JOHANNESBURG (miningweekly.com) – The Mapungubwe Institute for Strategic Reflection (Mistra) on Monday launched its latest research report on platinum group metals (PGMs), titled ‘A South African PGM Exchange: Policy Rationale for Financial Beneficiation’.

The launch took place at the company’s fourth yearly PGM roundtable, in Johannesburg.

Speakers at the roundtable emphasised that, with Southern Africa and South Africa blessed with the majority of the world’s PGM resources, the region must capitalise on this natural endowment.

Opportunities abound in a number of sectors, such as the jewellery market. Notably, speakers indicated that with the world entering the epoch of the hydrogen economy, South Africa had the potential to decide the pivotal role it can play.

Owing to the massive concentration of PGMs in Southern Africa and South Africa, the Mistra report argues that there is significant value to be garnered from using financial linkages to advance development.

The report explores the policy content, in terms of legislation and other statutes, within which such an exchange would be feasible.  

Further, it interrogates the practicalities of setting up such an exchange, including spot and future contracts to be handled, quantification of trade, and several logistical matters that go along with the exchange’s operations.

Speaking at the event, Pan-Africa Investment and Research Services chief executive Dr Iraj Abedian also made the case for a PGM exchange and greater mineral beneficiation.

He noted that while the country boasted the majority of PGM resources, in terms of primary supply, the percentage of its global supply share had diminished considerably, owing to secondary supply market becoming more prominent.

Therefore, with the market shifting in this regard, Abedian emphasised the need to establish a PGM exchange in the country, highlighting this as an important part of the country’s beneficiation strategy.

While he highlighted the need for this to be done carefully and with proper due diligence and consideration, he noted that time was of the essence, and that this had to be pursued soon.

Further, he said that this would be a long-term plan and therefore, would require setting up a platform that would endure for the next century and beyond. He indicated that the political discourse that surrounded the pursuit of such an exchange had to be cognisant of the longevity of the proposed platform.

Abedian also emphasised the need to ensure the stability of the supply market, which will send a signal to innovators of technology and other stakeholders that they can bank on the supply of PGMs.

He also called for an undertaking to create home base demand for PGMs in technologies, which would engender more demand as others follow suit on the back of these successes. In this regard, speakers from Anglo American and government attested to such undertakings, with the latter having used hydrogen technology in post office vehicles, for example.

Abedian indicated that the exchange will provide real time prices for PGMs. He emphasised that the platform will not fix the price, but, through this accessibility and transparency, will reduce volatility of prices.

CONSIDERATIONS
Abedian outlined the requirements that the country would need to meet to be able to execute such an exchange platform. Firstly, he noted the need for exchange credentials. Here, he pointed to the JSE, which was well established and entrenched, and was recognised globally as a well functioning and well-regulated exchange. Therefore, the country had evidence of being able to run an exchange.

Secondly, he highlighted the need for a capable banking sector. He noted the country’s banking sector as sound by global standards, indicating that, in fact, it was among the top three well-regulated banking systems, which needed to be capitalised on.

Thirdly, he highlighted the need for adequate legal capacity, which he said the country had in abundance.

Fourthly, he noted the need to be able to deliver on the actual physical quantum of PGMs or platinum; that is, having the logistical capacity to supply the demand. He noted the country had this capacity, referencing its history of doing this with gold and PGMs.

The country was able to meet all these requirements, leaving one further requirement, which would require a collective undertaking to execute the exchange platform. Abedian noted this was a supportive legislative and political environment.

He indicated this included the government, unions, the private sector, intellectuals, the media, etc.

In pursuing such a platform, Abedian indicated that this would entail a transition from how the market was structured now - that of a narrow, short term business - to a long-term business. He emphasised that such a transition would need to be undertaken carefully and with proper communication between all stakeholders, shying away from a dictatorial approach and, rather, aligning to realise a national strategic objective.