• COUNTRY IN FOCUS
The entire sector has prioritised the health of employees first,
in order to deliver critical services while limiting the damage
to operational abilities so that full and quick resumption of
operations can ramp up after the lockdown period.
The existing health challenges in the mining sector, such
as mining related respiratory diseases prompted decisive
preventative responses in the sector. Ironically, it seems that
BCG immunisation against TB and anti-retroviral regimes in
play across South Africa may yet turn out to be key strengths
in combatting Covid-19.
An advantage for prevention in most ‘majors’, is that widescale
health and safety regimes were already in place before
COVID-19 emerged. These needed to be adjusted specifically
for this infectious disease, but South Africa’s mining sector
looks likely to emerge from the crisis in better shape than
most. But the situation evolves daily and is hard to predict.
Will there be demand?
In a case of a global recession, mining companies are not
immune and for some, all the preparedness in the world will
not be enough. Most mining projects have either slowed
or shuttered. The biggest post-crisis question mark is on
‘demand’, which is less of an issue for coal as Eskom and
Sasol consume most of SAs coal production locally. Coal
production is an essential commodity necessary to fuel
power generation by Eskom and it is the key source within
the IRP for base-load power for the next 20-35 years. This
crisis is likely to highly impact junior mining companies;
however, tax and other statutory fee holidays could assist
companies that need some relief. Retrenchments may
also be inevitable as marginal mines are under pressure to
downsize most of the time and these restricted economic
times are likely to push some over the edge and contribute
to higher unemployment.
Exporting of coal through Richards Bay Coal Terminal (RBCT)
and other channels should resume soon after lockdown.
However, it is unlikely that demand and supply of any
commodity rebalances quickly. Some well-positioned
commodities in South Africa with bright prospects are the
producers in steelmaking such as iron ore and manganese.
The mining industry could be an enormous asset in stabilising
and growing the economy post the coronavirus crisis – given
the right economic and regulatory circumstances. The recent
downgrades present an opportunity to follow through on
implementing structural reforms such as opening the energy
grid to the private sector to ensure stable electricity supply
and to support small businesses. It would only be through
the implementation of the necessary economic reforms that
the ratings agencies would again take South Africa back to
investment grade. There is also room for the SARB to cut
interest rates further – by around 150bps-200bps.
The need for ‘long range diversity planning’ may also have
been thrust forward in time!
Leon Louw
Coal mining for domestic use by government utility Eskom was deemed essential during the
five-week nationwide lockdown.
18 • African Mining •May 2020
www. africanmining.co.za