Abstract
This research paper covers the impact that economic factors have had on the performance of the platinum mining sector in South Africa. The platinum industry is vital for South Africa, as it is the largest export product, contributed 6.05% of 2021 GDP, and supplies more than 70% of annual global supply of platinum and 40% of global supply of palladium. South Africa possesses more than 80% of the global unmined reserves, making the industry highly important for South Africa and the rest of the world. The research approach used a quantitative methodology using OLS regressions. The determination of the variables were multifaceted and economic factors were to determine if there was evidence of any previous impact, or if the variables should theoretically impact platinum mining company performance. Performance was measured by constructing an equally weighted share price index of listed South African platinum mining companies from 2003 to 2022, constituting Anglo American Platinum, Impala Platinum, Lonmin Platinum, Sibanye-Stillwater, African Rainbow Minerals and Northam Platinum. Economic factors that were included in the quantitative OLS regression analysis were labour strikes, wages, electricity supply, loadshedding, platinum demand and supply, exchange rates and PGM spot prices. The major findings were that exchange rates impacted returns on platinum mining companies the most, with a weaker rand corresponding to a decline in platinum mining company performance. JPYZAR and USDZAR were the most significant currency pairs. The second finding was that an increase in PGM spot prices in USD positively impacted platinum mining company performance and was more impactful than the ZAR-converted PGM spot prices. A third finding was that post-introduction of the Mining Charter Legislation, the average annual returns in the platinum sector declined compared to the period prior to 2005. The remaining variables showed no conclusive findings and event study methodologies were recommended as a more suitable approach.
Keywords
Platinum; precious metals; mining; South Africa; Economic Factors; labour strikes; PGM spot prices; exchange rates; wages; electricity supply; loadshedding;