Industry Trend Analysis - New Mining Charter Confirms Bleak Growth Outlook - JULY 2017


BMI View: South Africa's new mining charter will further solidify the country's negative mining sector growth prospects in the coming years, as updated revisions on black ownership levels and new taxes will raise compliance costs for miners in the country. As a result we have downgraded South Africa's Mining Risk Reward Index score. The operating environment outlook in the country remains uncertain as miners are likely to challenge the charter in court.

Following year-long deliberations and postponements, the South African government announced in June 2017 that it will be adopting a new mining charter. The revision of the charter, published on 14 June 2014, has been a major source of uncertainty for the domestic mining sector since its initial announcement on 15 April 2016 ( see: New Mining Charter To Cause Investment Uncertainty', July 1 2016). As anticipated, the revisions made under the new regulation are likely to increase compliance costs for miners operating in the country, at a time of slim margins, and has already hit miners share prices. In response, the country's chamber of mines, which was not included in conversations regarding the content of the final version of the charter, has announced its intention to take the government to court. The announcement of the new charter supports our view that growth witnessed in the domestic mining industry during 2016 will be cut short ( see: ' South Africa ' s Mining Recovery To Be Short-Lived ' , March 30 2017) and reinforces our negative longer term outlook for the sector, which we forecast to contract by an average of 0.5% over 2017-2021. Furthermore, we have revised down the country's Mining Risk/Reward Index score as a result of the new proposals, which will make the domestic regulatory environment more challenging for mining companies.

Worst Fears Confirmed

Future Of Mining On A Downtrend
Mining Industry Value (USDbn) & Mining Industry Value Growth (% y-o-y)
e/f = BMI estimate/forecast. Source: BMI Calculation/UN Data

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