South Africa’s Rise and Fall get’s worse

South Africa, once the predominant source of gold in the world is going from bad to worse.  Few may know that South Africa has produced around one quarter of all the gold in the world today.  That is about 1.55 billion troy ounces or around 48 tonne worth around $3.3 trillion.  The following video graphic takes you on a journey from 1900 to 2018 of global gold production by country.  It is as fascinating to watch for the demise of South Africa as it is for the explosion of China into that number one position.

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Things are now getting even worse for South Africa with protracted power outages bringing mines to a halt.  Whilst RSA is now a relatively minor player in the global gold market, it is the main producer of platinum in the world.  From Bloomberg:

“Platinum and gold mines in South Africa stopped operations as the country was hit by record levels of rolling blackouts that are crippling key parts of the economy, threatening another recession. 

Producers including Sibanye Gold Ltd., the world’s biggest platinum miner, recalled workers from underground and stopped milling ore after state-owned power utility Eskom Holdings SOC Ltd. announced late Monday it would cut 6,000 megawatts from the grid to prevent a complete collapse.

The rolling blackouts, which continued for a sixth straight day Tuesday, have a far-reaching and debilitating effect on the economy. In the first quarter, power cuts contributed to the biggest contraction in a decade. South Africa is the world’s main source of platinum-group metals, used primarily in autocatalysts.”

Mining exports make up half of the RSA economy and the impacts of this can’t be underestimated.

““It does mean that the economy is heading for a recession,” Iraj Abedian, chief executive officer of Pan-African Investments and Research Services, said by phone from Johannesburg. “There’s no way that hot on the heels of the previous quarter’s negative growth in GDP with this type of humongous and material disruption to the continuity of business that the economy can register positive growth.” 

Weak economic growth could lead to a further deterioration in public finances and heighten the risk of South Africa losing its last investment-grade credit rating with Moody’s Investors Service. The company cut the outlook of the nation’s Baa3 assessments to negative last month.”

As the biggest producer of platinum, it will be interesting to observe what happens with the price.  Like gold, platinum has surged since mid year but unlike gold it has not had the same pullback, still up nearly 25%.  Platinum’s lower stock to flow ratio makes it more susceptible to such significant supply disruptions.