28/01/2024 | By Busiswe Mavuso
The mining sector is facing unprecedented challenges. The rapid deterioration of Transnet’s ability to move output across the country and through the ports has meant a considerable decline in earnings. Richards Bay coal exports last year were at a 30-year low thanks to falling rail volumes, with Transnet delivering 48-million tonnes against a contracted volume of 60-million. Volumes of iron ore have also been falling dramatically with Transnet exporting 51-million tonnes against a target of 60-million, also a historic low. National Treasury estimates the economic cost of rail inefficiency last year was about 5.5% of GDP.
This has hit the mining industry hard, which has already been battling against energy insecurity and over a decade of regulatory chaos. Mining investment has been weak for some time as companies have held back amid uncertainty over energy availability and the future direction of legislation and regulation. Amendment bills have proposed extreme resource nationalism, giving the state unpaid interests in some sectors and the power to ban exports of key minerals, among many other changes. It is quite unclear which of these might end up becoming law and it is totally understandable that no one is committing billions of investment in these circumstances. The performance of the Department of Minerals Resources and Energy (DMRE) has also been dismal, with not one of the 2,525 mining licence applications received in the current financial year having been finalised as of December. We have also endured endless delays in the procurement of a new cadastral system to record mining activity across the country, one of the major reasons for inefficiencies in rights processing.
This is the background to the Mining Indaba that kicks off next week in Cape Town. It remains one of the world’s pre-eminent mining events, though the assembled executives from around the world tend to be much more focused on investment and opportunity elsewhere. The Fraser Institute’s annual survey of investment attractiveness now ranks South Africa behind Mali and the DRC, with continental leaders Botswana now rated as the 10th most attractive mining destination in the world and Morocco 16th. There has been a lack of expansion investment by South African miners, but even more concerning is the near absence of exploration spending. That means the industry is terminal, with only existing mines being slowly mined out and no new ones opening.
Yet the potential is enormous. Despite our long history of mining, we still have some of the best reserves of critical minerals and metals in the world, including 91% of the world’s platinum and 80% of the world’s manganese. The need to decarbonise the global economy means demand for manganese, chrome, vanadium, copper, nickel and iron ore looks bright, all of which South Africa has in abundance. Were it possible to wave a magic wand and give the domestic industry a certain and conducive policy environment, efficient regulation and reliable network industries including electricity and logistics, the GDP and employment impact would be enormous.
The Indaba is an opportunity to showcase what we are doing to improve the environment. The National Logistics Crisis Committee and the logistics roadmap it is overseeing could make a big difference if it is implemented with speed and focus. Energy security is improving, and miners have been some of the biggest investors in renewable energy thanks to regulatory amendments that have enabled them to generate their own power. Earlier this month, DMRE minister Gwede Mantashe was promising that this year his department would resolve the licensing backlog and complete the cadastre procurement. Along with that he could resolve the swathe of other unresolved legislative and regulatory uncertainties that hang over the industry.
I hope that Transnet and the department will be there in force to engage with global and local investors to demonstrate that tangible and reliable progress is being made. They must assure investors that efforts to concession part of the Durban port and some rail access will be redoubled and successfully concluded, and that many more concessions of port and rail infrastructure is in the offing. They must show that Transnet’s operations are being swiftly improved, and the parastatal being restructured, including a bailout of its balance sheet, in a credible way.
While it is only the successful conclusion of such reforms that will really cement confidence, the Indaba is an opportunity to engage and solicit buy-in from the global industry for the journey. It is an opportunity that I hope is grasped.
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
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