The SA mining sector’s contribution to GDP has fallen from 10% in 1993 to about 4.4% in 2022, the lowest it has been during this 30-year period.
The sector has also experienced a negative average annual year-on-year growth rate over the past two decades registering growth of minus 0.4%. This has “obliterated economic progress and deepened the plight of the most vulnerable”, said Themba Mkhwanazi, the regional director for Anglo American in Africa and Australia.
Speaking on Wednesday at mining industry event the Joburg Indaba, Mkhwanazi said the majority of investments in mining are aimed at maintaining existing operations, “indicating stagnation and a lack of growth” in the industry.
“We desperately need to find our way back onto a growth path that unlocks and realises the latent potential when we could start referring again to mining as the engine of growth in our economy,” he said.
As highlighted by other speakers at the event, one of the contributors to low growth has been the lack of spending on mining exploration.
SA’s share of global exploration spending has dropped to below 1% from a peak of 5% in 2003 and it has remained stubbornly below 1% for more than a decade. In addition, most of the exploration and new project development that is taking place is being done around existing mining areas by major companies.
Errol Smart, CEO of JSE-listed copper developer Orion Minerals, said the lack of investment is not because there is no interest to explore in SA but rather because “the regulator is not the champion” of the industry.
“We have the industry versus the regulator. There is a trust deficit that remains and until we address that I don’t think we will overcome this problem [of a lack of investment in exploration].”
The regulatory environment poses too high an administrative burden on exploration companies, and regulations governing the granting of prospecting and mining licences are not being applied in a consistent way, he said.
The mining sector has been lobbying the government for years to replace the “dysfunctional and outdated” SA Mineral Resources Administration System (Samrad) — which is operated by the department of mineral resources & energy — with a new, transparent and reliable online mining cadastral system.
The inefficiencies of Samrad resulted in a backlog of thousands of unprocessed mining and prospecting licences. In July, the department finally agreed to do as the industry has been suggesting for several years: to select a technology provider and purchase an off-the-shelf cadastral system.
But, said Smart, this will solve only part of problem if there is not consistency in how regulations are applied when awarding licences. “We need a clear, transparent, efficient and predictable regulatory system.”
According to Smart, their own experiences have shown that filing similar mining right applications at different offices often produces different outcomes.
“The system needs to be predictable. You have to know that if you prepare applications in a certain way, the outcome from such applications will be consistent.
“Our mining industry is in distress. There are too many barriers. It takes too long to get anything done,” Smart said.
Mzila Mthenjane, the recently appointed CEO of the Minerals Council SA, agreed with Smart and said more has to be done to reduce the processing time for applications.
Exploration companies, he said, have a set budget and they plan to spend the bulk of that money on “digging holes in the ground”. But if there are delays in the processing of an exploration licence, a large chunk of the budget is consumed by administrative costs as the company waits for approval.
This further underscores the need for regulatory certainty, said Mthenjane. “Solving the issue of the cadastre and geological information will not solve all our problems. We need to ensure administrative and regulatory certainty.”
According to Mosa Mabuza, CEO of the Council for Geoscience, the problem was not only the processing of applications, but also that too few of the prospecting rights that have been approved are being converted into actual exploration activities. This is partly because once exploration companies, especially juniors, are given prospecting rights, they struggle to gain access to funding.
“SA’s financing institution believe exploration posed too high a risk. [We need solutions] to where and how to mobilise resources to support exploration activities,” he said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.