost 450 000 jobs over two decades due to regulatory inefficiencies, infrastructure failures, and corruption. What needs to be done to save the remaining 500 000 jobs and potentially create 200 000 more?
“Mining is not everything. But without mining, everything is nothing,” is a quote attributed to the German physicist, Max Planck.
This holds true for South Africa as well.
In 2023, the mining industry directly paid R31 billion in royalties, R45 billion in VAT, R36 billion in PAYE, and R85 billion in company tax to the fiscus – a total of nearly R200 billion. Impressive numbers. Yet its contribution to GDP has dropped from +12% to 5.8% and we have lost 450 000 jobs in the past 20 years. Ten thousand more are under threat in the platinum industry.
Johannesburg is no longer the City of Gold, as mining contributes only 1.5% to Gauteng’s GDP. Employment in the gold industry exceeded 520 000 in 1983 and has declined steadily to 90 000 today. Times change, and we should be better aware of the consequences.
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Of a total of $34 billion in mineral exports, gold accounted for $25 billion in 2023. We imported $4 billion from Ghana and exported $10 billion to China, $5 billion to India, and $3.7 billion to Switzerland. Half of our foreign reserves are attributable to mineral exports, and this is how we finance our imports, such as fuel, machinery and other goods.
The story that our mines are running out of ore at economically viable costs to mine is true. But this is in the context that greenfield exploration for new deposits has almost ground to a halt due to state inefficiency and corruption. Brownfield work, which involves extending existing mines, continues. No greenfield exploration equals no new mines.
A little bit about the mining industry
It is hugely capital-intensive. Exploration, which has no guarantee of success, is intensive and painstaking work, and in most mining countries, the state supports and encourages it. The spending on exploration in 2006 was R6.2 billion. In 2024, it had declined to R780 million.
From discovering a deposit and assessing its size and quality, to planning the mining and extraction process and figuring out logistics, getting the first hole dug can take a decade or more. Rewards are huge if the analyses are correct and prices are right – but limited water, electricity, or port capacity can still block the mine’s opening.
So why has exploration stalled? The perception is that South Africa’s long-term, capital-intensive mining risks are too high. The Department of Mineral Resources (DMR) is often seen as – and sometimes is – slow, inefficient, corrupt, and unpredictable in applying regulations. BEE rules are also widely viewed as a challenge, especially during exploration and development.
Given the high cost and risk of finding and establishing a new mine, it’s not surprising that our world-class exploration companies are in high demand all over the world, but not here.
Permit and certificates backlogs
Permits and certificates have huge backlogs. Few, if any, mine closure certificates for any large mine have been issued for 15 or more years. This is leaving more than R100 billion, meant for post-closure land rehabilitation in various accounts and trusts, unspent.
Old mines are kept alive under expensive care and maintenance regimes for ages. One major platinum miner reports spending R3 billion a year pumping water around in non-producing mines. The Fraser Institute of Canada, which ranks mining countries by risk and ease of business, rates us as high risk and very low ease, respectively.
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Our mines’ profitability has faced several challenges. Intermittent electricity supply was a major drag, with load shedding alone costing an estimated R10 billion in 2019. As supply reliability improves, downtime has decreased, but power costs have soared, rising 360% over the past decade.
Inadequate supply and reliability
The fear remains that if the economy starts growing, the supply and reliability will not be adequate. Freight failures as a result of few trains and poorly managed ports cost the industry R98 billion between 2021 and 2024. Despite high mineral prices, we have not been able to get our product to market efficiently.
Mining fuelled South Africa’s industrialisation and built a stable financial system. But it underpinned apartheid, causing social and environmental harm that will take decades to undo.
The continued and growing success of the industry is important to our future. Witness the contribution to the fiscus. Vital as well are the economic multipliers it delivers and the vast number of jobs it should maintain and grow.
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Mining operations here function in a complex ecosystem of state governance. Regulation and delivery of minerals are overseen by many state agencies. Along with unreliable and low-functioning municipalities, mine owners are forced to build roads, find and treat water and generate electricity. Mining’s historically antagonistic worldviews and its relationship with the ANC government are well documented. The potential of the emerging coalition government offers a chance for a more efficient, coherent relationship with government to grow the industry and protect or expand the jobs it supports.
Our recommendation
We propose a new body made up of government, mining industry, academic, and labour representatives. Its role would be to simplify the complex ecosystem in which mining operates and drive an agenda to clear backlogs and grow the industry.
- A public-private body guided by global best practice
On the agenda:
- The long-awaited cadastre system: We must clarify who owns what and draw accurate boundaries. The design should be enhanced by layering all available geoscientific data, as is done in Australia.
- Crime and corruption: These also demand attention. Illegal mining threatens communities and deters investors. Meanwhile, a sophisticated procurement mafia fuels rising violence, extortion, and theft.
- Permitting systems: Digitise and redesign them so they are transparent and easily understood by the public.
- The closure of mines: Issue mine closure certificates. Spend about R95 billion with a just transition lens.
- Enabling and supporting exploration: Identify what these businesses need: tax concessions, clear and stable regulations, and an enabling environment.
- Freight and logistics: Some improvements have been made thanks to Operation Vulindlela and efforts by business and government to turn Transnet around.
- Environmental stability: Long-term investment requires long-term certainty. Agreements must be thoroughly discussed and respected.
- A modern mining industry: Define what it looks like, source scarce skills globally, and allow visa-free access where needed.
In summary:
South Africa’s mining industry is held back by institutional failures, unclear state roles, and strained investor relations.
Crime, corruption, and regulatory barriers further suppress investment, while the lack of coordinated policy and long-term vision keeps the sector from reaching its potential.
As for jobs, our first priority is to stop the decline, then chart a path to growth.
Mining is deeply intertwined with our political and social economy, so we cannot afford to fail. The industry currently employs just under 500 000 people. Any turnaround will be gradual, adding at most a few hundred thousand jobs over the next decade.
Conclusion:
Save what we can. Hold the 500 000 jobs we have. Publish the cadastre work and add geochemical data. Expedite the backlog in permits of all types. Make greenfield exploration 125% tax-deductible against future earnings. Shut down the DMR and start again with industry and academic leaders at the helm. Add 200 000 new jobs as a result.
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