Africa-Press – South-Africa. South Africa has wasted the golden opportunity presented by its rich mineral wealth by constraining the mining sector to the point of stagnation and decline.
One government policy, enacted in 2002, is arguably the source of the sector’s decline – the Mineral and Petroleum Resources Development Act (MPRDA).
This legislation, by shifting private mineral rights ownership to state custodianship, has played a large role in the mining sector’s decline, with the industry having shrunk by 11.5% since 1994.
This has seen employment in the sector steadily contract from its 1987 peak of over 760,000 jobs to around 465,000 today.
In a recent research note, the Bureau for Economic Research’s (BER) Robert Botha explained that the decline of South Africa’s mining industry is largely due to policy, regulatory and bureaucratic obstacles, rather than geological exhaustion.
In fact, the country boasts one of the world’s greatest sources of mineral wealth, with an endowment of global significance.
Botha particularly highlighted South Africa’s platinum group metals (PGMs), manganese, and chromium deposits – commodities he described as critical to the global energy transition.
However, he explained that, despite this geological lottery, the sector faces various constraints that have prevented it from taking full advantage of successive commodity booms.
Therefore, instead of using its impressive mineral endowment to its advantage, South Africa’s government has constrained the sector to the point of decline.
Botha explained that, despite successive commodity price booms, in real terms the sector has declined since 1994.
“Over this period, the sector contracted by 0.29% on average. By 2024, the sector was nearly 12% smaller than in 1994,” he said.
Botha attributed this decline largely to policy constraints, specifically pointing to the influence of the MPRDA of 2002.
This legislation essentially abolished private ownership of minerals, vesting them in the state to ensure equitable access to, and sustainable development of, South Africa’s resources.
“The MPRDA framework changed the ownership model and operating environment of the mining sector, giving the state a mandate to manage mineral resources,” Botha explained.
“By transforming mineral rights from immovable property into state-granted permits, the MPRDA reoriented the sector’s operational and legal foundations.”
The graph below, courtesy of the BER, shows the decline in South Africa’s mining sector from 1994 to today.
From sunset to sunrise
Botha said the MRPDA led to policy uncertainty, which has also been exacerbated by a series of legal challenges.
“The regulatory environment is currently in a state of flux,” he explained. “The shift to state custodianship under the MPRDA introduced profound fears regarding security of tenure and property rights.
Policy uncertainty is a serious concern across industries, but it is particularly constraining for the mining sector.
Modern Corporate Solutions mining analyst Peter Major previously explained that this is because of the long lead times mining investors need to contend with, as it typically takes 17 years to get a mine from the investment stage to operating at full capacity.
Major also pointed to the MPRDA as a notable constraint on investment in the mining sector, due to the uncertainty it created.
“Can you imagine working your whole life, decades, building the most modern, efficient plant? And then you wake up one day, and the dirt it is sitting on is no longer yours?” he said.
“The government tells you, ‘Your plant may be sitting on some dirt, but you don’t own any of that dirt. And if you do everything we tell you, you might use it for 20 years, 25 years, and then we will decide if we want to renew it.’”
Major explained that this effectively kills the investment case for mining in South Africa, with the hurdle for investing in the country being extremely high.
“Mines are a hundred-year investments. So, are you happy investing now? Somebody else took away your minerals, but they will let you borrow them with a lot of different terms and conditions than the day before,” he said.
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