By Sanlam Investments Head of Equity Research Marlo Scholtz and Equity Analyst Siphelele Mhlongo
The global mining sector is responsible for around 4-7% of total greenhouse gas emissions. As the world’s focus shifts toward decarbonisation and sustainability, the challenge facing the mining sector is how to reconcile the urgent need for environmental responsibility with its pivotal role in job creation and community development.
Mining has long been a cornerstone of many economies, particularly in emerging markets like South Africa, where it remains a major driver of employment and tax revenue. According to the Minerals Council South Africa, the sector contributed 6% to the country’s GDP in 2023, employed 477,000 people, and paid R141 billion in taxes and royalties. In regions where unemployment rates can reach up to 42%, mining represents a lifeline for thousands of families, offering jobs that support local businesses, schools, hospitals, and social infrastructure.
However, as countries and industries commit to net-zero targets, mining companies are facing increasing pressure to reduce their carbon footprint. For example, the coal industry, a significant employer in regions like Mpumalanga, Limpopo, and the Free State, faces the delicate balancing act of providing jobs while addressing its environmental impact. With coal mining being a key supplier of energy to Eskom, the sector’s environmental footprint is substantial. Yet, in Limpopo and the Free State, where unemployment rates exceed 45%, the sector is also a vital economic engine, supporting local economies and serving as a major employer.
Mining’s role in job creation and community development
In South Africa, up to 80% of the economic value generated by mines is distributed to local communities through suppliers, employees and social initiatives, according to integrated reports. These investments are far-reaching –including skills development, community health and education programmes, and infrastructure development, such as building schools and hospitals.
Responsible mining practices are central to ensuring the longevity of these benefits. The Mining Charter, a regulatory framework in South Africa, mandates that mining companies allocate part of their ownership to employees and local communities, thus promoting shared value. This approach has helped foster a model of corporate social responsibility that extends far beyond financial transactions, creating sustainable local economies.
The role of sustainable mining in the transition to a green economy
The global decarbonisation agenda has prompted some to view mining primarily as part of the problem due to its reliance on fossil fuels like coal. However, the mining sector is increasingly stepping up to the challenge of leading the Just Energy Transition.
Crucially, fossil fuels cannot be divested from overnight; a just transition is a gradual one. A growing number of mining companies have committed to renewable energy projects to reduce their carbon footprint and contribute to national and global sustainability goals. In South Africa, companies like Exxaro Resources and Seriti Resources have created renewable energy subsidiaries, investing in clean energy projects that not only power their operations but also provide renewable energy to surrounding communities.
These efforts are indicative of the sector’s potential to evolve into a driver of the green economy. The transition to cleaner energy sources can also provide new opportunities for job creation, particularly in regions where traditional coal mining jobs are at risk. For example, there is a robust pipeline of 73 energy generation projects, totalling 5GW with an estimated value of R65 billion ready for approval. This results from President Cyril Ramaphosa lifting the 100MW private energy cap for renewable projects in 2022. This is an important step in integrating sustainability into mining operations while preserving employment.
An evolving sector
The global mining industry saw a significant 20% decline in new job postings during Q2 2024 compared to the previous quarter, according to GlobalData. Furthermore, the mining sector faces a growing loss of young talent, driven by three converging trends highlighted by McKinsey. First, the shift toward automation and digital transformation is reshaping job roles, with more than 100 million workers globally expected to need new occupations by 2030. Second, changing worker preferences, accelerated by the COVID-19 pandemic, see 40% of employees considering leaving their jobs within six months due to evolving life priorities. Finally, the rise of permanent remote-working models –adopted by 72% of organisations, according to McKinsey – underscores a broader transformation in how work is structured, making traditional industries like mining less appealing to younger talent.
It’s an industry at an intersection. There’s a lot that needs to be done to stop attrition and make the sector attractive to emerging talent. Strategic transformation is an imperative. However, this evolution must be fairly paced to protect existing jobs and livelihoods.
A path towards responsible decarbonisation
The mining sector has a critical role to play in the transition to a low-carbon future, not just through its environmental initiatives, but also by ensuring that the social fabric of communities remains intact. A sustainable and responsible approach to mining – one that combines environmental stewardship with economic and social benefits - will be key to preserving jobs and promoting long-term prosperity in developing regions.
To achieve this, companies must continue to prioritise collaborative efforts that involve stakeholders from all sectors - government, communities, and industry leaders - to ensure that the just transition to a sustainable mining sector benefits all. By embracing this responsibility, the mining industry can evolve from a traditional extractive sector to a leader in sustainable development, ensuring that both people and the planet thrive for generations to come.
As asset managers and investors, we have a role to play. We can ensure we’re supporting companies that are furthering a just transition, with a clear commitment to transformation that’s intentional, carefully managed and aligned with best practice global sustainability frameworks.
