Jams derail mining
STATE OF RAILWAYS STOPS INVESTMENT IN MINES
Coal, iron ore and chrome companies missed out on about R35bn last year.
The Investing in African Mining Indaba got underway in Cape Town on Monday as miners showcased their green credentials, but the persistently hot issue for SA relates to the bottlenecks strangling growth and preventing the country from fully participating in the mining boom.
The Minerals Council of South Africa said coal, iron ore and chrome companies missed out on about R35 billion last year from contracted volumes that couldn’t reach ports. Exxaro and Glencore both reported decreased sales last year, directly because of rail capacity shortfalls.
Without urgent attention, “the mining industry, the fiscus and the rail and port operator will again forgo any benefit from commodity prices by not exporting minerals to South Africa’s full potential,” it said.
This contributed significantly to South Africa being ranked among the 10 least attractive jurisdictions for mining investment in the Fraser Institute’s annual mining industry survey last year.
Infrastructure now a bigger impediment than regulations
Andrew Lane, energy, resources and industries leader at Deloitte Africa, said infrastructure bottlenecks, such as rail capacity, road quality, the high price of energy and the reliability of energy supply are now bigger impediments to the mining sector than regulations.
South Africa has slipped to 75 out of 84 jurisdictions in the 2021 edition of the Fraser Index. In 2020, SA ranked 60th out of 77 jurisdictions.
The index measures perceptions of policy attractiveness and mineral resource attractiveness.
“We have noted concerns raised by miners in the [Fraser] surveys and we need to work hard to improve internal factors and influence external factors that contribute to these concerning results,” said Minister of Mineral Resources and Energy Gwede Mantashe in his keynote address.
So far, there is little evidence of this.
Nor is there much evidence of government achieving anything close to its stated target of attracting four percent of global exploration spending, equivalent to about $900 million.
SA, once a mining titan in global terms, accounts for about one percent of global exploration.
Lane highlighted some of the bottlenecks around infrastructure, such as electricity supply, labour productivity, as well as streamlining of permits and licensing, “which Mantashe undertook to reduce to less than two months”.
“Similar undertakings had previously been made and while there have been improvements, there is still room for further improvement,” said Lane.
Rail network
African Rail Industry Association CEO Mesela Nhlapo said immediate implementation of the National Rail Policy (NRP), which has opened the door to private third-party freight operators on the South African rail network, would resolve most of the problems mining houses have in moving their products from pit to port.
“Mining remains one of the key pillars of South Africa’s economy and one that should be contributing significantly to economic growth.
That growth can only be boosted if mining companies throw their weight behind the National Rail Policy, which allows for independent rail operators to use the national rail infrastructure to provide additional capacity and services,” said Nhlapo.
The speech Mantashe should have given
Zambian President Hakainde Hichilema gave the speech Mantashe should have given, according to Peter Leon, partner at law firm Herbert Smith Freehills.
Hichilema told delegates that his country has zero tolerance for corruption and is open for business, with a minimum of red tape.
“He reiterated his government’s commitment to a transparent, predictable and fair investment climate with absolutely no tolerance for corruption,” said Leon.