On May 29, 2024, South Africans went to the polls in one of the most pivotal elections in modern history to choose a new National Assembly and state legislatures. The ruling African National Congress (ANC), under President Cyril Ramaphosa, was expected to lose its majority in the national and provincial elections, having been the sole dominant party in three decades.

The ANC had successfully won every election since the end of apartheid in 1994, with Nelson Mandela becoming the nation’s inaugural black president. Fast forward, the ruling party was facing its most significant challenge yet, with polls indicating its popularity had reached its lowest point in history, hovering around 40%.

At 71 years old, President Ramaphosa had campaigned on a promise of a new beginning for South Africa, but critics argued he had fallen short of his promises. During his tenure, unemployment rates soared to record levels, pushing the ANC towards what is anticipated to be its most challenging election outcome. With widespread voter dissatisfaction, major opposition parties began to disrupt the ANC majority and popularity.

Traditionally, the mining industry in South Africa has played a crucial role in the economic development and job creation in the country and its neighbouring states. This sector benefits from its vast endowment of many natural mineral resources, such as Platinum Group Metals (PGMs), gold, chrome, diamonds, iron ore, and manganese. The mining industry continues to be a key driver of South Africa’s economy, accounting for over 5% of the Gross Domestic Product (GDP) and directly employing approximately half a million individuals.

However, despite its longstanding importance, the industry has encountered obstacles, including power shortages, poor safety and falling commodity prices leading up to the May 29 election. Significant investments and strategic alliances are needed to fully realize the mining sector’s potential value, and the existing challenges must be addressed.

The Economic Freedom Fighters (EFF) party, founded in 2013 by Julius Malema, emerged as one of the key candidates in South Africa’s 2024 democratic elections. The EFF gained attention for its advocacy of radical changes, such as land redistribution and the nationalization of key economic sectors to address deep-seated inequalities. Its proposals posed some of the most significant impacts on the country’s mining industry.

The Democratic Alliance (DA) was the other opposition party that posed a threat to the ANC’s majority in the National Assembly. However, it faced challenges distancing itself from its predominantly caucasian, middle-class image to appeal to a broader audience.

UmKhonto we Sizwe (MK) was the other opposition party that pressured the ANC through online campaigns and nationwide rallies. The party was led by former president Jacob Zuma, who had been barred from running in the general election after being convicted of a legal offence and sentenced to more than 12 months in prison. Lastly, the Inkatha Freedom Party (IFP) was the other critical political party that advocated for greater autonomy for traditional leaders.

Opinion polls conducted in March and April suggested the ANC’s support was around 39% and 40%, respectively. A result falling below 50% would force the ANC to seek alliances with one or more smaller parties to lead the country for the first time.

The leading opposition party, the Democratic Alliance (DA), was expected to garner 21.6% of the vote. In comparison, the support for Jacob Zuma’s newly formed uMkhonto we Sizwe (MK) party was estimated at 12.4%, surpassing the 10.8% support seen for the more established Economic Freedom Fighters (EFF).

The May 29 general election promised to be like no other in modern history as the nation grappled with numerous challenges that the voters hoped their favoured candidates would tackle. The most pressing issue was the high youth unemployment rate, which saw the general unemployment rate climb from 31 % to 33 % in the first three months of the year.

The main reason behind the lack of jobs was slow economic growth. South Africa’s economy has seen minimal expansion over the past decade, with average economic growth hovering around 0.8% since 2012.

The debt-to-GDP ratio was expected to hit 74.1% in 2024, a significant increase from 63.3% five years prior. The combination of widespread poverty, high unemployment, and inequality has fueled a rise in violent crime in South Africa, exacerbated by the growth of organized criminal groups. The South African Police Service’s annual crime report showed that from 2022 to 2023, 1.8 million severe and violent crimes were reported nationwide, marking a 7.7 % increase from the previous year.

The issue of housing was contentious ahead of the South African election, where the minority white group has historically controlled the vast majority of the land. It illustrates the significant disparities that have led to South Africa being recognized as one of the most unequal nations globally. A series of corruption scandals involving members of the ANC or their associates was also a big issue ahead of the polls.

