South Africa's mining sector will continue to face headwinds from policy uncertainty regarding the passing of the draft mining charter, hindering the potential of a recovery since 2016 from becoming solid. We forecast the domestic mining industry value to continue to decline over the coming years.
Despite the recent rally in prices, Anglo American will remain committed to selling its Kumba iron ore mine in South Africa. Production of iron ore in South Africa is set to stagnate at 75mnt from 2017-2021, as iron ore prices gradually decline over the coming years and regulatory and infrastructure challenges persist.
Anglo American will shed the majority of its assets and shift focus towards its diamond, platinum and copper mines. The firm's decision will result in significant divestments across the globe, of which South Africa will be hit the hardest.
BMI View: Because South African-listed companies derive most of their earnings from abroad, investors in the FTSE/JSE Africa All Share Index (JASLH) are not so vulnerable to South African growth wobbles. The index is dominated by the retail sector, which has displayed resilience and while the outlook for commodities is unsupportive, commodity companies only account for 11% of the index.
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Thanks, BMI Research