A truck travels underground to collect ore at the Chibuluma copper mine. Photo: Reuters
JOHANNESBURG - The Minerals  Council South Africa, which represents 90 percent of local production has said that there was not enough investment in new mineral exploration, to take advantage of the country’s geological potential.

The council's chief executive, Roger Baxter, this week said South Africa’s mining industry was only attracting 1 percent of global exploration when it should account for 5 percent.

“We need to get the exploration game going,” Baxter told the Future of Metals Conference hosted by Afriforesight in Johannesburg. “We just don’t have the pipeline at the moment.” 

Baxter said 90  percent of mining investment was currently for keeping existing projects and infrastructure going. 

“In Canada, they have 1 400 venture capital companies listed on the TSX, we have 12 in South Africa. We have got to learn from Australia and Canadian,” he said.  

The council said mining contributed an estimated 7.3 percent to gross domestic product in 2018 from 6.8 percent in 2017. It grew 1.2 percent in 2018 representing a 1.2 percent growth rate slightly faster than the overall economy.

Baxter flagged the electricity costs was one of the threats facing the industry. “In the last 10 years, electricity has gone up 500 percent,” said Baxter.

The failure of Eskom has been one of the major challenges facing the mining industry electricity constituting a significant component of total input costs in mining, particularly in the gold and platinum sectors. “Excessive increases in electricity tariffs have had a detrimental impact on the overall inflation profile of the mining sector,” Baxter said previously. 

Eskom has announced a net financial loss of R21-billion, the highest reported by any single company in South Africa in the 2019 financial year.  The utility which has almost R500bn in debt was allocated an extra R59 billion bailout in July.

Hugo Pienaar, chief economist at the Bureau for economic research said investors understood the need to clean Eskom balance sheet.

"The concern is that we are not hearing conditions to the additional funds to Eskom is a problem. For example, the chief restructuring officer  (CRO ) is now a temporary appointment. These are all disappointments, one would have thought that would have been a full-time position. It thinks it is a full-time job to get that done," Pienaar said.

South African Institute of Chartered Accountants chief executive Freeman Nomvalo was seconded to serve as CRO and oversee Eskom's unbundling. He will also work with  Eskom's board and management to carry out the recommendations of the Presidential Task Team, appointed in 2018.

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