South Africa Mining Report Q3 2012

The past decade of stagnation and decline in South Africa's mining sector is set to end as several projects across South Africa's vast mineral wealth come online in the next five years. We expect South Africa's mining sector value will reach US$30.9bn by 2016, from US$27.0bn in 2011.

Stagnation To End, But Global Share To Decline While South Africa's mining output growth is set to pick up over the coming years, we expect the country's share of global output to continue to decline as other major mining countries see faster rates of growth, most notably China and Australia. In addition, we expect investment, particularly in gold, to be increasing attracted to low-cost opportunities in the rest of the continent such as the DR Congo and Ghana. This scenario is likely to be replicated in the diamond and iron ore sectors as growth elsewhere, mainly Zimbabwe and West Africa, respectively, makes South Africa less attractive for opportunities.

Coal is the one important exception to this rule. We forecast coal output to reach 349mnt in 2016, marking average growth of 5.4%, one of the fastest rates out of major producers. Because of this growth, we expect South Africa to become a global coal export hub eating into the global share of exports which is currently dominated by Australian and Indonesia, where we expect output growth to slow significantly.