Amplats mine closures to create devastating consequences for SMEs
The potential loss of 14 000 jobs, amidst Anglo American Platinum’s (Amplats) pending decision to close several mine shafts, has come as devastating news to the mineworkers involved. However, according to Gerrie van Biljon, Executive Director of Business Partners Limited, the impact of the proposed mine closures will also have a disastrous knock-on effect on the entire Rustenburg community, especially the small and medium enterprises (SMEs) operating within the community that are either directly or indirectly dependent on the mining sector.
Van Biljon explains that mining is deeply embedded in Rustenburg’s socio-economic structure. “South Africa is the largest producer of platinum in the world, satisfying approximately 70% of global demand. Currently, Rustenburg produces around 94% of South Africa’s platinum. Additionally, mining accounts for approximately 90% of Rustenburg’s Gross Geographic Product (GGP) and is responsible for almost half of all formal employment within the region.
“Many SMEs service the individuals employed by the mines and are therefore very dependent on the organisations to ensure success and survival.”
Van Biljon says that the mining industry directly supports local entrepreneurs by often outsourcing products or services to SMEs within the region. “The mines are not in a position to source or produce the wide range of products required and SMEs are often in an ideal position to do so. The closing of these shafts will have obvious negative effects on these businesses.”
He says that by focusing on a limited supply of customers these business models are exposed to a significant amount of risk. “Another example of this situation is the dependence on the motor industry within certain areas of South Africa. There are many SMEs servicing the industry located in areas such as East London and Port Elizabeth, and a drop in activities from these motor manufacturers, would have a direct economic impact on these areas.”
He says that Amplats’ decision will not only affect SMEs dealing directly with the mines or big businesses. “A loss of 14 000 jobs will create a strong ripple effect on other SMEs in the area. The huge loss of disposable income, and therefore buying power, will severely affect local retailers and suppliers, and will ultimately significantly shrink their revenue and profitability. The local economy will probably be affected the most.”
Van Biljon says that with cut backs on business activities, SMEs often have to reevaluate their business models. “Options will include either down-sizing, finding new markets to operate in, or making adjustments to their current product or service offerings. These changes do however take time and require major effort, but could help businesses to ultimately survive,” concludes Van Biljon.