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South Africa’s Economic Recovery is Being Driven by Mining

South Africa’s Economic Recovery is Being Driven by Mining

South Africa’s mining and mineral export industries have played a key role in driving an economic recovery following the onset of the COVID-19 pandemic according to a South African Economic Recovery Report by PWC.

While container exports have seen a decline by 17.5% year-on-year (y-o-y) in the second quarter of this year, the value of mineral sales – both regarding exports and domestic use – increased by 3.9%.

The increase has in turn scaled-up revenue generation that will help get the South African economy back on track.

In 2022, Russia’s war with Ukraine, energy transition trends and a post-COVID-19 landscape have caused significant disruptions within global economies. However, at the same time, these very challenges have presented unique opportunities for South Africa. With international markets seeking to ease the reliance on Russian gas, demand for South African coal has significantly increased, resulting in coal shipments fetching prices that were 48.6% higher during the January-June period. The report notes that “European demand for coal has jumped in recent months and is expected to increase by 7% this year,” further enhancing South Africa’s coal export outlook.

However, coal is not the only industry driving the country’s economic recovery. According to the report, “processed products like coke oven and refined petroleum products (+46.1% y-o-y in June); products of iron and steel (+20.1% y-o-y); and other semi-finished metal products (+14.2% y-o-y) have also seen notably price gains over the past 12 months.” As such, the country’s container exports increased by 5.1% during Q1, 2022.

Despite these positive outlooks, a number of domestic challenges continue to restrict the growth of South Africa’s export economy. Notably, in addition to Russia-Ukraine challenges, load shedding, environmental impacts – such as the flooding experienced in the KwaZulu-Natal province – and operational inefficiencies at a number of South Africa’s ports continue to hamper exports.

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To address these challenges, the government has launched Operation Vulindlela – a joint initiative undertaken by the Presidency and the National Treasury to create a competitive and efficient freight transport system in South Africa. With the initiative, South African port and pipeline company, Transnet, announced a R14 billion investment over the next five years to improve the quality of port operations and infrastructure in the country. With Transnet expected to launch a request for proposals for public-private partnerships for container terminals, an influx in private sector investment is expected, and a new era of efficiency and exports is in sight.

Further Africa

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