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Recently Released Market Study: South Africa Mining Report Q4 2012

New Materials market report from Business Monitor International: "South Africa Mining Report Q4 2012"

 

Boston, MA -- (ReleaseWire) -- 11/08/2012 -- The past decade of stagnation and decline in South Africa's mining sector is set to end as several projects across South Africa's vast mineral wealth come online in the next five years. We expect South Africa's mining sector value will reach US$36.6bn by 2016, from US$33.2bn in 2011.

Stagnation To End, But Global Share To Decline

While South Africa's mining output growth is set to pick up over the coming years, we expect the country's share of global output to continue to decline as other major mining countries see faster rates of growth, most notably China and Australia. In addition, we expect investment, particularly in gold, to be increasingly attracted to low-cost, high resource opportunities in the rest of the continent such as the DR Congo and Ghana. This scenario is likely to be replicated in the diamond and iron ore sectors as growth elsewhere, mainly Zimbabwe and West Africa, respectively, makes South Africa less attractive for opportunities.

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Coal is the one important exception to this rule. We forecast coal output to reach 349mnt in 2016, marking average growth of 5.4%, one of the fastest rates out of major producers. Because of this growth, we expect South Africa to become a global coal export hub eating into the global share of exports which is currently dominated by Australian and Indonesia, where we expect output growth to slow significantly.

Regulatory Environment

South Africa's mining sector is amenable to investment in the sector with few obstacles confronting foreign investment. The government is generally stable and its business environment is one of the best on the continent. In terms of taxation, the South African government recently proposed increasing taxes on mining companies from 3-5%. We do not expect this measure, if implemented, to deter investment due to the size of the country's mineral wealth and because this tax is relatively small compared with those introduced and suggested in Chile and Australia.

The issue of nationalisation has resurfaced and although we see this as a highly unlikely scenario, it could deter some investment into the mining sector. In addition, the South African government has stated plans to introduce a new environmental tax in an effort to address future eruptions of acid mine drainage. If these proposals are implemented then it could increase costs for the mining companies, which have frequently been accused of environmental degradation.

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