As the 2024 election approached, the ANC was at its weakest despite having won every election since the end of apartheid in 1994. In the 1994 and 1999 elections, it garnered 62.5% and 66.36% of the vote, respectively, with 86% and 89% voter participation rates.

In 2004, despite a decrease in voter turnout to 76%, The ANC achieved its peak, winning nearly 70% of the vote and securing Thabo Mbeki a second term as president. The ANC, which controlled 230 seats in Parliament ahead of the polls, had secured more than 60% in all elections since 1994. The only time it didn’t was in 2019, when its share dipped to 57.5%.

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Due to a lack of political will, South Africa’s mining sector has yet to experience significant changes. The same was not expected as the country went to the polls with the ANC under pressure more than ever. Historical changes in the mining sector have been minimal, given that the ANC has been in power for 30 years. Nevertheless, the industry has had its ups and downs owing to fluctuating economic situations and commodity prices on the global scene.

South Africa has historically played a significant role in the global market for metals and minerals due to its rich natural resources, not just policy changes. Between 2016 and 2022, the country accounted for over 70% of global platinum production and 80% of iridium production. This resource wealth makes the mining sector a crucial part of the nation’s economy, contributing 6.2% to the country’s Gross Domestic Product (GDP) in 2023. 

However, the mining sector’s potential contribution to the economy is hindered by political interference, an outdated mineral rights cadastral system, and onerous black economic empowerment requirements. These factors have deterred foreign investment and caused South Africa to miss out on recent major commodities boom cycles. Despite these challenges, local companies have benefitted from legal victories, such as the “once-empowered, always-empowered” ruling, which has provided some stability amidst the regulatory uncertainties.

Among the four primary mining regions, the North West Province, Limpopo, Mpumalanga, and the Northern Cape, mining remains the leading economic activity, contributing between 20% and 30% of each region’s GDP.

Likewise, the country is a major exporter of gold and transition minerals and ranks seventh in the world for coal production. The top gold mine in South Africa, South Deep Gold Mine in Gauteng, achieved a significant milestone in 2023 by producing 321.5 thousand ounces of gold, with operations expected to continue until 2096. The mine at Mponeng, near Carletonville in Gauteng, is the deepest producing gold mine in the world at around 4km depth, having started operations in 1986.

The Minerals Council of South Africa reports that the mining industry contributed a total of Rand 425.6 billion ($23 billion) to South Africa’s GDP in 2023, representing 55% of the country’s total exports during the first 11 months of the year. Around 80% of the revenue generated from South Africa’s annual exports came from the export of PGMs (precious and base metals), coal, gold, chrome, manganese and iron ore.

The mining sector has encountered several challenges lately, including unreliable power supply due to frequent power outages (load shedding) from the state-owned utility Eskom and issues related to the country’s rail infrastructure. As a consequence, production of PGMs decreased by 11% compared to the previous year, coal output saw a slight decline of 0.7%, gold production dropped by 0.8%, and chrome production remained stable at 19.1 million metric tons, according to the Minerals Council South Africa.

On the other hand, iron ore production increased by 3.3% to 65.8 million metric tons, and manganese production saw a growth of 2.4% to 19.6 million metric tons.

Load shedding, synonymous with rolling blackouts, has become a prevalent and persistent issue in South Africa. Managed by the state-owned power utility Eskom, load shedding in South Africa has been implemented to prevent the national grid from total collapse as consumer demand exceeded the power supplied which was reduced as power stations became  overloaded due to failure of operating units.

The power shortages have been mainly due to excessive breakdowns in the country’s coal power plant fleet, which generates over 80% of South Africa’s electricity. Combined with delays in developing new generation capacity, the energy crisis has always been an issue for the mining sector.

Consequently, the power crisis was a key election topic in national elections. One reason for the ANC’s drop in support is that it did not act on early warnings that the electricity supply would drop to critical levels, consequently affecting the mining industry in South Africa. Recently, the ANC-led government tried to fix this by removing constraints to private electricity generation and appointing a dedicated electricity minister. But the situation had deteriorated beyond the point where these steps could fix the problem.

