South Africa hopeful rising metal prices will accelerate COVID-19 recovery

South Africa is optimistic rising global metals prices will play a significant role in accelerating the country's economic recovery from the pandemic downturn.

This is in addition to opening up new opportunities in the mining value chain, boosting the fortunes of the mines, and consequently the suppliers of capital goods and options for beneficiation.

In a statement on Monday, President Cyril Ramaphosa said in constant dollar terms, prices for most of the country's metals exports, led by platinum, gold and iron ore, are now as high as they were at the last commodity boom peak in 2011.

"These prices have helped sustain the economy despite the sharp decline in the hospitality and tourism industries. As a result, our growth has recovered far better than we thought possible in the bleak days of last April, although employment creation is still far behind," he said.

Last week, the South African Revenue Service announced the country had recorded yet another record trade surplus in May, to the value of $835 million. The surplus was attributed to a 1.5 percent increase in exports between April and May.

According to Ramaphosa, the trade surplus was primarily driven by mineral and precious metal exports, as well as exports of vehicle and transport equipment, and chemical and agricultural products.

"High commodity prices and rising global demand are good for our economy, particularly the mining sector," he said.

Ramaphosa said it's time to facilitate investment along the mining value chain to promote broader job creation, small business development and growth in dynamic new industries.

He said mining contributes over half of the country's exports, about 10 percent of gross domestic product and 5 percent of employment.

"It is a pillar of our capital goods industry. It is not a coincidence that when global metals prices peak, our economy and job creation also surge," he said.

However, Ramaphosa said mining has historically been central to South Africa's deep inequalities.

He said ownership is concentrated in a few huge companies, while workplaces, pay scales and communities around the mines are still largely shaped by discriminatory relationships established under apartheid.

Ramaphosa said the main challenge is ensuring the country benefits from the mining boom while laying the groundwork for more diversified, inclusive and environmentally sustainable growth.

"We need to ensure that the returns from mining are used to promote more employment-friendly activities, and that they empower mineworkers and mining communities," he said.

"We have to direct investments in infrastructure and a more efficient regulatory framework to both take advantage of new opportunities in mining and to support overall growth once the upward cycle in commodity prices ends."