Africa-Press – South-Africa. South Africa’s government has missed an opportunity to revive the country’s mining industry through making it more attractive to investors by addressing companies’ concerns.
These concerns stem from onerous regulations, ongoing policy uncertainty, repeated threats of nationalisation, and a decline in service delivery.
As a result of this, there has been no new exploration for minerals in South Africa, resulting in the country missing out on successive commodity booms.
The country’s mining output has also stagnated over the past 20 years, despite it still having substantial gold and platinum reserves, as well as a massive stock of bulk commodities.
Mineral and Petroleum Resources Minister Gwede Mantashe has had nearly a decade to reverse this decline but has failed to do so.
At the Joburg Mining Indaba earlier this month, Mantashe missed yet another opportunity to address the industry’s concerns and arrest its decline.
Modern Corporate Solutions mining analyst Peter Major explained that Mantashe’s address to close the second day of the Indaba was the perfect opportunity to address the collapse of the industry.
Mantashe had the opportunity to admit what the government had gotten wrong over the past twenty years and explain what it was doing to encourage growth in the sector.
“I remember telling people around me, ‘This guy has a big opportunity’. People remember what you say last and what you do last, the most,” Major told BizNews.
“He had a chance to go up there at the end of the Indaba, and he can be a hero. He does not have to do much, and we would forget, ignore, and pretend so much of this past decade did not happen.”
However, this opportunity, like with many others, was not taken by Mantashe, with no fresh ideas to revive the once-powerful industry in South Africa.
“He seemed not to comprehend the opportunity he had. He seemed to go up there with the attitude of not wanting to look weak by saying anything different, or they might think I am caving in,” Major said.
“I found him just rambling on. He likes making jokes, and that is okay, but I would say 50% of his talk was tongue in cheek and joking, with nothing serious.”
“Gwede missed a great opportunity. Instead of trying to improve South Africa’s mining charter to encourage investments, I thought he was just repeating more of the same and doubling down.”
The collapse of South African mining
Mining expert Peter Major
Mining was once the backbone of South Africa’s economy, with the country being the dominant global player in the industry.
The rise and fall of commodity prices still impact the local economy significantly, boosting the rand during a bull market and crushing the currency when the cycle flips.
South Africa itself has risen along with these cycles, with booms providing the opportunity to redirect excess resources into other areas of the economy.
The excess profits created by the industry during a bull market translate into a significant boost in tax receipts for the government, easing financial pressure and funding vital expenditure on anything from infrastructure to social safety nets.
However, in times of declining prices, the industry is crushed by significant impairments and thousands of job losses, as miners fight to stay alive until the next rise in commodity prices.
South Africa is well accustomed to this cycle, considering its history as a major mining producer over the past 150 years.
However, more recently, the country has missed out on the bull markets, while it continues to feel the pain of market downturns.
South Africa has not grown its mining production for the past 20 years, with no new exploration occurring despite the country’s rich mineral bounty.
Once the economy’s backbone, mining is playing a declining role in South Africa’s growth, with services making up the lion’s share of local economic activity.
Anglo American CEO Duncan Wanblad explained that it takes about 17 years from the time a mineral deposit is discovered through exploration until a mine can operate at full capacity.
This means that even if South Africa were to fully address its challenges, it would take around 20 years until new production came online.
Wanblad told the Joburg Mining Indaba that South Africa’s mining potential was under-explored due to unsupportive policy for the last 20 years.
“The data will show you that it takes about 17 years from the time that you find the deposit until the time that you get it permitted and ramped up into full production,” Wanblad said. “It’s a generation of mines that have been foregone.”
Major put it more starkly, saying the country has fallen from being the number one mining jurisdiction in the world to being ranked among the worst.
“We have fallen from 650 tonnes of gold produced a year, which we sustained for decades, down to 90 tonnes per year,” Major said.
While the country has mined out a significant share of its total gold reserves, there is still plenty left in the ground. With record gold prices, extracting this additional gold is economically viable.
“We still have half the world’s gold reserves in this country. Anybody should be asking, ‘Who managed this? Who oversaw this? Who implemented this disaster?’,” he said.
South Africa is also producing less coal now than it was three decades ago. A similar story has played out regarding iron ore.
“We were a leviathan in 1980. Nobody could beat us. Anglo American was the largest investor in the United States. The Americans were terrified of us,” Major said.
“You are seeing what happened in Zambia and in Zimbabwe now happening in South Africa. It has not turned around, it is still going down.”
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