In the last general elections in 2019, the three parties that received the highest number of votes devoted an average of just 2% (measured in pages) of their election manifestos to electricity. These were the ANC, Democratic Alliance (DA) and Economic Freedom Fighters (EFF).

In this year’s election campaign, the major parties devoted up to 10% of their manifesto to this topic. The DA and other parties that present themselves as “pro-business,” such as Action South Africa and Build One South Africa, believe that large-scale privatization of electricity will automatically lead to the end of power cuts. Their argument amounts to an ideological view that free market systems are more effective than state monopolies.

The EFF was a firm advocate of nationalization and was pushing for the termination of existing contracts with private power producers as one of the ways of addressing the country’s energy crisis. It also proposed repairing coal-fired power plants and keeping them going for longer.

In the aftermath of the ANC forming a coalition government after the May 29 election, mining activity in South Africa showed a promising resurgence at the start of the second quarter, thanks to the suspension of load shedding and improvements at the ports.

Data released by Statistics South Africa (StatsSA) revealed that mining production rose 0.7% year-on-year in April. This is a significant improvement from the 4.8% decline recorded in March. The positive trend in mining could also bolster the second quarter’s real GDP growth, especially after the sector, along with manufacturing and construction, dragged growth to a mere 0.1% in the first quarter.

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The mining sector is experiencing a significant shift with the introduction of automation and robotics. These innovations are used more frequently for risky, monotonous jobs or demand accuracy that surpasses what humans can achieve. For example, self-operating drilling and transportation systems are now commonplace as part of technological advancements in certain mines in South Africa, however, most narrow reef mines are still quite labour-intensive. These systems improve safety by lowering the risk of human contact with hazardous environments and increasing efficiency and output.

Additionally, robots are being used for the upkeep of machinery, the search for new resources, and the extraction of minerals. The incorporation of digital technologies and the analysis of data are also key elements of mining technology 2024 in South Africa. Sophisticated sensors and Internet of Things (IoT) gadgets are spread throughout mining areas to gather instant information on the performance of machinery, the state of the environment, and the availability of resources.

Artificial Intelligence (AI) and Machine Learning (ML) are transforming how mining is done. AI systems can sift through massive datasets to spot patterns and relationships that might elude human experts. This is especially beneficial in the search for minerals, where AI can forecast the presence of mineral deposits with higher precision, cutting down on the time and expense involved in exploration. However, these applications are still in their infancy although the technology will improve rapidly as implementation is adopted by a larger number of users.

Over the past ten years, South Africa has held the fifth position worldwide in terms of its contribution to the global economy through mining, and it currently stands among the top three nations in the production of several vital minerals, including platinum, magnesium, vanadium, ferrochrome, along with gold, coal and iron ore. Together, PGMs, gold, iron ore and coal represent 82% of the country’s sales, with 38% (R282 billion) of these as exports. The US Geological Survey has estimated that South Africa has ore reserves worth over US$2.5 trillion, with 16 minerals among the Top 10 globally.

However, the current state of the mining industry is declining amid waning foreign investments due to more attractive operational and regulatory conditions in other African nations. The Minerals Council South Africa data indicates that mining net fixed investment was nearly zero in 2021. At the recent annual Investing in Africa Mining Indaba conference, several mining companies mentioned that the operational and regulatory frameworks and the processes for handling mineral rights in other African countries were more appealing to investors than those in South Africa due to greater transparency in the application process and less ambiguous minerals legislation.

Moreover, South Africa has significantly reduced its focus on exploration, with its contribution to global exploration spending falling below 1% in the last three years, compared to over 5% two decades ago. The country must catch up to its African peers in adopting a modern, transparent system for managing mineral rights applications and records. The primary issue has been the need for action by President Ramaphosa to address the problems that deter investment, such as power shortages, issues with rail and port infrastructure and the absence of a comprehensive cadastral system.

