Cost control must move from month-end finance reporting to daily operational discipline as electricity, labour and capital pressures reshape mining performance
Electricity tariffs for large users have risen more than 900% since 2008 and wage settlements continue to run ahead of inflation, but Alvarez & Marsal warns that the bigger risk lies in how cost management itself is run: as a periodic finance exercise rather than a core operating capability.
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+900% rise in electricity tariffs for large users since 2008 |
~30% NERSA-approved Eskom tariff increases, FY2025/26–2027/28 (revised up from an initial ~25%) |
Above CPI multi-year wage settlements, year after year |
High Fixed Costs in mining and processing operations |
Source: Minerals Council South Africa, Facts and Figures 2025; Eskom, NERSA Decision on Tariff Adjustment, March 2026.
Across Africa’s mining sector, rising input costs, capital constraints, ageing infrastructure and operational instability are placing sustained pressure on performance. In South Africa, one of the continent’s most mature mining markets, electricity tariffs for large users have risen by more than 900% since 2008, while NERSA-approved Eskom tariff increases for FY2025/26 to FY2027/28 have been revised upward to approximately 30% for customers supplied directly by Eskom. Wage settlements continue to run ahead of inflation year after year, and mining and processing operations remain exposed to some of the highest fixed-cost bases of any industrial sector globally.
But Alvarez & Marsal (A&M) warns that the bigger risk for mining operators is not simply that costs are rising. It is that cost management at many organisations still lives in finance, runs periodically, and sits too far away from the operation itself. According to A&M, the companies best placed to protect performance will be those that build real-time cost visibility, operational accountability and disciplined cost reviews into the daily rhythm of the operation, rather than relying on tighter budgets or reactive cost-cutting when margins come under pressure.
For operators, the question is no longer how to cut costs in a downturn, but how to build cost discipline into the way the operation runs every day. Commodity volatility, input cost inflation, tighter capital markets and ageing infrastructure are forcing a far more disciplined operating environment than in previous commodity cycles, and yet cost programmes at many organisations still live in finance, run periodically and at a distance from the operation itself.
“South Africa’s cost pressure is no longer cyclical, it is structural,” said Brett Baldwin, Managing Director at Alvarez & Marsal Infrastructure & Capital Projects. “Electricity, labour and capital costs have moved permanently higher, and no single cost-cutting drive will offset that shift. The organisations that outperform over the next decade will be the ones that build cost discipline into how the operation runs every day, not the ones that cut fastest when the numbers turn.”
One of the most common challenges A&M sees in industrial organisations is that cost visibility lags the operation. Many companies still rely on multiple ERP instances, disconnected spreadsheets and monthly reporting cycles, so financial reviews land long after the costs have already been incurred, and by the time leadership identifies a problem, operational behaviour has often already moved in the wrong direction.
A&M’s response is a Cost Management Framework built around four connected disciplines: integrated planning, rolling forecasting, operational cost reviews and continuous cost-saving identification, underpinned by real-time cost visibility, clear operational ownership and leadership discipline. Applied together, these disciplines move cost management out of the month-end finance cycle and into the daily rhythm of the operation itself.
“Most cost systems in mining still measure too late,” said Johan van der Westhuyzen, Managing Director and head of Alvarez & Marsal’s Cape Town office. “By the time month-end reporting flags a problem, the operational decisions that caused it have already been made. Real cost control has to sit with the people running the operation day to day, not only with finance at the end of the month.”
Tighter budgets do not resolve this on their own. Budgets built primarily on inflation assumptions, disconnected from operational planning and without clear operational ownership, can unintentionally reinforce the weak cost behaviours they are meant to fix. Rather than asking, “What did we spend last year?”, the organisations pulling ahead ask a different question: “What operational activities are required to deliver the plan, and what should those activities realistically cost?”
Van der Westhuyzen added: “That distinction matters more than it sounds. One question defends last year’s spending. The other forces a conversation about what the operation actually needs to run well, and it is the second conversation that builds real cost discipline.”
Unplanned downtime, maintenance rework and emergency procurement routinely cost more than a disciplined, reliability-focused operation. For mining leaders, this creates a practical set of questions: does the organisation have real-time visibility of the operational drivers of cost, rather than only month-end financial reporting? Are cost reviews owned operationally, with individuals held accountable for variances, or do they remain administrative reporting exercises? And is reliability treated as part of the cost conversation, rather than a separate agenda item?
Baldwin added: “In Africa’s resource and infrastructure opportunity, the constraint is rarely ambition or capital. It is execution, and cost discipline is one of the places that decides it. Cost performance ultimately reflects how well the operation is run, which is why we see cost management and safety performance in mining resting on the same foundation.”
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