While mining companies in South Africa are increasingly setting ambitious carbon net zero targets, translating these into tangible actions is a long-term challenge, highlights global professional services firm BDO natural resources head Servaas Kranhold.

While some companies have started reducing carbon emissions through renewable-energy solutions and improved energy efficiency, the sector remains heavily reliant on coal and fossil fuels.

The firm notes that the key will be to identify scalable strategies that allow for meaningful reductions in emissions, while also leveraging policy frameworks and incentives to drive progress.

“Uncertainty in economic and development trajectories will create volatility within commodities and those more closely aligned with the just energy transition will remain a focus for investors,” he says.

However, Kranhold notes that additional considerations such as labour practices, ethical business practices and biodiversity risks will differentiate those companies able to attract green financing.

He adds that environmental, social and governance performance-related loans are likely to feature more prominently to redirect capital to more sustainable businesses.

BDO contends that the energy transition presents an urgent opportunity for South Africa’s mining sector to modernise and decarbonise, adding that as global demand for cleaner energy sources increases, the country’s mineral resources, including platinum group metals – which are key for hydrogen fuel cells – could place the country in a competitive position.

Many South African companies are starting to adopt decarbonisation strategies, often driven by global market trends, investor pressure and national policy incentives; however, the transition remains slow owing to challenges such as the high costs of renewable-energy adoption, infrastructure deficits and the need for regulatory clarity.

Risks, Opportunities

BDO notes that with South Africa’s mining industry facing potential shifts in policy regulation, which could affect operations and investments, as well as ongoing electricity challenges, there remains a great need to address energy infrastructure instability.

The impact of volatile commodity prices is another aspect that has been identified as a significant risk, with the pricing fluctuations for key minerals such as platinum, gold and coal impacting profitability.

However, BDO highlights that the demand for critical minerals such as lithium, cobalt and rare earth minerals is expected to rise owing to the shift toward clean energy and electric vehicles; while greater investments into improved transport, energy and mining technology, could also stimulate sectoral growth.

In addition, BDO elaborates that by expanding into new minerals and metals linked to the clean energy transition – such as cobalt and lithium – mining companies can hedge against volatility within traditional commodities.

“The South African government has prioritised infrastructure development, including improving transport, logistics, energy generation and enhanced infrastructure to reduce bottlenecks in mining operations and improve productivity, making the sector more attractive to investors,” says BDO natural resources partner and global mining lead Bert Lopes.

He adds that automation and digitalisation within this sector offer efficiencies and cost reductions, alongside improved safety. Innovation in mineral processing and extraction methods could also make previously uneconomical deposits viable, he points out.

Addressing the significance of efficiency-focused innovation, the firm says investing in technology that reduces costs and increases yields to boost competitiveness will enable mines to hone precision mining, resulting in an overall operational cost reduction and lower volumes of waste rock being mined.

Streamlining operations and improving project management could also help miners cope with fluctuating market conditions and external pressures, with a key area being around the distribution process, which will need significant capital injections from government and local businesses to improve the logistics thereof within South Africa.

“South Africa’s mining sector stands at a crossroads, where the choices made in the next few years will significantly shape its future.