in brief in the news By David McKay
MINING
Powering through Covid-19
As South Africa prepares for the inevitable economic fallout of a 21-day lockdown, David McKay takes a look at how the mining industry will cope with this drastic measure. Sibanye-Stillwater’s Khuseleka platinum mine in Rustenburg, North West province
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t is tempting to fear the worst following President Cyril Ramaphosa’s dramatic 21-day lockdown announcement on 24 March, aimed at stemming the spread of Covid-19, especially for the mining sector, which has long been at loggerheads with government over fiscal and economic policy. The Minerals Council South Africa’s response was to call for creative measures, in association with government and business generally, to make sure all mines can reopen on 16 April when the lockdown is scheduled to end. It fears some might not. However, there’s ground for optimism in the face of the unprecedented events around Covid-19. One is the most obvious: In terms of political capital, the Ramaphosa administration has never been more ‘on point’, moving with decisive pace in order to save the lives of South Africans. Secondly, the interaction between government and business in tackling the Covid-19 crisis might be catalytic for publicprivate enterprise in the future. “The cooperation between government and the private sector has been excellent in the last few weeks,” says Charmane Russell, spokesperson for the
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Minerals Council. “There’s a (ARM) burning 73% of its available These are precedentgreat deal going on behind the cash, and Kumba Iron Ore, the setting times, however. The Oppenheimer and Rupert scenes in terms of the private Anglo American subsidiary, using families have contributed sector coming to the table.” only 36% of its cash. Thirdly, the last two weeks All sectors of the investment of stock market volatility, market have probably been largely dominated by massive oversold but certain shares look liquidations, represents an especially attractive, such as Exxaro each to alleviate stress on opportunity for investors, Resources, which has fixedsmall businesses through especially in the mining space, cost contracts with Eskom in a the crisis. although caution is the by-word. commodity that is likely to escape Thanks to the hardships of 2015, when the the lockdown owing to the essential role it plays mining sector was found to have over-extended in energy generation. itself in search of market share, today’s As for Kumba, it will benefit from rand diversified mining companies are well-stocked hedge, and the fact that oil is at historic lows, to survive the crisis. lowering its cost of production. The firm is also “Even under a very long governmentexceedingly well-padded with cash reserves in a imposed shutdown, SA diversified miners’ sector that is well-disposed to the slow but sure balance sheets should be able to cope, a economic recovery analysts expect of China. testament to lessons learnt in 2015,” said Where there is stress, however, is in the analysts at RMB Morgan Stanley in a note mining sector supply chain where even a 21-day to clients. lockdown might see equipment and supplies Even assuming an extended shutdown companies unable to prevail. of the mining sector of up to six months – “Local suppliers of goods and services which would be catastrophic to SA society in will struggle to last a 21-day shutdown, in our general – diversified SA mining companies view,” said RMB Morgan Stanley. “In the event will survive, with African Rainbow Minerals of failures within the mining sector supply
R1bn
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