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Date : 24/11/2005
Source: Department of Minerals and Energy
Title: Hendricks: Launch of South African Gold Advance Scheme


  Address by the Minister of Minerals and Energy Mrs Lindiwe Hendricks at the launch of the South African Gold Advance Scheme, the Rand Refinery, Germiston, Johannesburg

Programme Director
Distinguished guests,
Ladies and gentlemen

I would like to thank you for inviting me to be part of the launch of the Gold Advance Scheme. I am excited about the possibilities that this scheme holds for the future of beneficiation of our mineral resources. When combined with the approaches we have received in the diamond sector, I see a very bright future for minerals beneficiation and the jewellery sector.

I understand that the Gold Loan Scheme is a culmination of a lengthy process, in which stakeholders in the gold industry, the finance industry and even the defence industry had to engage in discussions that would impact on the future of the gold beneficiation industry.

South Africa remains the number one producer of gold, producing 14% of the world production, but less than 4% of this gold is beneficiated locally. A number of reasons exist for this situation, which includes the higher costs and risks that our local manufacturers face, as well as, the lack of a scheme similar to the one being launched today. We therefore hope that this initiative will facilitate an increase in output of the South African gold jewellery manufacturing sector, and improve their ability to compete on an equal footing with other international jewellery manufacturing economies.

Another challenge that exists as a result of the comparatively few number of companies in this sector, is that we do not have a significant or large skills base of employees who would overtime be able to establish their own enterprises. Such a challenge can be overcome through concerted efforts of existing players in the sector to train new entrants, and through the work done by agencies such as Mintek and the Mining Qualifications Authority to equip and skill our people. Already these institutions have started to make an impact.

Ladies and gentlemen, through unblocking the constraints faced by companies in this sector we would be able to stimulate growth and attract new players. This initiative is therefore in line with our policies on beneficiation and if successful will have a favourable impact on growth of the gold beneficiation sector and on job creation. The benefits of growth in beneficiation industries will also play a role in cushioning the loss of jobs taking place upstream.

The importance of beneficiation as a growth sector and the long-term impact that it could have on our economy, has seen us incorporating beneficiation into the Mining Charter, which can be used as an offset for some of the equity requirements.

Following the promulgation of the Mineral and Petroleum Resources Development Act, the Department of Minerals and Energy, through Mintek, began negotiations with the mining industry in what we call “beneficiation offsets”, with the aim of determining jointly with the mining industry the base-level of beneficiation for each mineral. Unfortunately, the process has not been finalised.

Notwithstanding, companies such as AngloGold Ashanti and Gold Fields have shown determination by participating in this initiative, without knowledge of the quantity of offsets they might receive in return. I note with appreciation their role in contributing towards improving the South African jewellery sector. I would like to see this consultative process on offsets finalised, in order for us to implement the Mining Charter fully and to remove any uncertainty in this area. We will, therefore, take a decision based on the outcome of these discussions and we look forward to announcing the base levels and other details early next year.

You are probably all aware that on 1 November this year, the National Assembly passed the Precious Metals Bill. This Bill was drafted to ensure that we have an enabling environment for growth in the precious metals beneficiation industry. The main objective of the Bill is to encourage equitable access to precious metals for local beneficiation, therefore maximising value addition in the South African industry. In particular, the Bill allows holders of a Beneficiation License and a Jewellers Permit to deliver semi-fabricated precious metal in payment for debt or in consideration of services rendered. This is consistent with the aim of the gold advance scheme, which is to release manufacturer’s resources for capacity building and marketing. It is also important to note that through this Bill, we have centralised the regulation of the precious metals trade within the Department of Minerals and Energy through the Diamonds and Precious Metals Regulator. The Regulator will be replacing the existing South African Diamond Board and as the name indicates, it will also be responsible for the regulation of the precious metals trade.

Ladies and gentlemen, I have been informed that this gold loan scheme being launched today is presently being implemented in a form of a pilot project, and if it works, it will be expanded. We hope that the pilot will be a success and this will open the eyes of the other producers and manufacturers, as we would like to see similar initiatives for the platinum and diamond industries, which we will fully support.

It is indeed exciting to see different stakeholders pulling together to work on mechanisms that would provide some answers to the plight of many unemployed South Africans. It is therefore important that during the pilot project, an assessment is conducted to ensure this scheme is accessible to the main target market of small and medium scale jewellers. There is always room for improvement in project design, and we hope that through this and similar schemes we remove the obstacles to the growth of this sector. We look forward to this scheme also being affordable for new entrants who come into the beneficiation sector to take advantage of the favourable legislative framework for the precious metals and diamond sectors.

Programme Director, we also need to look at the successful models of clusters of small businesses in the jewellery industry for example in Dubai and Italy, and use these models to beef up our own Jewel City in the Johannesburg CBD, and other beneficiation centres. Central to these success stories is accessibility of small quantities of gold and other precious metals for these smaller enterprises, and something that must be considered and built into our own drive towards achieving greater levels of beneficiation. We would not like to see a situation where this scheme excludes small players and new entrants to the sector because of high quantities of gold that will need to be borrowed for them to qualify.

At the end of the day this venture will only be truly successful if it brings more investment into this industry and creates more opportunities for previously disadvantaged South Africans.

To SAAB, BAE Systems, and Standard Bank, we also thank you for your involvement in this process and we wish the scheme all the success. Finally, the importance of further integrating mining into the rest of the economy is a priority area for the government, and will contribute towards us achieving our desired target of 6% growth and reduction of unemployment. This project has the potential to encourage and stimulate beneficiation, and is part of a broad movement to our economy becoming involved in greater value addition.

I thank you.

Issued by: Department of Minerals and Energy
24 November 2005
   

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