In light of falling revenues, productivity and market capitalisation, the rapid integration of technological solutions, “localising the value chain from mining operations” and further exploration are crucial to rescue South Africa’s mining industry, according to McKinsey & Company.
The mining sector is of significant importance to the South African economy, comprising approximately 10% of the country’s GDP. McKinsey & Company places the value of the sector at approximately R300 billion, adding that the sector accounts for 450,000 jobs across all communities.
However, a dip in global commodity prices in 2014 spelled near disaster for the sector, which immediately registered a dip in its revenues and market capitalisation. As per McKinsey’s analysis, nearly 50,000 individuals in the mining sector have lost their jobs over the last decade.
The sector is also an example of job-vulnerability – an issue that is increasingly plaguing the South African economy. Unemployment in South Africa currently stands at nearly 30%, which is among the highest unemployment rates in the world. The mining sector could contribute substantially to these numbers.
McKinsey reports that nearly 50% of mining jobs in South Africa and more than 40% of the revenues generated from the sector are currently in what it describes as “the vulnerable bottom quartile of global cost competitiveness.” This scenario is further under threat from current conditions in the global scenario.
Coal makes up one of the most stable commodities in South African mining sector, given that its revenues and market capitalisation have stayed above water while those of gold and platinum have sunk rapidly. Nevertheless, this stability is now under threat from a preference across the globe for clean energy.
In its report on the mining sector, McKinsey has enumerated a set of broad recommendations that might help rescue the sector from its current peril. Predictably, the first recommendation is the integration of digital tools and implements into mining operations.
Consulting firms before McKinsey have suggested a similar solution in the past, arguing that the efficiency that technology can introduce into mining operations could reduce the time and resource investment required in the sector. Several consulting firms have also moved to support with this transition to the digital domain.
Big Four accounting and advisory firm Deloitte introduced an integrated digital mining solution last year, complete with the latest in real-time data analytics and provisions for predictive maintenance. Earlier this month, management consultancy Accenture launched an Applied Intelligence Studio in Johannesburg, catering specifically to the mining sector.
In addition to digitalisation, McKinsey recommends “four paths to competitiveness and growth.” The first of these involves structural optimisation of mining organisations in order to boost productivity in the sector, while the second recommends a shift in the “socio-economic role of mines.”
This entails the localisation of value chains and the simultaneous boosting of other sectors. Lastly, the firm recommends that the sector should “embrace the energy disruption” – through the development of fuel cells for instance – and “unlock high-potential mining assets.”
Source : consultancy.co.za
Keywords : Africa, News, Economy, Companies, South African mining, Job Creation, Digitalisation, Productivity