In South Africa, policy formulation is often based on inaccurate questions. The policy question of addressing illegal mining needs to be approached differently from the usual "Illegal mining is a crime; therefore, suppress it” framework.

South Africa has a historical precedent: a largely agrarian economy was once converted into an industrial economy through mineral extraction. A significant portion of the current informal/illegal mining sector operates outside of that industrial structure, which presents a current difficulty. Therefore, the policy question is not whether illicit mining should continue to be illegal – it shouldn't – but rather how to integrate small-scale and genuine artisanal mining into the formal economy while actively combating organised criminal mining. That distinction is significant.

For those who remember, these changes represent a historical paradox. The mineral revolution in South Africa began with the discovery of diamonds in the late 1860s and was further accelerated by the discovery of gold on the Witwatersrand in 1886. An economy centred mostly on agriculture was transformed into an industrialised economy that produced towns, railroads, banks, engineering capability, and large-scale capital accumulation.

However, the sequence contains a crucial lesson. Prospectors and diggers emerged as a result of diamonds, which led to capital concentration and organised mining, which in turn produced infrastructure, financial institutions, and industrialisation. These processes were further replicated in the gold economy.

That is the historical lesson that requires serious attention to today's illegal mining problem. Today's illegal mining is partly a symptom of structural failure, and we shouldn't idealise it. We should first separate three categories: legitimate large-scale mining, artisanal and small-scale mining, and criminal illegal mining.

Legitimate large-scale mining companies are licensed to operate within the MPRDA (Mineral and Petroleum Resources Development Act (Act No. 28 of 2002), a major piece of legislation in South Africa that came into effect on May 1, 2004. Resource access, use, and management are governed by this law. Artisanal and small-scale mining are small operators who could operate legitimately if they had appropriate rights, technical support, finance, processing facilities, and market access. Criminal and illegal mining operations involve organised syndicates; corruption; money laundering; theft of mineral products; illegal electricity connections; exploitation of workers; and destruction of infrastructure, to name but a few.

In lieu of being a development initiative, the third group should be treated as organised economic crime. However, it would be incorrect to infer that all those working outside the formal system fall into the third category. The policy projections of South Africa are starting to recognise this disparity. The Mineral Resources Development Bill for 2025 features a licensing system for small-scale and artisanal mining with the specific intention of formalising these operations and reducing illicit mining.

Additionally, the DMPR already has a Small-Scale Mining Fund to support authorised small-scale miners with capital equipment, operating costs, and rehabilitation guarantees. Economic harm to the current system is caused by the destruction of mining-related economic infrastructure. The loss of mineral revenues also contributes to economic damage, as minerals extracted illegally do not pass properly through the mine to the processor to the refinery to enhance the bank, thus affecting the tax system and export system. It is another topic for another day to discuss whether the formal mining value chain follows that pattern.

In contrast, illegal mining operations may be supported by informal supply networks. Media and authorities estimate illegal gold losses in the billions per year, but estimates vary widely. Since unlawful production is intrinsically difficult to quantify, the exact figures should be handled with caution. It is not the precise estimate that matters economically. It is the extraction of a mineral asset without producing the entire industrial, financial, and investment multiplier possible with legal mining. Due to the chain of taxable operations lawful mining creates, tax revenue is another economic loss. Illegal mining truncates that chain. Consequently, the state experiences the extraordinary paradox of "having mineral wealth underneath the ground while simultaneously having fiscal constraints above the ground"—thus, loss of industrial capability, which is made conceivable by inconsistent policies. The demand for a number of services needed in mining operations, such as mining equipment, electrical systems, geological services, surveying, engineering, and financial services, might be generated by a well-organised small-scale mining industry. As a result, a mining-related industrial ecosystem is created. Illegal mining bypasses that ecosystem

As a result, "the country loses not only the mineral; it loses the industrial development associated with the mineral."

The impact on infrastructure is particularly significant, and this is where the question becomes crucial from an infrastructure finance perspective. Among the risks to mining operations identified by the Minerals Council are theft of electrical equipment and unapproved electricity connections.

Several infrastructure problems are associated with underground mining in Johannesburg, according to City Power. Engineers warned that Roodepoort's pylons and substations would collapse because illegal excavations were hollowing out the ground. Mineral theft, infrastructure destruction, excessive government spending, environmental liabilities, and nauseating investments are the results.