Following the worldwide shift towards renewable energy in mining, companies face increasing demands to embrace eco-friendly practices and utilize technologies that emit fewer greenhouse gasses to lessen their adverse environmental effects. Private and public mining operations in Africa increasingly focus on sustainable mining practices to enhance environmental health, social impact and ethical business conduct.

Extracting and moving minerals in the mining sector requires a lot of energy. Consequently, the industry is turning to renewable energy sources like solar, wind and hydroelectric power to reduce carbon emissions and make the sector more sustainable.

Although the use of renewable energy in mining is still in its early stages in Africa, mining companies such as Pan African Resources. Anglo-American, Sibanye-Stillwater, Gold Fields, Harmony Gold and Impala Platinum are starting to harness the continent’s renewable energy potential and expand the use of sustainable energy in their large-scale projects in South Africa. Combining renewable energy with mining operations offers a promising investment opportunity and will grow in importance as the global shift towards a low-carbon economy continues.

Sustainability is a crucial focus for the company in the mining sector, which is evident through various initiatives. For example, Pan African Resources promotes reducing, reusing and recycling mining waste as it seeks to tackle the massive amount of waste produced globally each year. Additionally, the company is working to lower its carbon emissions by shifting to renewable energy sources generated by solar, wind and battery storage solutions. This commitment to sustainability is not just a policy – it’s a guiding principle in how the company operates, aiming to extract minerals while caring for the environment through conservation and biodiversity management and being socially responsible. The company seeks to minimize its environmental footprint by adopting advanced technologies while increasing operational efficiency.

Environmental, Social, and Governance (ESG) factors are increasingly significant across various sectors. The importance of ESG factors is particularly pronounced in the mining sector as a result of mining activities’ high environmental and social impacts. These activities encompass land use, energy and water consumption and waste generation, all of which have enduring effects on natural ecosystems and communities.

With an increasing focus on ESG initiatives, mining is a matter of ethical business and a strategic necessity for enduring success. Such a strategy can help mitigate risks, enhance the company’s reputation, attract increasing investment and spur innovation, providing a competitive edge in the current business environment. Addressing and successfully managing environmental and social challenges in the mining sector is crucial for ensuring the industry’s sustainable growth.

Concerning the environment, there is an apparent demand from investment institutions and the public in South Africa for a shift towards decarbonization efforts. This is because South Africa, with its carbon tax and status as one of the highest per capita emitters due to its reliance on coal for power, is under pressure to reduce its carbon footprint. Mining companies can lower emissions and lessen their carbon tax liabilities by increasing their use of renewable energy sources, thereby reducing their environmental impact.

In terms of social considerations, it is evident that there is an increasing desire for mining companies to offer fair working conditions for their employees, promote workplace diversity and support the communities in which they operate through infrastructure development and local economic growth. Pan African Resources, for instance, actively contributes to developing its host communities by funding and refurbishing schools such as Sheba Primary and Ngwane Secondary School and Cathyville health clinics. The company acknowledges that its mines can only provide jobs for a limited number of community members and has therefore begun to explore alternative employment opportunities, including large-scale agriculture projects that are highly labour-intensive, such as blueberry farming.

The governance aspect focuses on managing and overseeing the company’s resources, ensuring compliance with current local and international legal and regulatory standards. Strong governance and transparency in reporting are essential for the long-term viability of a business, as they can help reduce operational costs and the risk of damage to the company’s reputation.

Throughout intense debate leading up to South Africa’s May 29 election, one critical topic that was notably missing from the campaign trails has been climate change. Despite experiencing frequent flash floods in KwaZulu-Natal province since 2016 and a temperature increase in the country nearly double the global average, one might expect these environmental concerns to be at the forefront of the discussion. However, it is surprising that other issues subdued the election’s impact on environmental policies.

In its campaign platform, the ANC outlined strategies that focused on renewable energy, energy efficiency, waste management, sustainable farming and environmentally friendly production methods that would aim to ensure long-term ecological balance. This strategy includes positioning South Africa as a leading force in producing green hydrogen, batteries and electric vehicles. However, the plans excluded proposals on environmental regulations in mining.

