In this article, independent consultants Dr John Bristow and Dan Moagi outline a proposed six-point plan to help South Africa's minerals and mining industry overcome the challenges it is facing.
South Africa’s minerals and mining industry faces severe headwinds. The Republic of South Africa hosts a treasure trove of geology and minerals, valued at about $2.5-trillion. Without modern exploration, prospecting and new local and foreign investment, these resources will not be developed for the benefit of the country and its people.
Challenges facing the industry include ineffective and uncertain minerals policy, a dysfunctional Department of Mineral Resources (DMR), widespread industry corruption, labour challenges including poor productivity, substandard education and training, disinvestment, aggressive international competition for capital, old orebodies, high grading, lack of exploration, an absent junior sector, a paucity of modern geological information, the absence of new projects and replacement resources, and vested interests, as well as illegal mining, and grossly inadequate transformation and black ownership.
The country has the people, the skills and the goodwill to address these challenges. Enabling minerals policy interventions, restructuring and modernisation of the minerals industry are required to renew investment in exploration and new mines, to drive transformation, revive growth and longevity, and reverse unemployment.
A pipeline of new discoveries and projects is required to replace ageing mines and address legacies which the African National Congress government inherited in 1994. Industry challenges cannot be solved in the law courts; new leadership, partnerships and stakeholder engagements are required to implement solutions in this Six Point Plan:
1 Modernise the DMR, ensure transparent mineral rights management, as well as the ‘use or lose’ policy
Implement a modern real-time, transparent mineral rights management system, and ‘use or lose’ minerals policy. The ability to access mineral rights quickly and transparently provides a competitive edge for the development of new projects and mines, and encourages capital investment, as demonstrated by success- ful jurisdictions such as Botswana, Mozam- bique, Namibia, West African countries, Argentina, Canada, Chile, Australia, Peru and many others. The South African Mineral Resources Administration system needs a complete revamp, or preferably replacement by a modern real-time management system, with consideration given to acquiring the internationally recognised mineral tenure management system developed by the Spatial Dimension Group in Pinelands, Cape Town.
2 Facilitate exploration – develop entrepreneurial junior exploration and development companies
South Africa is grossly underexplored. There has been minimal ‘greenfield’ exploration using modern exploration methodologies, technologies, data processing and interrogation of ‘big data’ sets since the 1970s and early 1980s. The last world-class exploration discovery was the Venetia diamond mine in 1980; existing and ageing mineral deposits were discovered by farmers, prospectors and entrepreneurs in the late 1800s and early 1900s. A strong junior exploration and development sector will provide opportunities to create real black ownership, drive exploration, make new discoveries and create black-owned mining companies. Successful international minerals development jurisdictions such as Australia, Canada, Peru, Chile and West African countries have a robust mix of junior and senior companies; this situation does not exist in South Africa, where there are many unique small and midtier minerals opportunities in rural areas in alluvial diamonds, industrial minerals and semiprecious stones in the Northern Cape and North West provinces. Poor minerals policy is negating development of these opportunities.
3 Transform the industry by creating genuine black ownership
Existing mineral and mining policies and Mining Charter III are in need of modernisation to revive the industry and drive transformation, which is non-negotiable. We reiterate that ease of access to mineral rights and transparency will assist black entrepreneurs and businesspeople in establishing meaningful ownership in the industry. We believe that a State- and industry-backed Minerals Development Fund (MDF), which supports black entrepreneurs and junior explorers and developers on a preferential and matching rand-for-rand basis up to feasibility study, will assist in developing real black ownership. Funding for the MDF would be from a levy applied to established small to midtier mining and quarrying operations, with matching funds from the State. Other innovative options should be explored, including the newly announced R5-billion Aluwani Capital fund for junior miners. (Black-owned asset management company Aluwani Capital, in partnership with VM Investment Company and Ntonga Group Holdings, launched the Aluwani Mining Fund on the sidelines of the Mining Indaba in Cape Town last month).
4 Provide modern geological information and technical support
Successful exploration, development and mining require access to modern real-time information; ‘big data’ is crucial. Valuable old geological information exists in the State archives, for example, the Council for Geoscience (CGS), and extensive modern information exists in numerous public domains, including in the competent person’s reports of securities exchange-listed public companies. This requires urgent capture to assist explorers. The CGS, Mintek and the Council for Scientific and Industrial Research Mining Group must be restructured and modernised, and partnerships established with university geology departments to undertake critical mapping. Incentives for research and development to aid exploration, generate discoveries, facilitate technology-driven robotic mining in challenging underground mines and enhance health and safety are essential to future development and growth. The Department of Science and Technology should establish at least two new Research Chairs university positions to drive new technology developments to modernise the minerals industry. Many excellent young geologists, mining engineers, hydrologists and geochemists, predominantly black, are unemployed; hence, these assets are not used.
5 Provide incentives to restart exploration and development
The South African government should consider innovative tax and financial interventions, as is being done in other competitive mining jurisdictions. These include flow-through shares and matching exploration funds to drive exploration and thereby revive the existing mining industry and stem job losses. An MDF would facilitate transformation and black ownership, and ensure exploration and new discoveries. Exploration, new discoveries and new mine development will create new ownership, jobs and, critically, additional royalties, taxes and revenues, as well as renewed economic development.
6 Implement modern enabling policy and regulations
The existing Mineral and Petroleum Resources Development Act, Mining Charters and black economic empowerment (BEE) policies require modernisation, with the caveat that policy consistency and certainty of tenure, limitation of discretionary powers, transparency and communication between role- players are paramount against the background of transformation being non-negotiable. Minerals policy should be rewritten with the objective of reviving and transforming the industry and ensuring new investment; a patchwork approach to fix existing policy would be counterproductive. Local and foreign explorers and investors recognise the treasure trove of geology and minerals, and the quality of people and skills in South Africa, but are reluctant to commit new long-term investment, given poor and uncertain minerals policy, BEE-ownership complexity, lack of transparency and corruption. Peru, like South Africa, has a lengthy history of colonial legacies, poverty and disadvantaged indigenous peoples; investor- friendly minerals policy interventions have helped it become a favoured international exploration and mining jurisdiction, with consequent economic growth and poverty reduction. Examples like this should be interrogated.
South Africa’s existing, standalone ‘sunset’ mining industry is locked in an old paradigm; it is contracting rapidly and shedding jobs.
Existing minerals policy is ineffectual to address legacies and challenges, and skewed to ‘benefit’ large mining companies that can afford big legal, environmental, mineral rights, health and safety, and allied services departments.
Current minerals policy should be rewritten, and Mining Charter III replaced with sustainable transformation mechanisms, thereby developing entrepreneurs, junior explorers and developers. Present policy is detrimental to the existing mining industry, unsupportive of exploration, discovery and new mine development, and ‘negative’ to new investment.
Without healthy synergy between junior explorers and developers who can identify new deposits and large mining companies that can develop big capital-intensive mine projects, South Africa’s exceptional mineral wealth will not be realised and unlocked.
We are regularly approached by young black entrepreneurs, geologists and emerging miners for help in accessing mineral rights, mineral projects evaluating, ‘accessing’ technical and financial support, and ‘entering’ the minerals industry.
Many have accessed mineral rights, but, regrettably, the barriers to entry, lack of information, inadequate technical and financial support, and other challenges severely hamper these aspirant explorers and miners.
Political will, foresight and leadership are required to modernise and transform this essential industry, drive job creation and revive economic development.