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Stable quarry growth hampered by cost, legislative challenges

19th June 2015

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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As a result of the local construction industry’s recovery and government’s multibillion-rand infrastructure projects, the South African quarrying industry is on a steady growth path, says Aggregate and Sand Producers Association of South Africa (Aspasa) director Nico Pienaar, adding that production is stable.

“We believe that it is a good time to invest in the industry, just in time to benefit from the expected growth,” he tells Mining Weekly, highlighting well-documented plans to upgrade and expand South Africa’s road, rail, power generation and related infrastructure, which will further unlock the construction industry and result in the expansion and the complete use of resources.

He notes that the quarrying industry – South Africa’s biggest producer in terms of tonnage and volume after coal – produces about 120-million tons of aggregate and sand a year.

“Moreover, the labour-intensive nature of quarries and the further processing and transport of materials are significant contributors to employment. Consequently, industry growth can have an overwhelmingly positive effect on overall employment figures in South Africa,” he maintains.

Detrimental Legislation
Despite the stable industry outlook, Pienaar acknowledges the recurring challenges that aggregate and sand producers continuously face.

In addition to facing many of the same issues that the larger mines face, such as labour unrest, general costs, fuel prices and labour costs, the South African quarrying industry also has to comply with strict legislation, which can occasionally be detrimental to business, he elaborates.

Extensive legislative requirements cause aggregate and sand mining companies’ expenditure to increase significantly, Pienaar highlights, lamenting the quarrying industry’s having to comply with regulations similar to those governing larger mines. Most quarrying operations are smaller enterprises with few specialists employed, making it difficult to sustain spending profits on costly compliance exercises and specialists.

Further, quarries have to compete with illegal mining operations, which the industry believes are increasing. These illegal operations are unfairly competing against heavily regulated compliant businesses, Pienaar says.

Pienaar emphasises the importance of legislative certainty in terms of the granting of mining rights and the proper management of the industry, in tandem with legislation to reduce or eliminate competition from illegal miners and even “unscrupulous operations taking short cuts”.

Other legislative challenges concern the “demanding” tax legislation that focuses on royalty payments, Pienaar says, something over which Aspasa is engaging the South African Revenue Service (Sars) and the National Treasury to determine where the value of a mined product is to calculate payments, and to simplify the requirements of sand and aggregate quarries in terms of royalty payments.

“The problem with royalty payments is that it escalates the cost of material that is mostly used for State contracts. These costs are passed on to the user, which is then paid for by the public,” he explains.

Legal advisers Shepstone & Wylie Attorneys legal expert Camilla du Toit, who briefed a tax and financial workshop held by Aspasa, in Johannesburg, in January, advised Aspasa members, who believe that royalty calculations are incorrect “to first ensure that they follow the necessary steps needed to comply with the payment of royalties, while simultaneously bringing the necessary applications to Sars . . . to lodge a query”.

Further, Pienaar says global challenges have also affected South African aggregate and sand producers, noting that the supply and prices of machines used in quarries, and fuel, have placed pressure on the industry in terms of the cost of producing a quality product for infrastructure that is required to last for years, while illegal material used is often not up to standard.

Meanwhile, Aspasa is reviewing the aggregate grading specifications to move the construction industry in Southern Africa towards stricter specifications that all sectors can uniformly adopt. “We are seeking a common grading system to be used across the sectors when ordering or specifying aggregate for any purposes,” Pienaar says.

Currently, buyers can quote either South African National Standards (SANS), or the dated technical material handling (TMH), besides others, when ordering materials, which leads to some confusion among suppliers and users. “However, we aim to move from using the TMH specifications to using only the SANS specifications and will finalise the reviews by the end of the year,” Pienaar says.

Industry Regulation
Pienaar emphasises that, to establish a properly regulated, but fair and practical environment in which the quarrying industry will not only survive and grow but also continuously develop, government, local authorities and other semigovernment bodies must work more closely with and support industry in dealing with challenges.

However, establishing this regulatory environment will need vision from government, as the quarrying industry is not the same as the general mining industry, with different issues, such as skilled labour requirements, Pienaar notes.

Employees require different skills, while the management echelon also comprises different skills sets, he says, adding that only a few people running such a business unit have to deal with issues such as marketing, interaction with customers, the public, the workforce, legislation and profitability.

Pienaar further points out that Aspasa has a health and safety audit programme in which its members have to participate – including a separate environmental audit programme – which assists management in being up to date and legally compliant. Aspasa and the industry have worked on world-class or best-practice guidelines and the regulators do not seem to appreciate the work Aspasa is doing in terms of self-regulation, he points out.

“Aspasa would like to see increased partnership between the regulators and the industry, which would bring calm and certainty to the industry, thereby ensuring stability and sustainability,” Pienaar concludes.

Edited by Leandi Kolver
Creamer Media Deputy Editor

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