South Africa’s mining input cost index stays at “historic lows”
Historic lows. This is what the Minerals Council South Africa described its mining composite input (MCI) cost index for August 2025. According to the latest figures, total mining input costs (including labour) increased by just 1.3% year-on-year (y-o-y), while costs (excluding labour) continued its slight declining trend, dropping by 0.2% y-o-y.
Image credit: Artyom Korshunov on Unsplash
This subdued cost environment mirrors both global and domestic trends, with headline consumer inflation and the producer price index (PPI) for final manufactured goods also at multi-year lows.
Importantly, the mining sector is experiencing significant relief from several fronts: interest rates have eased over the past year, the rand has strengthened, easing import costs, and Brent crude oil prices have moderated to levels last seen during the Covid-19 pandemic in 2020.
These factors have collectively reduced cost pressures for mining operations.
This context is precisely why the South African Reserve Bank (SARB) has chosen to target the lower end of its inflation band, aiming for 3%.
With inflationary pressures already muted, the SARB sees an opportunity to anchor inflation expectations at a lower level without risking economic growth.
This policy shift is reflected in the ongoing lack of cost pressure on mining inputs.
Mining inputs
At present, the only significant drivers of mining input costs remain electricity and labour.
In August, water supply costs remained the most significant driver of y-o-y input cost increases, rising by 11.6% following municipal tariff hikes effective from 1 July.
Water remains a critical input for mining operations, essential for washing and treating ores and stockpiles, as well as for cooling and operations in underground mines.
Labour costs rose by 5.9% y-o-y, underscoring labour’s continued role as a major contributor to mining input costs.
According to the latest Quarterly Employment Survey (QES) from Statistics South Africa, the mining sector employed 467,934 people at the end of Q2 2025, with gross earnings totalling R49.8bn for the quarter — emphasising the scale and impact of labour costs in the industry.
Transport and storage costs increased by 4.3% y-o-y in August, driven mainly by higher road transportation costs and increased tonnages railed at a higher cost per dry tonne compared to the previous year.
Electricity costs continued to rise in August, following a sharp increase in June and a further uptick in July, driven by winter tariffs for large industrial users.
August marked the last full month under winter electricity tariffs for intensive users, with September being a transition month before tariffs revert to lower summer rates.
Overall, these trends reinforce that while input cost pressures remain subdued in most categories, water, labour, transport, and electricity continue to be the primary cost drivers for the mining sector.
On a more positive note, several cost categories provided relief over the year:
- Financing costs declined by 10.6% y-o-y.
- Coke and refined petroleum products fell by 4.7% y-o-y, largely due to lower Brent crude prices.
- Intermediate mining and quarrying input costs eased further by 2.4% y-o-y.
Before Covid-19, mining input costs typically averaged about 2 percentage points above the headline PPI for final manufactured goods.
During the Covid-19 period, the mining sector froze wage increases to preserve jobs, and operations continued while most other sectors were temporarily shut down.
As a result, input cost pressure dropped significantly.
Excluding the unique reset and adjustments that occurred during 2020 and through 2021/22, there has been a clear shift in the cost structure.
From 2023 to August 2025, mining input costs averaged only 1 percentage point above the headline PPI for final manufactured goods.
This marks a notable change from the pre-pandemic pattern, reflecting a new, lower-cost baseline for the sector.
In August, the platinum group metals (PGM) sector continued to experience the highest increase in input costs, followed by the gold and other metallic minerals sectors.
Both PGM and gold mining are typically deep-level, underground operations that require intensive use of electricity and water for cooling, pumping, and ventilation, as well as large labour forces to maintain production.
Cost pressures were also evident in general mining, quarrying, and coal operations.
In contrast, the manganese and iron ore sectors recorded the lowest input cost inflation among major commodities.