Highlights from PwC’s ninth edition of SA Mine, a series of publications that highlights trends in the South African mining industry released by PwC
2017 was another challenging year for South Africa’s mining industry in light of a decrease in dividends and market capitalisation, various retrenchments across the industry, and marginal increases in taxes paid. However, spot price increases for bulk commodities supported the industry and resulted in a return to profitability after the first substantial increase in revenues in five years. These are some of the highlights from PwC’s ninth edition of SA Mine (APO.af/m8dmDx), a series of publications that highlights trends in the South African mining industry released by PwC (PwC.com) today.
Michal Kotzé, PwC Africa Energy Utilities & Resources Leader, says: "The 2017 year can be described as a year of policy uncertainty and real questions over the long-term sustainability of the industry."
Despite an improvement in the financial performance of the industry, regulatory announcements in June 2017 resulted in market capitalisation dropping to June 2015 levels. A subsequent recovery at the end of August was aided by improved USD prices and hope by investors that the suspended new Mining Charter would be revised before final implementation. In this edition, we have also included a brief look at the regulatory changes in Nigeria, the DRC and Tanzania.
Revenue increased by 13 per cent (R43 billion) from the prior year. “It is notable that this is the first substantial increase in more than five years,” says Andries Rossouw, PwC Assurance Partner.
The gold companies’ revenue increased by 17 per cent (R23 billion) due to improvements in USD gold prices and a weaker rand for most of the reporting period. The platinum companies have seen revenue increases by 4 per cent from the prior year on the back of improved platinum prices for parts of the year.
Operating expenses increased by R13 billion, which is a 5 per cent increase from the prior year. Continued low commodity prices have resulted in another year with significant impairments in the industry, with a total of R22 billion in impairment provisions. More than R100 billion was impaired over the last three years, more than wiping out the last two years of capital expenditure in the industry.
Across the rest of the continent, the growth in the DRC mining sector since 2002 has been facilitated by the commodities boom, attractive tax and customs incentives, greater stability and an improved regulatory environment. By the end of 2016, 482 companies held mining rights, compared to 35 in 2002. The production of copper amounted to 1.035 billion tons at the end of 2016 versus 27 259 tons in 2002. Cobalt production achieved 69 038 tons at the end of 2016, versus 11 865 tons in 2002.
Despite various challenges theGovernment of Nigeria has taken a number of steps to make the mining sector more attractive for investment by putting in place clear regulatory policies and operationalising existing ones. There are still a number of challenges in the sector ranging from insufficient infrastructure as well as regulatory conflicts. The Nigerian mining sector realises it needs to align itself with world trends and norms, especially around the future demand for various minerals.
In 2016, the Government of Tanzania has introduced fundamental changes to the income tax regime for the extractive sector. June 2017 saw significant changes for the sector, even more fundamental than the 2016 changes. The broad objective of the new legislation is to seek to obtain a higher return to Tanzania from its natural resources.
