South Africa’s delegation, led by President Cyril Ramaphosa, returned from the World Economic Forum in Davos with fresh commitment to attract investment, unlock growth, and build the skills needed to accelerate job creation in a technologically changing world.
Employment in the mining sector, which is the historic bedrock of South Africa’s economy, has fallen by one-tenth in the last ten years. At the same time, McKinsey research indicates that the productivity of many South African mining operations has declined—even as mining companies in other regions have rapidly improved productivity.
The result is that much of the South African mining industry is losing global competitiveness. When we assessed South African mines in four major commodities—gold, platinum group metals, coal, and iron ore—we found that 47 percent of jobs, along with 42 percent of revenues, were in the bottom quartile of global cost competitiveness. That means that many mines are less profitable than their global peers and more vulnerable to cost or pricing changes.
The industry needs to harness the transformative potential of digital technologies—which could improve the margins of South African mining companies by as much as 15 percentage points, according to our analysis. Digital could also bring about a step-change in workers’ skill-sets, experience, and wellbeing.
There are two big digital opportunities that South African mining companies can embrace: enabling the frontline with technology and improving performance through extracting value from data. Let’s explore each in turn.
To enable frontline workers and supervisors to thrive in South Africa’s tough mining conditions, companies can deploy technologies which improve employee safety, performance management, and visibility—particularly underground. For example, companies can provide connected devices, managed by workers, that communicate real-time data on tasks, workplans, and progress reports.
One global precious-metals-mining company issued connected tablets to its underground workforce to foster real-time communication, collaboration, and sharing of best practices underground. That greatly improved working conditions and improved productivity by 10 percent. South African mining companies can do the same—and use such technologies to help shape a more motivated, collaborative culture.
Companies can also improve performance through data-driven insights. They already generate swathes of data across their operations, but few use it to generate real value. The pioneers are showing the way. For example, a South African gold-processing plant applied advanced analytics across the key processing steps in a 30-year-old plant—and improved recovery by up to 2 percent while reducing costs.
Elsewhere in Africa, a precious-metals miner consolidated data from disparate sources into a data lake, then used advanced data analytics to identify improvements it could implement in a few months. It boosted recovery in its plant by 4 percent, even while grades were declining.
A North American base-metals-mining company harnessed advanced analytics to increase the tons produced per day by more than 10 percent, from both throughput and recovery improvements. It created an artificial intelligence “adviser” that makes recommendations twice a day to optimize settings on controllable variables.
To achieve similar gains, South African mining companies will need to overcome challenges such as connectivity in deep underground mines and a lack of digital skills. But with effective design thinking, they can take advantage of technologies that allow more frequent underground connectivity, and tailor their digital solutions to the specific skill levels of each mine.
Indeed, companies can embrace digital to enhance the skills of the entire workforce and shape new ways of working across their organizations. That matters. McKinsey’s Organizational Health Index—which measures dimensions such as leadership, employee motivation, and the work environment—shows there is an 8 percentage-point difference in operational effectiveness between mines with top-quartile organizational health and those in the bottom quartile.
We should emphasize that, in the drive for digitization, there is plenty of room for collaboration. For example, companies can create joint digital-mining innovation hubs and incubators and codevelop infrastructure and technology to lower capital costs and reduce investment risk.
Of course, digital initiatives are not the only part of the puzzle. Other key steps are needed to restore the competitiveness and growth of South African mining. For example, South Africa can unlock its high-potential mining assets in regions like the Northern Cape, which is rich in high-quality iron ore and manganese reserves. Doing so could create tens of thousands of jobs in the Northern Cape.
It’s time to recast the story of South African mining, which in recent years has been dominated by headlines about conflict and stagnation. By embracing technology-enabled mining, South Africa can realize major improvements in productivity and worker wellbeing—and revitalize the industry as an engine of value-creation, employment, and growth.