COUNTRY IN FOCUS •
Leon Louw
Digging dirt in South Africa. The mining industry in South Africa will only be able to survive three months without any production.
WHAT IF WE HAD TO SHUT
FOR THREE MONTHS?
By Prof Frederick T Cawood, director: Wits Mining Institute.
Covid-19, or more broadly, the spread of an infectious disease, is not a new
issue for mining. This issue has been on and off mining agendas for some time.
[Please note that this article was written mid-March before the level-4 lockdown measures were announced. It is interesting
though, as it gives us an idea form how long mining companies can continue without production, should there be a second wave
of infections, or in preparation for future events of a similar nature.]
The Ebola outbreak in West Africa and high rates of
malaria, HIV and Tuberculosis infections at African and
South African mines elevated the issue to prominence.
The big question currently is this: is the Corona virus in 2020
one of those major events that could lead to the fall of a
government or an industry?
Such a doomsday scenario depends on whether or not
government and industry have the cash to prop up the
economy and operations. Cash (or capital) normally comes from
loans, investors and earnings. The proportions depend on the
risks involved, capital availability and cost of the capital. Despite
good growth in foreign direct investment (FDI) in the rest of
Africa, investment capital in South Africa was already scarce
before the crisis, and post-Covid-19 will be worse. Post-Covid-19
debt will be harder to secure and will be more expensive.
UNCTAD 1 estimates that Covid-19 will cause capital globally to
shrink by 30% to 40%, with company earnings likely to be down
30%. With national shutdowns now the norm and the South
African lockdown extended, companies are rightfully concerned
about where earnings will come from. At the same time, they
are supportive of the greater public health imperative to limit
the spread of the disease. Trying to predict post-Covid scenarios
requires assumptions like these:
1 UNCTAD Investment Trends Monitor - Corona special update March 2020. Available from http://www.unctad.org
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African Mining Publication
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African Mining • May 2020 • 31