Challenges facing the industry over the past five years

The minerals market, by its business nature, is characterized by booms and bursts. Evidence and minerals data indicate that the last commodity boom ended abruptly in 2014, forcing the market to surplus and therefore low commodity prices. South Africa, as one of the leading mineral commodities exporting countries, has been negatively affected by these global economic factors and as a result, our mining industry has experienced a decline in performance over the recent years.

However, the minerals market conditions improved in 2017 at the back foot of improving global demand. Nominal price indexes from World Bank reveal that energy and metals prices improved by 23 percent in 2017 compared to 2016, while precious metals slightly increased by 1 percent due to subdued demand in investment and jewellery segments.  This is a positive outlook indicating a commodity boom in the horizon.

Besides global factors, South Africa has had other internal challenges that have contributed to the sluggish mining performance, these include:

• Falling ore grades in gold and platinum group metals sectors
• Rising costs due to deep and difficult operations levels – investment in mining technology needed
• Labour related matters and
• Trust deficit among industry stakeholders

Trust deficit among stakeholders (government, labour and business)

One of the major challenges faced by the industry over the past five years was the breakdown in stakeholder relations between the tripartite partners. However, this relationship has been restored to a level where we, as stakeholders have had an open engagement on several matters affecting the sustainability and competitiveness of the sector. These engagements have culminated into a robust process aimed at resolving the impasse on the Mining Charter 2017 to produce a Charter which is supported by all stakeholders.

The consultation process on the Mining Charter began in March 2018 with a meeting of social partners which established two task teams, one focusing on transformation and the other on competitiveness and growth.

The work of the Stakeholder Task Teams further culminated in the Mining Charter Summit held on 7 - 8 July 2018. The deadline for submission of written submissions into the Mining Charter comes to an end this Friday. It is envisaged that the final Mining Charter will be published for implementation by November 2018.

The MPRDA Bill

To provide the so much needed regulatory certainty, the MPRDA Bill has been withdrawn from Parliament and the MPRDA will be applicable in its current form. We have since engaged the gas and petroleum sector and initiated a process for the development of a separate legal framework specifically for this sector and not have it as an appendage to the mining sector framework. This move will also provide certainty for the gas and petroleum sector.

Mapping the way forward

With all the joint work done by both the sector and government this year, we are still faced with several challenges that require a continued joint effort, together we have agreed on the need to respond to the following questions:

1. Where are the prospects for growth in the sector? we will be looking at the different commodities and analysing their potential and how to unlock such potential.
2. How do we attract investments into South Africa’s mining sector?
3. Where are the prospects for employment creation? Lastly,
4. Where can we create opportunities for unemployed youth in the country?

The President, in his State of the Nation Address made a call for South Africa to attract $100 billion (R1.3 trillion) investment into the country. One of the interventions in response to this call is for government to table a “stimulus package” that will attract the desired investments into the sector. The centrality of this package will be based on:

1. Lowering the costs of doing business, with considerations for tempering with administered prices i.e. commodity linked electricity pricing structure, rail and port costs as well as ramping up investments by the state into rail and port capacity.
2. Increased policy and regulatory certainty and building confidence in the South African mining sector
3. Growth of the economy in the attraction of investment. The Department has recognised that an internationally competitive regulatory framework is instrumental in promoting the sustainable growth of the mining industry
4. A strong drive to increase exploration spend with a proposal for specific tax incentives on exploration projects. In this regard, we are also proposing a dedicated focus on junior miners and exploration companies’ assistance with access to finance. To this end, the South African government has also committed to a R20 billion ten year mapping programme. The programme will be a great platform in rebuilding and protecting the rich and unique geological heritage of South Africa.

Opportunities going forward

While the exploration drive will be geared towards the discovery and quantification of a new minerals pipeline and promoting investments into other commodities other than gold and PGMs, we will together with the industry, work on triggering the demand for PGMs thus converting our comparative advantage into competitive advantage. One of the key projects under consideration for this is the production of the Mandela Platinum Coin, which will be sold as a reserve asset.

Mintek has successfully developed the fuel cells technology which will play a significant role in driving the demand for PGMs while providing the much-needed support for the energy sector. It is critical for all stakeholders to look for ways to commercialise this technology to drive the demand for PGMs.

Addressing Internal Departmental Capacity Challenges

Since the Beginning of the year, we have worked on addressing internal capacity matters affecting our efficiency. Filling of vacant Top Management positions has been done, Senior Management vacant posts are being currently attend to and will be filled before end of the year. This will help stabilise the leadership vacuum. 

We have also heeded the call on complaints received regarding alleged irregularities and performance at our Regional Offices and have since instituted an internal audit process to address such concerns. To date four Regional Offices have been audited (Mpumalanga, Limpopo, North West and Northern Cape) and corrective action will be instituted when the audits have been completed to ensure that we have ethical leadership within the Department.

Information and Communication Technology (ICT) overhaul

A parallel process to revamp and upgrade our entire ICT system has been initiated. This will reduce information silos by integrating the existing information systems that currently facilitate the application for rights and permits, management and administration of Mine Health and Safety information, mineral commodities information and revenue collection for the Department. This will enable the Department to have a central management and storage system that will improve turnaround times with processing of applications as well as internal and external information requests. This central system will improve the Department’s business processes, efficiency, enable proper management and promote compliance.

We are committed to engaging with investors who, with a long-time horizon, intend to invest in South Africa and see the country’s fortunes as their own. My team and I look forward to engaging with you over the next few days and we look forward to welcoming you in South Africa. Please do visit our stand located at no. 47 and join us for the investment seminar on the Friday at 12:30 at the Origins Restaurant.

Ndiyabulela, I thank you.