The best of South African literature
The 2013 Mining Lekgotla presented a unique opportunity for various stakeholders in the industry – mining companies, trade unions, mining communities and the government – to reflect on the state of the South African mining sector.
Taking place after the adoption of the National Development Plan (NDP) and during the month of the first anniversary of the Marikana tragedy, the lekgotla was an important forum to discuss not only measures required to prevent a recurrence of that tragedy; but also to identify a long-term path for the sector. As is expected across the economy, the time has come to develop Mining Vision 2030, as a contribution to the realisation of NDP objectives.
What are some of the major issues that the industry needs to take into account in this regard?
The NDP economic storyline includes such issues as the infrastructure programme, development of manufacturing, Green Economy opportunities and mass employment in agriculture. Critically, it acknowledges that there is no other sector in South Africa that contains possibilities to spur all these efforts than mining.
This is not just a sentiment of history. Mining remains a pillar of the economy. Combined with supplies to the industry (backward linkages) and activities beyond extraction (forward linkages), mining contributes about 18.7 percent of gross domestic product (GDP), and around the same percentage of total private fixed investments and corporate tax receipts. It provides about 1.3 million jobs and 47 percent of the country’s exports.
Recent analysis of the global state of mining creates an impression that this is an industry in decline. Reference is made to the downturn in the global economy and the fact that China, the main market for most minerals in the past decade, is reconfiguring its economy towards domestic consumption. While there is some truth in this assessment, its weakness is the failure to differentiate between temporary and cyclical indicators.
Even though the commodities super-cycle of the past decade may taper off, medium- to long-term global trends point to continuing demand for most minerals. Urbanisation is accelerating in China and the rest of the developing world, along with the rapid rise of a global “middle class”.
It is estimated that some 3 billion more people will live in urban areas by 2050, which as early as 2025 will require about $80 trillion in investments. The global car fleet is expected to double to 1.7 billion by 2030. India, Vietnam and countries of sub-Saharan Africa – to quote a few examples – are following in China’s industrialisation footsteps, including through low-end manufacturing.
This will drive the demand for such minerals as iron, nickel, copper, platinum group metals, vanadium, manganese, chrome and gold. South Africa has most of these endowments in abundance.
In addition, as the book recently published by the Mapungubwe Institute (Mistra) on South Africa and the Global Hydrogen Economy: The strategic role of Platinum Group Metals demonstrates, new energy streams are being pursued.
These include the generation of electricity for vehicles and households from hydrogen, using fuel cells that require significant levels of platinum loading. The by-product of this process is water, with minimal carbon emissions.
And so, there will be opportunities galore for the extraction and export of minerals in the coming decades.
The fundamental question is whether South Africa has a mining sector strategy that ensures requisite levels of investment. Critically, the country needs to encourage the emergence of a mature mining industrial cluster that combines extraction with value-addition in the form not just of beneficiation, but also the supply of mining equipment and technologies, as well as services such as mine design and operation.
In other words, in the same manner that mining formed the bedrock of South Africa’s industrialisation in past centuries, it can contribute fundamentally to South Africa’s growth and development in the coming decades.
One of the areas exercising the mind of the mining sector is whether public policy encourages these trends.
The fundamental approach in public policy, mandated in the resolutions of the 2012 ANC Conference, is based on the principles contained in the State Intervention in the Mining Sector research report and the Mineral and Petroleum Resources Development Act.
As the ANC pronounced 21 years ago in its policy document, Ready to Govern, state ownership will be considered “where deemed appropriate on the balance of evidence”. The proposed state mining company will take part in “strategic sectors” and will partner with the private sector.
Two critical issues, though, require further discussion.
The first one is about the so-called resource rent tax which is meant to fund skills development, research as well as collation and analysis of geological information. The tax review committee set up by the Minister of Finance may help clarify this issue. But discussion on this may need to proceed from a different starting point. This is because resource rent tax is about taxation only in a qualified sense. The aim is to ensure reinvestment of mining rents for sector regeneration, an objective that mining companies share.
If the mining sector is uncomfortable with the instrument – the resource rent tax – they should propose alternatives to attain these agreed aims.
The second one is on strategic and important minerals. In the resolution from the ANC Conference, about 20 such minerals are listed, and a call is made to identify “strategic minerals that require special policy measures…” In other words, much work still needs to be done and, in the process, a balance will need to be found between certainty for the investors and open-ended ministerial fiat.
The need for affordable feedstock that drives beneficiation cannot be disputed.
But how this is done will require creative reflection. For instance, the ANC resolution broaches the issue of vertical integration: that a state-owned company such as Eskom can deal with security of supply and cost of coal by holding shares in some of the mines from which it sources coal and “sell” that portion to itself at cost.
Eskom, the coal producers and the public at large would all benefit.
Mining Vision 2030 should draw lessons from the Marikana tragedy as a catalyst for immediate positive change. This includes such issues as workplace consultative forums. Marikana taught us that while good relations with union leaders is important, that in itself does not guarantee good labour relations, especially if social distance has developed between the leaders and the mass of the workers.
It also taught us that ructions about cash wages may also be a reflection of a deficit in the social wage, including sanitation, electricity, housing, health facilities and other basic needs – which need to be addressed by municipalities working with the mining companies.
Further, social stability in the mines requires the elimination of violent union rivalries which, to quote former ANC president Oliver Tambo, in fact constitute “a fight among the powerless for power over one another”.
Mining Vision 2030 should also include fundamental change in the current form of the migratory labour system as well as job grading and remuneration.
It is said that, in countries such as Australia, miners spend, in a month, some two weeks in the outback and two weeks with their families.
The Wall Street Journal of November 16, 2011 reports about rock drill operators who are employed as contractors, with some earning as much as R2 million a year.
This of course is informed by special circumstances that cannot be mechanically implanted in our situation. But South Africa has to start thinking afresh about these issues.
The Mining Lekgotla was at one that the change in mind-set should also address improved productivity, including new technology.
Some manufacturers are touting rock drills with better damping systems; AngloGold Ashanti claims it has discovered “game-changing” technology that will eliminate drilling and blasting altogether; the Council for Scientific and Industrial Research (CSIR) is researching robotics for narrow tabular reefs and ultra-deep areas; and Exxaro is motivating for underground coal gasification.
These initiatives will affect mining labour-intensity.
But a sustainable development approach should create opportunities in upstream and downstream activities.
For instance, scientist and entrepreneur Gunter Pauli has demonstrated a Blue Economy approach that includes manufacturing paper from extracted rocks.
At the same time, basic changes are required to ensure workers feel like, and actually become, stakeholders in the economy.
An element of this should be employee stock ownership plans as a critical part of empowerment programmes.
Such plans, as we have learnt from the Kumba Iron Ore experience, should be combined with appropriate representation, financial education and mutual trust.
The South African mining sector has to initiate fundamentally new approaches that will reconfigure an industry that has retained many negative elements of the colonial era.
In this regard, the Mining Industry Growth, Development and Employment Task Team needs to shore up its efforts.
It should include in its deliberations senior representatives of all partners, including from such departments as Trade and Industry, Science and Technology, Economic Development and Public Enterprises – because mining should be more than just about mining!
- Netshitenzhe is the executive director of the Mapungubwe Institute (Mistra) visit www.mistra.org.za