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I’ll somehow re-emerge in the mining sector at some point in the future, says Baxter

Outgoing Minerals Council South Africa CEO Roger Baxter interviewed by Mining Weekly's Martin Creamer. Video: Darlene Creamer.

13th June 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) –  I’ll somehow re-emerge in the mining sector at some point in the future, outgoing Minerals Council South Africa CEO Roger Baxter said on Tuesday, when spoke to Mining Weekly in a Teams interview.

At the end of this month, Baxter will hand over to incoming CEO Mzila Mthenjane, who will inherit a Minerals Council that has been profoundly, transformatively elevated to new heights with regard to safety, race, gender, and minerals diversity advancement. (Also watch attached Creamer Media video.)

When Baxter joined the then overwhelmingly pale and male Chamber of Mines back in 1992, there were 551 fatalities that year compared with 49 in 2022/23, the lowest number in South African mining’s recorded history.

While the chamber was dominated by the gold mining industry with a bit of coal and diamond mining thrown in, today’s members of the rebranded Minerals Council mine 60-plus different minerals, representing 90% of the value of mineral production in South Africa and more than 90% of employment.

Moreover, the Minerals Council’s 32-member board has been led by a lady president for the last three years and is race and gender diversified.

Changes at employment equity and ownership levels mean that significant numbers of black South Africans, who have earned their stripes in the sector, today own and manage operations across a broad front. Involved today are 72 500 women versus virtually no women before.

In partnership with the Mandela Mining Precinct, the Department of Science and Technology and the Council for Scientific and Industrial Research, modernisation has also been significantly advanced through an expenditure of R500-million in the last five years.

MAKING MINING MATTER

Under Baxter, #MakingMiningMatter has been the rallying cry of a council that heads an industry that has generated a trillion rand a year for the past two years.

Mining grew employment by more than 15 500 jobs during 2022, when employee earnings increased by 5% to R175-billion year-on-year. The mining industry’s contribution to South Africa’s gross domestic product was 4% higher at R494-billion. Direct payments into the fiscus included company tax generating R73.6-billion, and royalties rising by a fifth to R14.2-billion.

The council’s skills development team is involved in all levels of skills development from adult education and training to operators, miners, artisans, technicians, professionals and managers. This encompasses theory training in technical vocational education and training colleges, universities of technology and other universities, skills training in accredited training centres and workplace-based experience.

Mining Weekly: What regulatory environment does mining need in South Africa to be able to compete on a level footing with other mining jurisdictions?

Baxter: What's important to state is that the regulatory framework is just one aspect. If you look at the Fraser Institute survey report on South Africa for 2022, the worst-ranked area for us was security. We are focused on the issues around improving the security environment in South Africa, but we need government to come to the party on that. Two or three of the other critical issues are around the fact that our logistics has fallen by 40% over the last five years and we don't have reliable electricity supply. Those factors, which were very much to our advantage five to ten years ago, have now become negatives in the Fraser Institute survey report. We can have the best regulatory environment in the world, but if we're not sorting out crime, logistics and the heartbeat of the economy, which is electricity supply, we're not going to be able to grow mining.

On the regulatory front, we do need a transparent online off-the-shelf cadastral system that is very easily accessible for free, with all the precompetitive geological information, showing who's got what prospecting right, so you can go in and apply. We need to have the regulatory framework organised in a way that it takes no more than two to three months to get the prospecting right versus the current 354 days, which simply doesn't work, particularly for venture capital exploration. We need to get all the backlog of the regulatory approvals cleared out the way, which the Department of Mineral Resources and Energy (DMRE) has now committed to do.

We need to have an exploration plan, and a lot more incentives around venture capital funding. In our view, this should be the flow-through shares equivalent, which is borrowing from the Canadian model, to get venture capital funded exploration ignited in South Africa, to unlock a pipeline of new exploration projects, which could unleash more investment in the mining sector. Those are the areas that we've been certainly engaging government on and the Minister did say last week that the five preferred candidates for the cadastral system have been listed and they’re going to be looking at choosing one of them by the end of July, so let's see what happens.

If given the right environment, does mining have the power to crush South Africa’s unemployment, inequality and poverty?

