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PERSONALITY OF THE MONTH Tackling SA mining’s biggest risks Financial decline due to labour and cost pressure 2014 has been a tough year for mining companies, with the five month platinum strike having seriously affected productivity and profitability in the industry, as well as the economy of the country. Nonetheless, there is still value in South Africa’s mining industry, and companies have managed to maintain relatively strong balance sheets with stable liquidity, says Hein Boegman, PwC’s African mining leader. Vicky Sidler reports. T he industry has seen significant decreases in profitability, declining market capitalisation and regulatory uncertainty. In addition, local cost pressures and international demand weaknesses have resulted in shrinking margins and wide ranging impairment provisions, which have been driven up 145% to R49 billion and have resulted in a 19% contraction in the sector’s capital expenditure (capex) for the year to R57 billion. In spite of this, Boegman states: “The mining industry still adds significant value to the South African economy with regards to GDP contribution, employment, tax and export revenues. Leadership will be required from all stakeholders to ensure long-term optimisation of the industry as opposed to the threat of instant gratification claims by stakeholders.” The significant decrease in profitability of the industry fuelled the contraction trend in market capitalisation of South African mining stocks. This decrease THEY SAID IT Coal retained its status as the biggest revenue generator, representing 29% of South Africa’s R351.3 billion mining revenue for the year. Photograph of Isibonello colliery, courtesy of Anglo American and Philip Mostert 6 MINING REVIEW AFRICA ISSUE 12 2014 is in line with international mining counterparts who are also struggling with higher costs and lower prices. A weakening rand tended to shield the South African mining industry from the decline with rand prices remaining relatively flat. “The mining industry still adds significant value to the South African economy with regards to GDP contribution, employment, tax and export revenues.” Hein Boegman T THE REAL COST OF LABOUR O A According to PwC’s sixth edition of ‘SA s Mine’, a series of publications that p highlights trends in the South African t mining industry, one of o the biggest risks