By: Lubabalo Cengani

The current structure of the South African economy is deeply rooted in the development of the Mineral Energy Complex (MEC) during the apartheid era. This model focused on capital-intensive and carbon-intensive industries like mining, steel, petrochemicals, and automotive manufacturing. It flourished due to heavy protectionism and limited trade connections in Africa, Asia, and the Middle East. The Department of Trade and Industry and Competition's 2026 Industrial Development Strategy aims to tackle premature de-industrialization, slow economic growth, decreasing investment in productive sectors, and infrastructure backlogs, especially in energy, rail, and ports. The policy responds to global geopolitical tensions, changes in supply chains, the urgency of climate change, and the need for digitalization. Thus, the Industrial Development Strategy is presented as a key part of the government's Growth and Inclusion Strategy, which outlines the current administration's overall economic policy.

The main disagreement between the South African government and the mining sector over the Industrial Development Strategy centers on the state’s proposed measures to enforce local beneficiation. There are concerns about how these measures will affect policy certainty and investment. The government’s strategy suggests linking mining rights to conditions that promote beneficiation. However, the mining sector argues that mining and beneficiation are separate areas and that forcing mining to subsidize beneficiation is unsuitable. The IDS includes proposed taxes and quotas on chrome ore exports to encourage local processing. Industry bodies believe these restrictions won't solve industrial decline and instead create unnecessary and harmful policy uncertainty. The mining sector claims that the drop in domestic smelting is mainly due to high electricity costs, not a lack of ore supply. They argue that the government should focus on making electricity pricing more competitive instead of imposing export restrictions.

CEO of the Minerals Council, Mzila Mthenjane, clearly states that “Beneficiation cannot, and must not, be imposed on mining because beneficiation is part of manufacturing and overall industrialization. Therefore, specific measures must be introduced to incentivize and attract investments to stimulate industrialization and diversify our economy.” Mr. Mikateko Mahlaule, Chairperson of the Portfolio Committee on Mineral and Petroleum Resources, supports the government’s position that “The commitment to exploration funding and beneficiation shows that government is serious about ensuring our mineral wealth leads to inclusive growth and sustainable employment.” This conflict highlights the tension between the government’s wish to use regulatory tools for value-added industrialization and the mining industry's belief that growth needs a stable, competitive, and market-friendly environment.

The deadlock between the South African government and the mining industry over the Industrial Development Strategy poses a complex mix of political and economic risks. The main economic threat is the dampening of investor sentiment. Linking rigid beneficiation requirements to mining licenses creates policy uncertainty, which directly limits capital allocation. Since exploration and mine construction involve significant risk and long-term investment, investors may shift their funding to more predictable regions if they see their returns as being unfairly restricted by state-mandated obligations. The 2026 IDS relies heavily on successful collaborative sectoral masterplans. However, overly strict regulatory mandates may jeopardize the fragile trust built through government-business joint initiatives. While DTIC promotes interventionist trade measures like export taxes, the Department of Mineral and Petroleum Resources typically prefers an investment-centric approach to boost exploration. This internal policy misalignment weakens the state’s ability to act as a unified, predictable regulatory body.

Protectionism within the mining industry, particularly through state mandated beneficiation and export restrictions, threatens to stifle growth and transformation of the sector. By forcing mining companies to subsidize downstream manufacturing, the government risks creating policy uncertainty that deters long term capital investment. Because mining exploration and construction are high-risk, capital-intensive endeavors, investors often pivot toward more predictable, market friendly regions when faced with rigid, state-imposed obligations. Rather than fostering growth, these protectionist measures could act as a barrier to global competitiveness of the industry. Furthermore, the government’s failure to align with the mining industry regarding the 2026 Industrial Development Strategy undermines the possibility of uniform sectoral growth. The mining sector contends that the decline in domestic smelting stems from structural issues, specifically high electricity costs and infrastructure inefficiencies rather than a lack of ore supply. When the state prioritizes top-down regulatory mandates over these fundamental economic barriers, it damages the fragile trust required for collaborative masterplans. 

A misalignment between the government departments, such as the Department of Trade, Industry and Competition, and the Department of Mineral and Petroleum Resources, further weakens the states’ ability to act as a unified regulatory body. For mining to successfully evolve into a high-tech, inclusive, and decarbonized industry, the state must pivot from coercive mandates to an investment-centric model. By replacing export taxes and forced beneficiation with competitive energy pricing, improved logistics, and targeted fiscal incentives, the government can stimulate industrialization as a business-friendly choice. Ultimately, ignoring the industry’s expertise in favor of rigid interventions risks stalling both mining output and the broader industrialization goals the government seeks to achieve.

The main goal of South Africa’s modern economic vision is to change mining from a traditional extractive sector into a socially inclusive, high-tech, and decarbonized industry, as mentioned by President Cyril Ramaphosa. To transform the mining sector amicably while maintaining a stable relationship with industry associations, the state can move from strict regulatory mandates to a model based on collaborative incentives and structural reforms. Instead of enforcing mandatory beneficiation or export restrictions, which the industry sees as shifting goalposts, the state can use targeted incentives to make local processing a business-friendly choice. The mining industry consistently states that high energy costs and infrastructure inefficiencies are the main reasons domestic smelting has faced challenges, not a lack of government directives.

The state can continue to collaborate with Eskom to offer competitive, stable electricity prices for energy-intensive processors. Current tensions are often worsened by perceived division between the Department of Trade, Industry and Competition and the Department of Mineral Resources. Stakeholder forums, like Mining Lekgotlas, should serve as genuine platforms for collective learning, where policy is co-designed based on economic feasibility studies, not just top-down mandates. The state should also actively encourage firms to invest in the social fabric of mining communities, focusing on education, skills, and water infrastructure. By concentrating on energy, reliable logistics, and fiscal incentives, the state can reach the development goals of the 2026 IDS strategy while providing the regulatory and fiscal certainty that the Minerals Council sees as essential for a successful mining nation.

Lubabalo Cengani holds a master’s in political studies from Nelson Mandela University. He writes in his personal capacity.