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You can also listen to this podcast on iono.fm\u00a0here.<\/p>\n
JEREMY MAGGS: South Africa\u2019s mining sector is once again under pressure, with the Minerals Council warning that the Middle East conflict has reversed a brief period of cost relief, pushing up fuel prices, weakening the rand and driving a fresh surge in input costs. The concern, I think, is that what looked like a temporary reprieve is turning quickly into a renewed inflation cycle for an industry that, as you well know, is already battling structural cost pressures.<\/p>\n
I want to talk now to Bongani Motsa, who\u2019s chief economist at the council. Bongani, a very warm welcome. How quickly has the situation turned, in your opinion, and that cost relief that I referred to, do you think it was ever really sustainable?<\/p>\n
BONGANI MOTSA: I think it\u2019s a great question because in mining we talk about short summers and long winters. The previous cycle of high mining input cost inflation lasted for about 24 months. That was from November 2021 right up to February 2024. We\u2019ve now had a low inflation environment in terms of input costs in mining for about 23 months.<\/p>\n
So it is our view that this might actually be one of the longest periods in which we have had low mining cost inflation.<\/p>\n
Read:
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JEREMY MAGGS: To what extent is this being driven purely by the price of oil, perhaps, versus broader disruptions within the global supply chain?<\/p>\n
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BONGANI MOTSA: I think the first thing, Jeremy, is that I need to take your listeners into confidence about the fact that as a sector, we are price takers. The fact that when there are increases in input costs, we cannot transfer those increases into the price of the minerals and metals that we sell or that we produce.<\/p>\n
But I think also there within that, it\u2019s very important then to note that as price takers, our prices are determined by global forces of demand and supply.<\/p>\n
So the conflict is certainly going to affect the operation or the profitability of our members. Because if we look at the cost structure of mining in South Africa, the first one is labour costs and labour costs are about a quarter of our total input cost. It\u2019s followed by finance and insurance, which is about 10%. Liquid fuels, and in this context, diesel and petrol accounts for about 5.5% of our total input cost as mining.<\/p>\n
But it is our hope that with the ceasefire that that kicked in today, that will be the end of the war. If that\u2019s the case, what it means is that as mining, the impact will only be felt in April. On average, we spend about R3 billion a month on petrol and diesel. In April, we are going to spend about R4 billion this month in terms of petrol and diesel because of the price escalation.<\/p>\n
Read:
Godongwana sounds alarm over oil spike
Sasol\u2019s new destoning plant delivers improved coal quality
Gwede Mantashe and Sibanye clash over US minerals plan<\/p>\n
JEREMY MAGGS: And how quickly does that then hit the margins within the industry?<\/p>\n
BONGANI MOTSA: Like I\u2019m saying, in April this will start kicking in. There is no lag in mining. However, the lag would be in the context of what do we do in order to remain competitive. Here I\u2019m talking about issues of employment. Do we continue hiring the number of people who we are currently hiring, which stands at about 472 000 people at the moment.<\/p>\n
Also, just to provide context with employment, in 2011, we employed 512 000 people. In 2025, we employed 472 000 people.<\/p>\n
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If the conflict in the Middle East were to continue, and petrol and diesel prices remain at elevated levels, what it means is that to remain competitive, we\u2019ll have to see where we can cut costs.<\/p>\n
But I must say, to answer the question directly, this hits us immediately as the costs increase, it hits us. But it\u2019s the adjustment period in terms of what do we do? Which areas do we attend to, to basically mitigate the risk of costs?<\/p>\n
JEREMY MAGGS: That\u2019s also a not-so-subtle warning that the industry has to brace itself for job losses.<\/p>\n
BONGANI MOTSA: Yeah, it is true. But like I said earlier, Jeremy, it is encouraging to hear that there\u2019s going to be a ceasefire. We just hope that this is basically the end of the war. But if the conflict continues, our global competitiveness will certainly be at risk.<\/p>\n
Read: JSE and rand jump on Trump-Iran ceasefire<\/p>\n
JEREMY MAGGS: It\u2019s difficult to build any kind of business on hope. What does all of this mean for investment decisions, do companies delay expansion or do they start to cut back? And is there perhaps evidence of cutting back already?<\/p>\n
BONGANI MOTSA: Not necessarily. There\u2019s no evidence of cutting back already. I was just talking about the fact that the impact is immediate. The higher mining cost means that a bigger portion of our revenue that we will generate will now go into covering the cost increases that we are talking about. This is revenue that we could have actually used as capital to expand our business and now we are using it to basically pay more in terms of those input costs.<\/p>\n
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It might mean as well that in the long term, if it continues, jobs will be compromised so that we will remain competitive. Again, let me remind your listeners that in 1994, we employed over 600 000 people. Last year it was just over 470 000 people and one of the reasons for the decline in employment is because of cost pressures.<\/p>\n
But the consequence, in fact, has not only been the reduction in employment, we have also seen the sector itself contracting.<\/p>\n
In 2025, the mining sector, in real terms, was 84% of what it was in 1994. It is the only sector, in fact, that has been shrinking compared to the other nine macroeconomic sectors.<\/p>\n
JEREMY MAGGS: Just a final question. We referenced labour and fuel, but electricity is also a big cost driver and that surely is compounding an already fragile cost base.<\/p>\n
BONGANI MOTSA: Yeah, earlier, Jeremy, when I said that, among other things, the reason for the decline in employment and also the sector contracting in real terms, I meant cost pressures, foremost among those being labour costs but also, in there you have electricity. Since 2007, our electricity has increased by almost 1000%.<\/p>\n
It has significantly compromised our global competitiveness. Electricity is an issue, from 1 April, electricity costs increased by almost 99% compared to the previous year. So that does compromise our global competitiveness.<\/p>\n
JEREMY MAGGS: It is a very worrying picture indeed. Bongani Motsa, thank you very much, chief economist at the Minerals Council South Africa.<\/p>\n
#Mining #sector #warns #rising #costs #shrinking #competitiveness<\/p>\n","protected":false},"excerpt":{"rendered":"
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