However, there is a caveat to the historical parallel with the Kimberley, despite its utility. We shouldn't idealise the diamond rush. Over time, the Kimberley economy shifted from a large number of independent miners to concentrated corporate mining. Founded in 1888, De Beers took the lead in the diamond industry. Larger, capital-intensive operations gradually replaced smaller diggers.

A cursory glance at history reveals something worthwhile. An industrial ecosystem may start with these "Zama-Zamas." Can South Africa establish an institutional link between artisanal miners, or "Zama-Zamas," and formal industrial mining? This is the current policy question. Yes, is certainly the answer.

The suggested policy paradigm should focus on "Formalise, Industrialise, and Integrate" to organise policy around these three concurrent tracks.

FORMALISE: Create a genuine artisanal and Small-Scale Mining (ASM) economy. This requires simplified licenses, designated mining areas, geological information, basic environmental requirements, mining training, and access to finance, to name a few. The 2025 policy proposals have already moved in this direction. Research on ASM formalisation also identifies the absence of suitable frameworks, excessive regulatory barriers, weak enforcement, and structural exclusion as major reasons informality persists.

INDUSTRIALISE: South Africa could make significant progress in this area. Granting a license to a small miner is not enough. Create a mining development zone around suitable abandoned or marginal deposits. The zone could provide geological surveys, mining rights/permits, a shared processing facility, electricity, and many more operational essentials. Now the miner becomes part of an economic system.

INTEGRATE: One of the main reasons small miners struggle is their inability to acquire advanced processing equipment. The government or DFIs might establish Regional Mineral Processing Hubs with crushing, milling, assay labs, and environmental controls – all essential elements – instead of each operator processing ore independently. The transaction becomes traceable, the mineral is weighed and tested, and the miner pays clear processing costs. This would initiate the formalisation of an informal mineral extraction process.

However, reaching this industrial ecosystem will be impossible without a genuine financing structure. The critical point in this assertion is that the state should distinguish the miner from the syndicate. While ruthlessly destroying criminal syndicates, access to the market, capital to support enterprises, and training to formalise miners must be made available.

This is a much more nuanced response than outright criminalisation. A particularly powerful policy: "Mine-to-Industry." The ultimate goal should be to use mineral extraction to increase domestic industrial capacity rather than just formalising it. Despite carefulness and qualification, formal mining isn't functioning optimally in this respect. Unfortunately, this is where mining morphs into an industrialisation strategy instead of an extraction strategy.

It is essential to distinguish between criminal justice policy, which focuses on dismantling illicit mining syndicates, and development strategy, which promotes the formalisation and legitimation of miners.

Instead of one being used in place of the other, the two policies ought to function concurrently. The underlying economic argument is a more significant lesson in this case. The historical Mineral Revolution in South Africa created a chain of events that led to the development of advanced infrastructure, banking, industry, engineering, urbanisation, and industrialisation.

Today's illegal mining represents almost the inverse: minerals create informal extraction, criminal finance, infrastructure destruction, environmental degradation, lost tax, and weak local economies. The policy challenge is therefore to reverse the direction of that chain.

From: Illegal extraction, which destroys infrastructure and creates a criminal economy

To: Formal mining, infrastructure investment, engineering services, processing, finance, taxation, and industrialisation, which could be made possible by legal mineral rights. In light of this, it is important not to frame the policy question as follows:

"How do we stop zama-zamas?"

The more economically powerful question is, "How do we convert South Africa's informal mineral economy into a formal, productive, and industrialising small-scale mining sector while dismantling the criminal economy that exploits it?” That is a fundamentally different policy question. And it has a direct historical precedent in South Africa. The diamond rush and subsequent gold economy demonstrated that mineral wealth can become an infrastructure and industrialisation engine.

But the state and private capital created institutions around the mineral economy. Today, we must build the missing institutions for legitimate ASM. South Africa has already begun moving in this direction with the proposed ASM licensing regime and its Small-Scale Mining Fund. My view is that the next step should be considerably more ambitious: establish regional artisanal mining & industrialisation zones, backed by DFI finance, shared infrastructure, electricity, processing facilities, geological services, mineral traceability, and engineering support.

It would turn illegal mining from being viewed exclusively as a law-and-order cost into a formalisation and industrial-development opportunity – without legitimising criminal mining.

Written by Bongani Mankewu, Director, InfraFIN