Exploration should be GNU’s Trump card

Exploration should be GNU’s Trump card

Despite its recent progress and gains, South Africa is not out of the woods yet.

By Leon Louw founder of WhyAfrica and editor of the WhyAfrica magazine

Even with a semi-functioning Government of National Unity (GNU), no loadshedding, more functioning railroad lines and a reinvigorated national airline, South Africa is not out of the woods yet.

The fact that South Africa was officially handed the presidency of the G20 forum in early December will not, like a magic wand, make American President Donald Trump’s hostility towards BRICS countries, and worst still, his obvious animosity towards African countries not supportive of the US Dollar and his foreign policies, suddenly disappear.

Increased tariffs of South African exports to America will be disastrous for a country still hamstrung by structural challenges, poverty and inequality. To make matters worse, South Africa’s agricultural sector experienced a dismal third quarter in 2024, and the much-acclaimed mining sector hardly shot the lights out.

But for once the geopolitical gods might just be smiling down on South Africa. In their search for alternative supply chains and raw materials for the energy transition, and as Trump’s hardline economics continue to turn the world on its head once again, a few countries and investors are looking at Africa, and South Africa, with renewed interest.

GNUs honeymoon is over

Although the GNU honeymoon has officially come to an end, there is still significant interest from foreign investors to take a chance on South Africa, especially in the mining sector.

Despite the challenges that negatively affect the productivity and growth of South Africa’s mining sector, the country’s mineral wealth remains a big attraction.

South Africa is one of the world’s largest producers of platinum, manganese, iron ore, gold and coal. With global demand for commodities expected to remain high (particularly for energy transition metals), South Africa’s resource sector is a major drawcard for investors looking for opportunities in mining and related industries.

A lack of exploration projects

Despite green shoots, a lack of greenfields exploration projects in South Africa has been a major concern for a long time. Global mining companies have been shifting their investment focus to other regions, including Africa north of the Limpopo, with less regulatory burden and greater ease of access to resources.

Countries like Canada, Australia, and those in South America (such as Chile and Peru) are often seen as more attractive due to their mining-friendly policies, better infrastructure, and easier access to high-grade deposits.

Additionally, rising concerns over environmental, social, and governance (ESG) criteria have made investors more cautious. The South African mining sector, with its legacy of labour issues, environmental degradation, political instability and regulatory uncertainty, may not appeal to investors looking for stable returns.

Despite South Africa’s ongoing economic challenges, the country remains an attractive investment destination due to its natural resources, strategic location, and diversified economy.

As it continues to implement reforms, improve governance, and take advantage of regional trade agreements like the African Continental Free Trade Agreement, it is likely to draw increasing attention from both domestic and international investors looking for long-term growth opportunities.

The relatively low level of mineral exploration in South Africa, despite its rich mineral resources, can be attributed to several factors. These include economic, political, environmental, and global industry trends. Here’s a breakdown of the main reasons:

• Depletion of easily accessible resources
• High cost of mining
• Political and regulatory instability
• Decline in global investment in South Africa
• Environmental concerns
• Geopolitical and economic factors
• Competition from other resources not abundant in South Africa (lithium, cobalt and rare earth elements)

Increased focus on mining for energy transition metals (countries like Chile, Peru, and Australia are attracting more exploration and investment)

Exploration should be GNU’s Trump card