For all of its challenges, much of South Africa’s mining industry has recently been becoming more profitable. There have been costs involved, including the closure of underperforming shafts and job losses. But the sector has been doing relatively well. number for mining for March 2019, which showed that prices at the mine gate rose 20.2% year on year from 10.6% in February. It was last in this region about three years ago before slowing sharply, briefly into negative territory.
Meanwhile, input costs remain relatively subdued. The Minerals Council South Africa has designed its own index to measure these costs, which exclude labour and which has been peer-reviewed by Statistics South Africa.that these costs are currently running at around 6% to 7%. The latest Eskom power hikes have not been factored in yet, so that could change.
There is an unsurprising correlation between the mine PPI and commodity prices. But this does not immediately translate into increased production.Production trends tend to lag behind changes in commodity prices by around 12 to 18 months.
This is another example of how structural policy and economic issues prevent industries in South Africa from realising their full potential. If mining production could nimbly scale up to take advantage of this situation, the benefits would not just flow to mining boardrooms and investors. They would feed into economic growth, employment , tax collection, the current account and other areas.
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