Forex: South African mining woes – Capital Economics

FXstreet.com (Barcelona) - The structural problems in South Africa’s mining sector have been brought starkly into focus by the ongoing bout of labor unrest. According to Shilan Shah, an Economist at Capital Economics, “Although it is difficult to predict to how events will pan out from here, we think that, ultimately, the sector will continue to drag on the economic outlook in the coming years.”

More broadly, the sector demonstrates some of the problems associated with commodities-driven growth facing much of sub-Saharan Africa. The latest wave of strikes, which reached a nadir after the deaths of 34 miners at the Marikana platinum mine last month, has been sparked a combination of pay disputes and increasing redundancies in the sector.

In reality, however, South Africa’s mining sector has been in decline for many years, as gold production has plummeted, while production of other commodities has remained largely stagnant. The sector now accounts for just 5% of GDP, compared to over 10% in 1991. Employment in the sector has declined by 150,000 since 2001.

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