Let me start by saying that South Africa has a completely unsustainable unemployment crisis. We've got more than ten-million people unemployed, and if you use the expanded definition, about a 43% unemployment rate, and an unemployment rate of 63% in youngsters between the ages of 15 to 24. It is completely unsustainable. It is a significant contributor to our high Gini coefficient, which is the measure of income inequality around the world, and so, yes, it's critically important for government, business and labour to focus on how we can really get this country growing. Remember, if you have a 5% growth rate for 12 years, you can double the size of the economy, and halve the unemployment rate. It's not just about what mining can do.

Mining is a part of the solution but it's not mining alone, because we already have 475 000 people employed in mining. We could grow that further if we were able to unlock greater investment in the sector, but it's also in the rest of the economy that we need to unlock growth. You can only unlock that growth in the rest of the economy if we can solve some of those security and crime issues, which is part of the Business for South Africa/Business Unity South Africa initiative that was announced by the President and Business for South Africa last week.

A specific government and business task force is seeing to unblocking our logistics, what I refer to as our vascular system, and our energy, which is the heartbeat of the economy. As I like to say, if the heartbeat is weak and the vascular system is blocked, then the body of the economy is in ICU. As the private sector, we can unblock the vascular system by applying private sector stents and we can unlock the heartbeat of the economy by applying a private sector defibrillator. I think we’ve probably seen, more now than ever, the willingness of government to understand that we need to drive these issues and work in partnership to solve them. You can see that with the energy policy reforms that took place last year, which are probably the biggest structural reforms in South Africa in 20 years.

Do you believe the public sector-private sector partnership has the wherewithal to succeed in energy, logistics and security?

It's quite important to appreciate where we are. For over a decade, the government was significantly exposed to State capture and the hollowing out of capacity, with voluntary separation packages given to qualified people in the State-owned companies, etc, so we need to appreciate that our State-owned enterprises don't have enough capacity to run the size of the companies that they have in place. The private sector, on the other hand, does have a lot of technical expertise, managerial capacity, project management capacity, etc, so when you bring those two together, with a willing political partner on the other side, you can unlock a way of sorting out these particular challenges, by the private sector playing a role in private concessioning of rail networks, bringing in locos, bringing in other sources of capability to supplement and complement what Transnet might be doing. In my view, these could be significant game changers, but it's early in the process.

On the energy side, we’re more advanced. In mining alone, we're going to do something like a gigawatt of new solar projects in the sector this year, two gigawatts next year, two gigawatts in 2025, but let's also appreciate that there are some very significant constraints on energy where the transmission network to the Northern Cape is very underdeveloped and we do need a State-owned national transmission company to be established to urgently invest in expanding that network so that we can set up the solar plants and others in the Northern Cape. It's probably one of the biggest areas that is holding back investment in more renewable energy projects in South Africa, as an example. So, can it work in each of these areas? Well, from my particular perspective, with the involvement of business, with a willingness on the part of government to play a constructive role, and the State-owned enterprises appreciating that business is a partner, I think that we can make some improvements to the current environment.

Outside of energy, logistics and security, what are the other big obstacles in the way of the South African mining industry becoming as prosperous as it is in other major mining jurisdictions?

Within the domestic environment, we do have some very specific constraints in relation to the fact that we have over 5 000 outstanding prospecting rights, mining rights, Section 11 approvals within the DMRE system. There are too many rights applications that are outstanding, but having a transparent online cadastral system will play a big role in unlocking that capability. Instead of legislating for a prospective right to be issued within a year, it should be done within two to three months in our view, so shortening the timelines, putting in place fewer requirements, and keeping it stable and predictable are some of the key issues in terms of unlocking exploration in South Africa, obviously with the addition of other incentives around flow-through shares as a tax incentive to encourage greater funding for venture capital exploration companies. Getting local government back to a level where it can perform is an important issue and these are some of the points that we're dealing with, in addition to the security, logistics, and energy issues.

What is your main departing message as you leave for other pastures?

This has been an incredible journey. I've been incredibly privileged to have played a leadership role in the industry. My blood is green. I've really enjoyed the sector. I’ll somehow re-emerge in this sector at some point in the future. But if I think about all my colleagues, we've got a very well-capacitated Minerals Council in place. It's very well led through the Minerals Council office bearers and the incoming CEO Mzila Mthenjane is a very capable leader, so I've got no doubt they'll keep on pushing the positive reform agenda and being the change that they want to see because ultimately I'm a firm believer that with them, we are going to be able to achieve the aim of #MakingMiningMatter.

Edited by Creamer Media Reporter

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