The Democratic Alliance’s (DA) election platform also highlighted its commitment to tackling climate change by moving away from Eskom’s dominance and increasing the reliance on renewable energy sources. This strategy involves building local production capabilities for renewable energy technologies without engaging in protectionist trade policies and encouraging the growth of the renewable energy workforce.

The Economic Freedom Fighters (EFF) election platform on climate change presented a detailed strategy to tackle environmental challenges and shift towards sustainable growth. The EFF sought to simplify environmental approval processes for mining and property development under the Department of Environmental Affairs. To combat pollution, the EFF planned to manage stormwater runoff and reduce the use of plastic by initiatives such as eliminating plastic bags and investing in eco-friendly alternatives.

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On May 29, South Africa held one of the most pivotal elections. After three decades of leading the country, the ANC faced its biggest challenge yet trying to secure at least 50% of the National Assembly seats. A record-breaking 23,292 polling stations opened, with expert opinions affirming the country was headed for a coalition government after the polls. The Independent Electoral Commission (IEC) approved 14,889 candidates for the 2024 election, including 70 political parties and 11 independent candidates, to contest 887 seats in the election.

South Africa operates under a proportional voting system, where political parties and candidates vie for 400 seats in the National Assembly. The elections feature two ballots for the National Assembly and a third for the provincial legislative bodies in South Africa’s nine provinces. The people do not directly elect the president. Instead, the National Assembly, comprised of 400 members, selects the president with a simple majority vote – 201 or more votes are needed to secure the presidency.

Once the 2024 election results in South Africa started streaming, it became clear the ruling ANC would not secure the majority. It ended up securing only 40.18 % of the vote, a significant underperformance that led to it forming alliances with other political parties to remain in office.

The DA emerged as the second-largest party, receiving 21.81 % of the vote, followed by the MK party with 14.58 % and the EFF with 9.52 %.

Ultimately, the ANC was compelled to form a coalition with the DA and several smaller parties. This new coalition government saw the National Congress of South Africa (NC) secure 20 of the 32 cabinet positions, with the DA holding six seats and the remaining smaller parties sharing the remaining six seats.

Nevertheless, it was unclear the election impact on the mining sector once it became certain that South Africa would be governed by a coalition government for the first time since 1994. Over the years, the ANC was the dominant force that called all the shots on policies that affected the mining sector.

The formation of South Africa’s first coalition government since the end of apartheid marks a significant moment for the country, particularly in leveraging its renewed interest in the mining sector. Despite being the world’s leading repository of gold, the mining sector had been overlooked. However, over the past six months, a notable surge in global interest in South Africa’s mineral resources has been driven by the increased demand for metals like copper, nickel, PGMs and gold.

South Africa’s government of National Unity Ent (GNU) will not undergo any policy alterations that would affect the mining sector, according to Premier Panyaza Lesufi of Gauteng Province. Policy changes post-election are unlikely given that the ANC remains the dominant force in the National Assembly despite losing the majority, but this could change.

The government’s policies currently remain unchanged and its relationship with China will be further solidified. Economic prospects, though, will be expedited. The government will not be pulled away from the BRICS alliance; instead, it will remain a member, regardless of political changes. China is considered a reliable ally. South Africa is turning to China for advancements in infrastructure, high-speed rail systems and solutions to solve energy deficits.

Public opinion on election results varied as it was the first time in history that the ANC had lost its majority and control of parliament.

Economic expansion slowed from 1.9% in 2022 to 0.6% in 2023 as a result of ongoing issues with electricity supply, transportation limitations and a drop in global prices for gold and PGM  during that time. In the face of continuous power outages that hinder business operations, the statistics agency reported that the economy contracted in the first quarter of 2024, with manufacturing, mining and construction being hit the hardest.

After the May 29 elections, the future looks optimistic, with economic expansion anticipated to reach 1.3% in 2024 and 1.6% in 2025 as new investments in public sector infrastructure bolster the construction sector and help other industries recover. Expectations for inflation are set to ease to 4.8% in 2024, with a reduction in interest rates. The government’s budget deficit is expected to fall to around 4.3% of GDP in the 2023/24 fiscal year, as tax revenues are expected to rise.

