Promises to make industry fly
After a two-year hiatus because of Covid19 the annual Investing in African Mining Indaba returned to Cape Town this week, where delegates heard commitments by the government to remove hurdles that are impeding the industry’s potential.
Mining is in a strong position thanks to high commodity prices, but the industry has raised concerns about rail and port constraints. Theft, infrastructure restrictions and legal issues around procurement have undermined exports of bulk minerals.
According to the Minerals Council SA, commodity production for 2021 was just shy of R1.2-trillion compared with R910bn a year earlier as the industry rode the wave of strong prices. The windfall was a boost for the fiscus as miners paid higher taxes, while boosting wages and employment.
Though production rebounded by 11% from the low base in 2020, the 20-year index of mining output shows that sector production has not recovered since the 2000-2006 peak and is struggling to maintain 2015 levels.
The council’s CEO, Roger Baxter, said: “Investment at the moment is largely sustaining [production] and production is flat. However, if we sort out the regulatory and infrastructure issues, including ports, rail, exploration, and the cadastral system, we will see investments go up”.
The council said it remains concerned about rail and port constraints, which it estimates resulted in an opportunity cost of R35bn for 2021.
“While mining companies did extremely well financially there are underlying challenges which are demanding our full attention. We are working closely with Transnet to address the constraints that are preventing SA Inc from fully benefiting from high commodity prices and strong demand for our minerals,” Baxter said.
Transnet Freight Rail CEO Siza Mzimela said there was a focus on addressing historical matters, including resolving legal issues around the procurement of the 1,064 locomotives contract. “The locomotive contract is not something that happened today or two years ago. Whether you talk about infrastructure, it is not that it is suddenly breaking today. Even the security problems have always been there; they have been increasing at a phenomenal pace over the past few years and there has been a lot of work that has been done by the Transnet team together with our customers to try to turn things around.”
SA fell to the bottom 10 of this year’s Fraser Institute’s Investment Attractiveness Index, to 75 out of the 84 jurisdictions surveyed. This compares with 60th out of 77 in 2020. The index accords a 40% weighting to policy and 60% to mineral potential.
President Cyril Ramaphosa said the ranking underlines the reality that SA needs to move with greater purpose and urgency to remove the various impediments to the growth and development in the industry. “We understand very clearly the need to fix the regulatory and administrative problems,” he said.
The backlog of mining and prospecting rights and mineral rights transfer applications must be cleared, and a modern, efficient cadastral system and effective exploration strategy needs to be implemented, he said.
Commenting on the government’s commitments, Sibanye-Stillwater CEO Neal Froneman said: “The problem is if this type of commitment and thinking was put in place when the government had capacity and the credibility to deliver, I would say ‘wonderful’. [But] I don’t believe the government has the capacity or the ability to make the differences that are so desperately needed.”