African mining sector set for strong growth in 2022

African mining sector set for strong growth in 2022

With mining companies currently enjoying high prices, exceptional production performance, and robust supply chains, Standard Bank's mining team anticipates that the sector will continue showing resilience and growth, remaining financially sound in 2022.

Mines have made a significant contribution to the fiscus in the countries in which they operate, proving a stable source of foreign exchange, which translates into better balance of payments and currency stability. South Africa’s unexpected windfall of an extra R182bn in tax collections was largely attributed to the mining sector.

These operations are using their strong financial position to repair balance sheets (industry net debt to EBITDA is at historically low levels), reward shareholders through dividends and buy-backs, decarbonise operations, contribute to communities and increase resilience.

Limited greenfield investment opportunities, as well as higher environmental and regulatory hurdles to start new mines, mean that focus has been directed towards improving operational efficiencies. The Standard Bank team expects to see increased mergers and acquisitions activity as companies continue to strive for efficiencies, relative value and repositioning towards commodities with exposure to the energy transition.

Social upliftment remains an important consideration for the industry, given the continent’s inequality and developmental challenges, which have been exacerbated by the Covid-19 pandemic. Mining groups have