In the first quarter of 2024, the nation experienced a significant rise in foreign direct investment inflows, hitting R24.4 billion, primarily due to higher commodity prices. However, there were continued outflows in portfolio investments, signaling the seventh quarter of declines as fears about the election and its impact became rampant.

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The impact the 2024 election will have on the South African mining sector is still unclear. While the ANC lost the majority in parliament and was forced to form a coalition with other smaller parties, it remains the dominant player in the political space. Consequently, it should continue to influence policies and regulations of the multibillion-dollar sector.

For mining investors,  the mining sector should remain the cornerstone of the country’s industrial expansion. That’s because the mining sector generates billions of dollars in tax revenues to the government so that it can offer essential services and meet its financial obligations.

Nevertheless, investment in mining in 2024 casts a shadow over the nation’s economic future. The leading investors in South African mining have put on hold their plans to invest billions of dollars in new ventures due to a drop in earnings caused by various local issues and falling commodity prices, such as PGMs.

In 2024, the mining industry in South Africa is projected to experience further declines following a downturn in 2023. This slowdown will be exacerbated by ongoing issues related to high operational costs, power supply interruptions, rail and port systems inefficiencies, and the aggressive actions of labour unions, all of which continue to burden the sector. However, these should be mitigated by increasing commodity and metals prices, especially gold.

To overcome these challenges, South Africa needs a more rapid increase in both private and public sector investments and swift execution of fundamental structural changes to enable the private sector to engage more effectively in critical economic sectors.

In financing mining projects, managing risks is a crucial element that tackles the numerous uncertainties. The mining sector, being capital-intensive and subject to the ups and downs of mineral markets, relies heavily on solid risk management approaches and the security of its investments to ensure the financial health of a project. Investors and stakeholders in a mining operation must be aware of the various risks, ranging from the exploration and extraction phases to the fluctuations in commodity prices and geopolitical issues. Successfully navigating these risks guarantees that projects are executed on schedule and within the allocated budget while also enhancing the likelihood of achieving profitability.

The initial phase of risk management involves pinpointing potential long-term risks. Within the mining industry, this process requires a comprehensive and detailed examination of internal and external elements that could threaten the financial well-being of a project. These elements might encompass geological uncertainties, market instability, environmental obligations, or regulation changes.

After identifying risks, they need to be evaluated and determined for their likelihood of happening and their potential impact. This phase employs qualitative and quantitative techniques to assess risks, aiding in the mining sector’s decision-making process on which risks demand immediate attention and resources. A thorough risk assessment aids in ranking these risks according to their importance and potential to interfere with the project’s goals.

The mining sector has consistently been a key driver of the South African economy, contributing over 5% to the Gross Domestic Product (GDP) over time. It plays a crucial role in improving the lives of workers, local communities and the country’s fiscus by generating tax revenues and royalties, creating employment opportunities and benefits, offering educational and training programs for employees and communities, and investing in social initiatives and infrastructure. As a result, the nation’s progress is deeply intertwined with the mining sector. If it cannot be grown, it has to be mined.

Despite facing economic hardships locally and globally, the mining sector has maintained and even increased employment numbers. In the challenging year of 2023, employment in the sector grew by over 1.6%, surpassing the 1.3% increase seen across all formal sector jobs (excluding mining and agriculture).

In 2023, women represented 19% of the total workforce in full-time positions. A year-long review of reports from 12 Minerals Council members across various minerals found that mining companies allocated over R5.18 billion for training and development in a single fiscal year, with an average cost per full-time employee ranging from R13,500 to R21,700.

However, the industry faces an uncertain future amid a different political landscape in South Africa. The ANC’s loss of its parliamentary majority necessitates collaboration with other political parties on sector-related policies. Additionally, significant investments and strategic alliances are essential to fully realize the mining sector’s potential, and existing barriers must be overcome.