The push for the local beneficiation of South Africa's mineral wealth, which is a key element in South Africa’s economic strategies, including the National Development Plan, has received a boost in the form of the research and development (R&D) tax incentives that were effected in October last year.

The South African R&D tax incentive regime aims to provide an additional ‘super’ 50% income tax deduction on eligible R&D expenditure in the mining industry, which would equate to a saving of 14% tax on every rand of identified R&D expenditure.

The R&D tax incentive should encourage mining houses and businesses to spend more on R&D in the field of mineral beneficiation, thereby improving the local technology and skills base and enhancing local minerals beneficiation.

KPMG R&D tax and incentives head Mohammed Jada states that the incentive will result in a reduced tax charge profile, thereby lowering tax costs and increasing shareholder returns.

In 2011, the mining industry spent about 1.2% of turnover on R&D; however, with the tax incentive in place, the number is set to grow.

The areas that have been identified to benefit from the tax incentive include activities involved in the development of new or old mines; logistics modelling, handling and shipment efficiencies; the development of new mining methods; the design, testing and development of pollution control dams; rehabilitation and water treatment systems; ventilation and gas management systems; and noise and dust suppression techniques.

Other fields are also to benefit from the incentive, including wireless technology used at mining sites at variable depths and computer programming for real-time monitoring and exception reporting; the development of global positioning system surveying technology; remotely operated equipment; automated systems and robotics; seismic mapping; development of three- and four- dimensional simulation and wireless sensors technologies; iterative development and testing of new or modified offshore platform systems, including supporting logistics; and the automation of monitoring systems with regard to emissions control and gas flaring.

The R&D tax incentives fall under the Income Tax Act, which the Department of Trade and Industry pronounced Section 12i of the Income Tax Allowance Programme to accelerate economic growth through beneficiation activities.

Government’s beneficiation strategy is rooted in various other policy provisions and regulatory frameworks, and these provisions must be reviewed to strengthen them for ease of implementing beneficiation strategies.

The minerals and mining policy of South Africa identifies the need to adopt a policy to create an enabling environment for beneficiation, further enunciated by the Mineral and Petroleum Resources Development Act (MPRDA).

The policy also includes provisions for the  immediate implementation of the beneficiation strategy and the MPRDA is set to further clarify the provisions.

Further, the amended Mining Charter, which seeks broad-based socioeconomic empowerment, encourages both downstream and sidestream value addition to minerals through two provisions.

The first provision requires mining companies to offset up to 11% of their ownership requirements against the value of their levels of beneficiation, with the second requirement stating that mining companies must procure at least 40% of their capital goods, 70% of their services and 50% consumables from black economic empowerment (BEE) entities.

The Precious Metals Act ensures that priority will be given to applicants whose beneficiation processes will be at the last stage of the mineral beneficiation value chain or will have a positive impact on the beneficiators in the last stage, which holds the highest prospects for job creation.

Further, policy provisions include industrial funding and the manufacturing investment programme – designed to stimulate growth and investment in small to medium-sized manufacturing businesses.

Finally, the State-owned mining company policy was formed to execute the developmental agenda of government, aimed at providing competition for existing producers, assisting in holding prices down for downstream activities, identifying innovative activities and projects, and mobilissing private and public resources to develop the mining value chain.

Deloitte executive Ebrahim Takolia says there are four stages of beneficiation, with the first involving the actual extraction of the mineral, the second the concentration of the mineral into concentrates and its further beneficiation into a saleable product typically defined by industry standards.

“Third is the inclusion of the mineral in the production process for a saleable product and fourth is the sale of the final product to the consumer,” he adds.

While government continues to highlight its concern over growing coal exports as a threat to its economic growth plans, State-owned power utility Eskom pressurises it to implement export restrictions to ensure local demand is met first.

In 2011, Eskom chief commercial officer Dan Marokane told the HIS McCloskey South African Coal Exports Conference that Eskom proposes the country’s resources are developed and exploited in the national interest. A key element would be a national primary energy coal development plan to provide a framework for investment in the industry.

This is to ensure domestic energy demand is met at prices based on efficient costs with fair returns for coal producers to prevent producers from exporting to more lucrative Asian markets.

Further, at the 2013 IHS conference, Mineral Resources Minister Susan Shabangu said that government had resolved that certain resources, such as coal, be declared a strategic national resource, but the state has not decided on the introduction of an export levy as it has not yet been debated.

Ten commodities were identified and divided into five value chains for government’s beneficiation strategy, which are energy commodities, including coal, uranium and thorium; iron and steel, which includes iron-ore, chromium and manganese, and pigment; titanium production, including titanium and vanadium, and autocatalytic converters; diesel particulate filters that include platinum; and jewellery fabrication, including diamonds, gold and platinum.

Current Projects

Diamond miner De Beers has formed joint ventures with the Botswana and Namibian governments to bolster local beneficiation, and is currently in talks to work with the South African government to bolster beneficiation.

Anglo American, which owns 85% of De Beers, plans to invest R20-million in South Africa to build an underground operation to support local diamond cutting and polishing at its flagship Venetia mine, in Limpopo, thereby creating 3 000 new jobs. The mine will supply the South Africa market until 2042.

Last year, Sephaku Holdings’ Sepfluor embarked on a fundraising drive to finance the development of its proposed R2.1-billion mine and beneficiation plant outside Bronkhorstspruit, in north-east Gauteng.

Of the R2.1-billion, R1.2-billion will be used for the beneficiation plant, which will use about 42 000 t/y of its own manufactured hydrogen fluoride to flow directly to the manufacturing of 60 000 t/y of aluminium trifluoride, to be supplied to local and international aluminium smelters.

Kumba Iron Ore awarded Tenova Bateman Technologies a contract to supply a 50 t/h modular beneficiation plant for its Sishen mine, in the Northern Cape province.

The plant will be used to demonstrate the commercial feasibility of separating iron-ore at specific operating densities, using cyclone-based technology.

Challenges

The challenges in implementing local beneficiation are a lack of infrastructure, which the National Development Plan is set to address with its infrastructure plans leading to 2030.

Government’s solution to the R&D challenge is to align beneficiation R&D requirements with the national ten-year plan for science and technology.

“It also plans to promote skills development and partner with the relevant sector education and training authorities to align the beneficiation skills pipeline to the National Skills Development Strategy and the Sector Skills Plans,” explains Takolia.

Finally, future trade agreements must adequately support the beneficiation intent to support investment in beneficiation in South Africa.