CAPE TOWN (miningweekly.com) – The Presidency is determined to remove all impediments in the way of the sustained growth of the South African mining industry, President Cyril Ramaphosa told the Investing in African Mining Indaba on Tuesday, where he drew full auditorium applause.
In addition, Minerals Council South Africa welcomed the President’s interventions into removing obstacles curtailing mineral exploration, mining and exports, and emphasised the urgency of key structural reforms in energy and transport logistics to truly unlock mining’s full potential.
Speaking ahead of Félix Tshisekedi, President of the Democratic Republic of the Congo (DRC), Ramaphosa credited the Mining Indaba with becoming one of the most important platforms for the advancement of mining, which he described as “the bedrock of African economies for millennia”.
“In the global drive towards sustainability, the mining sector has a particularly important role to play, requiring it to be responsible, agile and innovative.
“For South Africa, mining continues to be an essential part of our economy,” said Ramaphosa of an industry which last year generated a record R1.18-trillion to boost gross domestic product, exports and revenue, but which was forced to cope with energy and logistics constraints.
“Despite this achievement, we are far from realising the full potential of our mining industry,” the President said of the industry that accounts for close to half a million direct jobs and close to a million indirect jobs.
Mining revenues enable government to provide services to citizens and drive a concerted programme of economic reconstruction and recovery in the wake of the Covid-19 pandemic.
The fact that mineral production contracted by 9% year-on-year in November 2022 – largely due to electricity shortages and inefficiencies in logistics – is indicative of the challenges South Africa needs to confront and overcome.
In addition to the energy crisis and problems with port and rail operations, the outlook for the year ahead has been dampened by concerns about safety and security, illegal mining and the pace of structural reform.
“These are precisely the issues that government is working to address.
“We have a responsibility as government, industry, labour and communities to ensure that our mining industry is able to grow, to become more globally competitive and to be a pioneer in the global drive towards sustainable development,” said Ramaphosa.
To realise these objectives, South Africa, the President said, needs to:
- achieve a secure supply of electricity;
- accelerate economic reforms to improve the operating environment;
- tackle illegal mining and damage to infrastructure; and
- improve the regulatory environment.
The electricity crisis has had a huge impact on the mining sector. Six months ago, the Presidency announced a National Energy Action Plan to improve the performance of the country's existing power stations and to add new generation capacity to the grid as quickly as possible.
Eskom has assembled experienced technical teams to improve performance and recover capacity at power stations, with an initial focus on the six least reliable stations.
Through a regional power pool arrangement, South Africa has imported 300 MW of capacity from neighbouring countries and is working to increase that by an additional 1 000 MW.
The successful renewable energy programme is being strengthened.
In the last six months, agreements have been signed for 25 renewable energy projects representing 2 800 MW of new capacity. These projects will soon be proceeding to construction.
“We are facilitating investment in new generation capacity by private producers by, among other things, removing the licensing threshold for embedded generation projects,” Ramaphosa told a packed Indaba main stage auditorium.
Eskom is looking to purchase surplus power from companies with available generation capacity and the mining sector is continuing to make significant moves towards generating its own electricity.
Since the electricity licensing threshold was lifted, 89 embedded power generation projects have been developed by mines, with a focus on renewable energy solutions such as solar, wind and battery storage.
Not only will these projects support mining operations themselves and bring down operating costs, but they will also add much needed power to the country’s overall supply and support South Africa’s decarbonisation process.
Mining is leading the way in developing other new energy technologies.
Ramaphosa recalled his attendance last year of Anglo American’s launch of the world’s largest mine haul truck that runs on green hydrogen.
Anglo is developing an entire hydrogen ecosystem to support its local operations, and the launch of the haul truck was the first project for the Green Hydrogen Valley being developed from Limpopo, through Gauteng to KwaZulu-Natal.
South Africa has abundant renewable energy resources as well as 75% of the world’s platinum group metal resources needed to produce green hydrogen and catalyse hydrogen fuel cells.
“This puts us in a favourable position to develop such technologies,” said Ramaphosa.
“The second part of our efforts to develop the mining industry is to accelerate economic reforms to improve the operating environment.
“We have been driving a range of structural reforms through Operation Vulindlela, an initiative of the Presidency in partnership with the National Treasury, the Department of Mineral Resources and Energy (DMRE) and other key departments.
“As part of streamlining regulatory processes, we are reducing the timeframes for environmental authorisations, exempting energy projects from environmental authorisations for certain activities, and speeding up the process of registering new projects and grid connection approvals.
“A critical area of reform is in logistics, which is a huge problem for the mining industry,” the President said.
For example, last year coal exports through the Richards Bay Coal Terminal dropped to 50-million tonnes, the worst performance since 1993, and it is estimated that government infrastructure inefficiencies have resulted in a 15% decline in mineral sales, which has only not posed more of a concern owing to high commodity prices.
“We therefore welcome the partnership announced late last year between the Minerals Council of South Africa and Transnet to stabilise and restore the operational performance of our rail lines and ports.
“The reforms we announced to improve the state of freight rail are moving ahead. One of these – opening key routes to third party operators – will bring much-needed investment for upgrading, maintenance and rehabilitation,” the President revealed.
