Despite its critical role in global decarbonisation, the SA mining industry has failed to reduce its environmental impact in line with the goals set about by the Paris Agreement, putting the sector at risk of losing out on financing and becoming less globally competitive.
Mining is second only to agriculture in terms of pollution, accounting for 28% of global greenhouse gas emissions when downstream emissions are included.
In the pursuit of a low-carbon transition, SA is at a disadvantage to some global peers given the disproportionate energy requirements of mining platinum group metals (PGM), of which SA is the world’s leading supplier.
On top of deteriorating infrastructure and an unstable electricity supply, the country’s ageing gold mines also require deeper shafts which are constructed further from work sites, demanding more energy for the extraction process.
Consulting firm dss+, a knowledge partner of the Investing in Africa Mining Indaba 2025 to be held in Cape Town next month, said the industry’s rate of decarbonisation was too slow to meet science-based targets.
The firm’s research of 52 mining companies in 2018-21 found an average annual rate of emissions reduction of about 2%. That continued rate would result in a 40% gap to the 2030 targets implied by the Paris Agreement goals of limiting global warming to below 2% of pre-industrial levels.
To achieve that the mining industry would have to increase its annual decarbonisation rate to 4.5% and be expanded to include downstream emissions, according to the group.
A 2021 article by McKinsey and Company estimates that achieving the Paris Agreement’s target by 2050 would require the mining industry to reduce direct carbon dioxide emissions to zero.
“Encouragingly, our analysis shows that solutions to decarbonise the majority of emissions will become economic within this decade, addressing both scope 1 and scope 2 emissions,” McKinsey said.
In SA, the need for private miners to meet environmental, social and governance (ESG) goals is offset by the rising demand for energy transition minerals, the mineral inputs needed to facilitate a transition to a low-carbon economy.
The growing need for these minerals calls for a ramp-up in production, which will require more energy and greenhouse gas emissions in the process.
“This creates a situation where the current rate of decarbonisation is too slow to meet targets — an issue that is increasingly seen as problematic by the investors needed to fund the exploration and expansion of mining operations,” dss+’s Gerhard Bolt said.
Absa director of resources and energy client coverage Dean Hack and Absa head of SA corporate lending Chetan Jeeva said in a recent article for Engineering News that “while the world’s green energy future depends on African minerals, Western-driven ESG requirements risk leaving the continent’s mining industry less competitive and more isolated”.
They pointed out that financing for African mining increasingly hinges on miners’ adherence to ESG practices, arguing that “today’s financiers and investors increasingly prioritise ESG-aligned projects over pure profitability”.
If SA mining cannot reduce its carbon emissions soon, it is likely to face more pressure from foreign policies such as tariffs proposed by the US and the EU’s proposed carbon border adjustment mechanism (CBAM).
Hack and Jeeva said green bonds and sustainability-linked loans allowed miners to access financing with green incentives built into their borrowing structure, but these required sophisticated monitoring systems and ESG frameworks, with an administrative burden that deterred many African miners.
This underpinned the importance of investing not just in sustainable mining projects but in the systems in which they operated, for example by financing more renewable energy infrastructure that powered mining operations.
Improving the efficiency of SA’s logistics networks would also help to reduce the environmental burden of the country’s mineral exports, they said.
In November, the National Treasury released its long-awaited discussion paper on phase 2 of SA’s carbon tax design, proposing the adjustments that will be implemented in 2026-35.
The document advocates for a gradual reduction in the basic tax-free allowances afforded to SA businesses, which would see their effective carbon tax rates increasing in turn.
The Treasury also proposed that the removal of the carbon budget allowance, which provides incentives for companies to report their carbon budgets, take place from 2026 rather than the previous target of 2025 — meaning companies will continue to benefit from this allowance next year.
“Currently, you get that allowance if you submit a carbon budget to the government, but they are going to effectively replace it with a carbon budget penalty,” said EY’s Duane Newman.
While the proposal provides SA businesses with clarity on the effective carbon tax rates they may face, there are concerns that the proposed adjustments would put undue strain on the local economy.
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