[South Africa] Mining Maintains a Solid Business to be in
14-08-2017 11:25:00 | by: Andrea Ayemoba | hits: 23022 | Tags:

Take a look at almost any measure of success in the South African business world and you'll see that mining companies always perform well. Regardless of whether you assess a company by size, global presence, revenue or share value, mining outfits such as Anglo American, BHP Billiton and Gold Fields all rank highly in a list of top performers.

Now, it's no secret that mining and manufacturing natural resources is a strong business to be in. However, with recent negative regulation, a strained political situation and an uncertain economy, the mining industry in South African can't simply rely on tradition. Indeed, there have been plenty of industries that have crashed in tough economic times (housing and banking being the obvious examples), so why have mining companies remained fairly robust?

Market Position Proves Powerful for South African Companies

Well, one possible answer is the position of South Africa within the Africa market. According to experts, the recent economic growth of African countries such as the Ivory Coast has kept South Africa's 40 richest companies ticking over nicely. Taking The Economist's recent analysis that nine African economies are now among the fastest growing in the world, Richard Baker suggests that South Africa's status in the mining industry will benefit from this.

By virtue of the South Africa 40 containing major mining companies, the country is essentially able to serve the growing industrialisation needs of Africa's booming economies. In turn, serving these needs means more revenue and, therefore, greater profits for the companies involved. So, even if South Africa's economy isn't thriving as it once was, businesses within the country can benefit indirectly from the growth of economies within Africa.

A Way to Negate the China Crisis

In light of this, mining continues to be a strong industry within South Africa. In fact, the potential increase in deals and investment across Africa could help to relive some of the reliance on China. Although China will remain the lynchpin of virtually every economy in the world over the next few years, its recent troubles haven't gone unnoticed. Even though the Chinese government is moving to expand its influence in other countries in a bid to offset a struggling economy at home, relying so heavily on China isn't ideal.

The emerging African economies clearly can't fill a void that would be left by China's disappearance into the economic abyss. However, they could negate it and allow South Africa's companies to stave off any potential dips in the future. Indeed, it's no secret that falling trade between China and South Africa has hurt the latter. As Chinese imports from Africa dropped by almost 40% in 2015, South Africa and Nigeria saw the value of their currencies plummet.

Even though recent legislation has clearly shaken the South African mining industry, it still has a glimmer of light at the end of the tunnel. Is it a glittering rainbow with a pot of gold at the end of it? Possibly not. However, if there's a solid business to be in, it's mining and it's in South Africa.