According to the Oxford Business Group, SA’s mining sector has an estimated $2.5 trillion worth of proven mineral reserves. Accounting for 8% of the country’s current GDP, the sector also provides 14% of SA’s employment, making it the country’s second-largest employer. Historically, the mining sector played a pivotal role in SA’s growth and today remains an integral part of the country’s economy.

The discovery of gold in Johannesburg during the late 1880s was the catalyst for sudden and significant commercial development. Indeed, mining was the industry that kick-started Johannesburg’s rapid expansion. It was also a key factor in the founding of the JSE in November 1887. The bourse was established to facilitate the exchange of commodities, and many mining houses were among the earliest companies to list on the JSE.

DRDGold was the first mining house to list on the JSE (which it did in 1895) and is still listed today. Numerous inward listings have taken place over the years, such as BHP Billiton, and there have been several unbundlings, including Sibanye Gold and South32, which listed on the JSE in 2013 and 2015 respectively.

In 2017, one of SA’s first mining houses, Anglo American, celebrates its 100th birthday. The company was founded by Ernest Oppenheimer (considered by many to be a doyen of the mining industry) and has, over the years, made a massive contribution to the country’s economy. Several of SA’s largest and most successful companies have developed out of Anglo American, including De Beers. It also founded several other JSE Top 40 companies, such as Mondi.

While SA’s economy has evolved from what was predominantly mining-based a few decades ago to become more diversified today, mining is still a cornerstone of this development. As such, the sector remains extremely important to the JSE. There are currently 60 basic resources companies – comprising mining and industrial metals – listed on the bourse.

The number of new listings has decreased during the past 10 years. In 2007, there were nine new basic resources firms listed on the JSE, although this number decreased over the period and there were no new listings of basic resources companies in 2016. We do, however, expect to see the position improving as macroeconomic conditions change in favour of new listings of mining companies.

The sector is susceptible to global headwinds. If we look at the performance of mining companies on the JSE over the past 12 months, many of them have struggled to some extent. However, others have performed superbly during the course of 2016, including AngloGold Ashanti, Sibanye Gold, Anglo American, Anglo American Platinum, Gold Fields, Glencore and South32. If you look at the mining index of the JSE, this has improved 22.3% overall since March 2006, despite the tough environment over the period. More than R282 billion has been raised from mining companies through secondary capital raisings since 2007.

SA offers some of the best mineral reserves in the world and, as global commodity prices recover, this will almost certainly translate into improved performance for the mining sector.

As touched on earlier, the mining sector is the second-largest employer in SA. According to Statistics South Africa, 460 000 people were employed in the mining and quarrying sector during the third quarter of 2016. Moreover, data obtained from the Department of Mineral Resources puts the average monthly earnings of employees in this industry at R22 140.

The mining sector also plays a crucial part in technological advancement, and many would argue that it’s leading the charge. As the world moves towards clean energy sources and responsible industry, mining has an important part to play in ensuring that companies continue to focus on technological improvement in their operations and undertake their operating activities in a responsible way.

Given that SA still has a very large repository of resources, mining companies are going to be relevant long into the future. The JSE is committed to ensuring that SA remains on an upward growth trajectory – and that the mining sector continues to be a part of this.

Prejelin Naggan
Head: Primary Markets

January 2017
Image: Ricardo Lategan