A new policy framework for rail sets out actions to modernise the rail network, enable private investment, improve regulation and restore rail as a competitive mode of both freight and commuter transport.
Similar efforts are underway to enable private investment in our ports and certain container corridors.
The third area of focus is to tackle illegal mining and damage to infrastructure.
The South African Police Service has established multi-disciplinary Economic Infrastructure Task Teams that are operational in 20 identified hotspots. In the last six months, these teams have made a significant number of arrests.
Transnet has developed partnerships with the industry and private security to address cable theft and vandalism on the freight rail network through advanced technologies and additional security personnel.
Industry, law enforcement agencies and government departments are deepening cooperation to stamp out illegal mining and other acts of economic sabotage.
In the fourth work area of regulatory improvement, backlogs in prospecting and mining applications have been reduced by 42% in the last 18 months and plans are in place to eliminate the backlog in the short to medium term.
The DMRE has indicated that the process for procuring an off-the-shelf cadastral system, which can be customised to South Africa’s needs, is underway.
“This is essential for the operation of a modern mining rights administration system, which in turn is vital for the growth of the industry,” said Ramaphosa.
These are some of the efforts South Africa is undertaking to improve the business operating environment for a sector that is the lifeblood of its economy.
“South Africa is home to some of the most experienced miners in the world, with unparalleled expertise, knowledge and capacity for innovation.
“Just as we look to attract investment in mining to grow our economy and create jobs, investors will find South Africa an attractive destination for miners and associated sectors.
“This is particularly the case for companies looking to leverage the opportunities presented by the global green energy transition and the African Continental Free Trade Area.
“Just as there can be no development without mining, mining must be at the forefront of social development.
“The implementation of Social and Labour Plans must be accelerated and improved.
“These plans have an important contribution to make to the provision of housing, schools, sporting facilities, bursaries, health facilities and road infrastructure, among others,” said Ramaphosa.
Regarding the challenging time for mining being experienced in South Africa and across the continent, he said
Africa had the means to overcome its difficulties and forge a brighter future for this industry.
As the world changes, mining is changing with it and the industry reiterated at the Indaba that it stands ready to seize the opportunities that the future presents.
Minerals Council South Africa also highlighted the implementation of an off-the-shelf cadastral system to modernise and improve the processing of prospecting and mining rights.
“President Ramaphosa’s speech hit all the right notes and he has touched on the key points that are constraining the mining industry that the Minerals Council has identified, but it is absolutely vital that we see real urgency on implementing the interventions and measures he outlined. We need action. The time for talking has long passed,” Minerals Council CEO Roger Baxter stated in a release to Mining Weekly.
“We are encouraged by the government’s recognition that it must buy a proven, off-the-shelf cadastral system rather than developing a bespoke system. It’s key to bringing in new entrants into the sector. We would encourage the DMRE to resolve the backlog of thousands of rights in the next six months rather than in the medium term,” said Baxter, who also drew attention to the separation of Eskom into its constituent parts, particularly the creation of a separate State transmission company, being critical to ensure investment in expanding the grid.
Such expansion would allow 9 GW of private sector energy projects, worth more than R160-billion, to be commissioned quickly to address South Africa’s crippling electricity shortage.
“It needs to happen now otherwise we cannot bring the energy projects on stream that we want to develop. It is important for our members to reduce their carbon exposure and protect their markets,” said Baxter.
Eskom CEO André de Ruyter has said Eskom needs up to 6 GW of new energy generation to give the utility the space to conduct maintenance of its aged fleet of coal-fired power plants which supply 80% of its electricity. The mining industry has 6.5 GW of energy projects, which will take pressure off Eskom, reduce its exposure to carbon-based electricity, and ensure reliable, lower cost sources of energy.
The Minerals Council is in regular talks with Eskom to provide assistance, data and advice so the mining and minerals processing industries are not damaged and employees are safe.
Private sector involvement on the railways, particularly the main commodity corridors, as well as operating ports, will be a game-changer for the economy.
Mining has forfeited revenue of R50-billion in 2022 when Transnet Freight Rail’s deliveries are measured against target. The loss was R35-billion in 2021.
If the railways were operated at nameplate capacity, mineral exports would generate R150-billion more revenue of which R27-billion would go to the fiscus.
The Minerals Council board and the Transnet board agreed a partnership in December 2022 to stabilise and restore rail operations to contractual levels and then grow network utilisation to installed capacity. The partners have agreed to bringing more junior and emerging miners onto the railways and ensuring export allocations at ports is a core part of this work.
The council is working closely with government’s security cluster to address illegal mining and deteriorating security on mines and State infrastructure. The formation of a dedicated mining police task force is still a priority.
“Measures to address the procurement mafia need urgent and consistent attention. They are negatively impacting the entire economy and damaging investors’ perceptions of South Africa as a safe, secure mining investment destination,” said Baxter.
DEMOCRATIC REPUBLIC OF CONGO
Tshisekedi, speaking in French, following Ramaphosa's adddress, noted said the DRC had historically been a contributor to all of the world’s industrial revolutions and was now in a position to take part in the world’s latest energy revolution by providing much-needed cobalt, copper, nickel and lithium.
But this time around, the people of the DRC must benefit through local value addition and value chain initiatives that contribute to the DRC’s economy and create local employment opportunities and community development.