Most mining companies still choose to have a management node in Gauteng, South Africa, global consulting firm Accenture reports.

Accenture African mining lead Duncan Sloan tells Mining Weekly that this is as a result of South Africa having the largest industrial base in sub-Saharan Africa (SSA). “This is important if a company is operating a mine, as it will require a range of equipment, and people who can service the equipment when required.”

He notes that even if equipment is not manufactured in South Africa, the big mining equipment suppliers, which provide services in the SSA region, will still be located in South Africa.

“In South Africa, mining companies have easy access to suppliers, mine services and skilled individuals who can assist in mining operations,” Sloan says, adding that South Africa is a hub not only of transport, education, mining and electricity but also of engineering, procurement, and construction management.

He points out that South Africa has many universities and State-funded institutions – such as the Council for Scientific and Industrial Research, which has a dedicated mining innovation division – which undertake research to improve and develop new mining technologies.

However, there are signs of a shift occurring, specifically involving products and services providers relocating to East Africa, and particularly to Nairobi, Kenya. Sloan believes this is a potential risk for South Africa because other SSA countries are seen as becoming a more attractive base of operations as a result of improvements in telecommunications and the boom in oil and gas exploration off the east coast of Africa.

But, he notes that the South African government has 18 strategic integrated projects, or Sips, which include plans to build a corridor connecting the Waterberg coalfield, located in the Ellisras basin of coal-rich Limpopo province, to the Mpumalanga coal-haulage network to transfer the coal to the Richards Bay port in KwaZulu-Natal.

He points out that significant capital expenditure by the South African government in the past two years has been allocated to the buying of, particularly, bulk transport rail wagons. State-owned enterprise Transnet is also upgrading its signalling and rail infrastructure.

“This is important because unlike other African countries, South Africa has attempted to maintain its existing infrastructure and upgrade it, which is critically important in ensuring that the mining industry functions effectively,” Sloan emphasises.

Challenges

Sloan notes that in the past ten years, while other key mining countries such as Canada, Australia and Brazil have grown on a yearly basis, the South African mining industry has shrunk, mostly during a boom period for commodities, by about 0.7%.

He says this can be attributed to the gradual mining out of South Africa’s resources over several generations. He cites gold production as an example of this trend.

“Many of the projects in the platinum sector have not come to fruition, owing to emerging platinum miners not being able to mobilise the required skills sets and finances required to effectively build and operate these platinum mines.”
Further, Sloan says mining companies want stability in the regulatory environment.

“From an investment point of view, as companies have obligations towards investor capital which seeks regular returns, if they do not have certainty on issues such as royalties, tax regimes or even the extent of government’s influence on mining ope- rations, companies will be deterred from embarking on operations in countries where these significant uncertainties exist,” he warns.

Mining Weekly reported in April that Webber Wentzel partner and head of Africa mining and energy projects Peter Leon told the Commonwealth Law Conference in Cape Town that South Africa’s draft Mineral and Petroleum Resources Amendment Bill was replete with vague and uncertain language.

Leon said that this would amplify, rather than remove the uncertainty of the exist- ing Mineral and Petroleum Resources Development Act, thus ignoring the counsel of the National Planning Commission – which President Jacob Zuma established in May 2010 – to fix the Act’s regulatory problems.

Mining Weekly also reported in February 2012 that President Zuma, during the course of a televised breakfast briefing, emphatically stated that nationalisation of the mines was not government’s policy.
Additionally, the ongoing labour unrest that has plagued the mining industry in the past 18 months is a matter of concern with which government, labour and the miners are still grappling, says Sloan.

Beneficiation

Trade and Industry Minister Dr Rob Davies reiterated governments’ view that mine- ral beneficiation is an important element in ensuring the increased industrialisation of South Africa.

Speaking at a function hosted by financial services group Sanlam, in June, Davies emphasised the importance of beneficiation, in which more value is added to domestic mineral products before they are exported.

“We can use the minerals of South Africa as a tool of development and the only way to achieve this is through beneficiation, which will create more jobs and promote industrialisation,” asserted Davies.

Government is perhaps too fixated on the idea of downstream beneficiation as the challenges associated with downstream beneficiation include the technical complexi- ties of downstream processing, is Sloan’s rejoinder.

He says government should rather look at the inbound supply chain instead and focus its efforts on becoming a global supplier of mining goods and services, as South Africa is already strong in this area, as opposed to dabbling in the complex technical challenges, which are associated with downstream beneficiation.

“Despite all the challenges that South Africa faces, I am still upbeat about the long-term prospects of its mining industry,” he concludes.