The energy transition will open many new opportunities for mining in Africa, but for SA to benefit, the structural impediments that are preventing growth in the sector will have to be resolved — and the private sector will have to take much of the responsibility for it.
Despite a recent upswing in earnings boosted by record-high commodity prices, SA’s mining sector remains in decline as companies choose to exploit those assets they already have, instead of opening new resources and reserves. The absence of mining exploration spend can largely be attributed to the government’s failure to resolve various red tape issues affecting miners, and to maintain electricity, rail and port infrastructure, says Andrew Lane, energy, resources and industrials leader at Deloitte Africa.
During an interview with Business Day at a recent mining conference in Johannesburg Lane said there is an “underlying positivity about mining in SA”, however it is clear the industry will need to “take the lead and craft the future that they want”.
“The state does have a critical role to play, but it is not clear what that role should be — there seems to be an emerging consensus that government is not doing well, to the extent that the state appears to be slowly but surely failing. So, being the only capable actor on the stage at the moment, it is incumbent on the private sector to fill the gap [left by the government],” Lane said.
Apart from the challenges posed by uncertain electricity supply and inadequate rail and port services, the industry is being held back by inefficiencies at the department of mineral resources & energy. This is due to the many difficulties in getting permit applications approved through the Mineral Resources Administration System (Samrad) and the lack of a transparent competitive cadastral system.
Lane said there are already many examples of mining companies coming on board to help solve the electricity crisis by investing in their own renewable power generation plants, but the private sector can also, if the government allows it, help ease the bureaucracy of getting the permits through the system.
“The private sector can help the government to streamline that process; it is basically a manufacturing process and the private sector has the expertise needed to get such a system to work,” he said.
According to Lane, the relationship between the government and private sector has improved over the last year or two. This creates a window of opportunity for the sector to approach the government to help it find and implement solutions.
There are new opportunities on the horizon for which the mining sector should position itself, Lane said.
“On the one hand you have sectors that are volatile, like the fossil fuel commodities such as coal and gas that are becoming less favourable — although I think there will always be a role for fossil fuels. But on the other hand there are new opportunities emerging through the energy transition for green metals used in the renewables value chain.
“As a continent Africa has reserves of all the green metals of the future, such as copper, nickel, cobalt, lithium and vanadium,” he said.
According to a new report by Deloitte Africa, titled “Africa’s role in a clean energy future”, after the signing of the Paris Agreement in 2015, clean energy investments grew only 2% a year to 2020. But the pandemic, resultant supply chain disruptions (exposing a disproportionate reliance on China), policy-driven moves in major markets from internal combustion engines (ICE) to new energy vehicles, and net-zero commitments of the world’s foremost economies have accelerated this trend, the report says.
As a result, since 2020, clean energy investment growth has increased to 12% per year and Russia’s invasion of Ukraine has given further impetus to this trend.
High prices, coupled with energy security concerns, have accelerated several governments’ commitment to invest in renewables, the report said while also increasing the need to diversify concentrated sources of supply for the green metals used in the renewables value chain.
“As the world looks for supply source alternatives to Russian energy, Africa, arguably, has the potential to reshape the supply chain for many clean energy options. Some African economies could even become pivotal suppliers of energy minerals and natural gas in the immediate term,” the report said.
SA can benefit from the expansion of capacity in key commodities and downstream industries, such as nickel, vanadium, rare earth elements, and platinum group metals.
As one of the largest producers of platinum group metals in the world SA also has a significant competitive advantage in producing green hydrogen energy for export — an opportunity that could transform its domestic economy.
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