BERNARD SWANEPOEL AND PRASHAEN REDDY: Localisation is the way forward for mining

After decades in the mining sector, from underground shifts to boardroom battles, one thing is clear: if we want mining to drive SA’s future we have to change the way we think about economic value.

We can’t keep talking about localisation as if it’s some bureaucratic obligation; a line item on a mining charter scorecard. It’s time we recognise it for what it really is: a hard-nosed business strategy and one of the most practical levers we have to navigate the just energy transition.

There are lessons to learn from elsewhere. A Middle Eastern national oil company achieved an 85% increase in its localised supply base. Earlier iterations of the programme experienced difficulties similar to those still experienced by the SA mining industry. The breakthrough came when the company shifted focus from a regulatory tick-box approach to a more strategic value-driven approach. 

Mining remains the backbone of the economy, accounting for more than 6% of GDP and half a million direct jobs. But the system is under strain. Costs are rising. Logistics are buckling. Global markets are unpredictable. And now we’re being asked (correctly) to transition to a low-carbon economy, with all the pressure that brings.

Here’s the truth: if we don’t localise smarter, we won’t transition fairly. And if we don’t transition fairly we’re headed for serious trouble, not just in Mpumalanga but in mining towns and rural communities countrywide.

Moving on from coal

Coal has powered SA literally and economically for decades, but the writing is on the wall. The global shift towards cleaner energy is accelerating.

A just energy transition requires us to build something new in places where coal once dominated. That means jobs, businesses and infrastructure. Localisation is how we do it. We can’t import our way to economic justice. We have to build the capacity locally with local suppliers, manufacturers and service providers. That’s how we cushion the social impact, but also how we lay the groundwork for new industries.

We’ve hollowed out much of our local supply base in past years. In the name of efficiency or short-term savings, many mining houses defaulted to importing everything from haul truck spares to consulting services. But when global supply chains broke down we learnt the cost of that the hard way.

We’ve also seen how reliant communities are on mines for everything from employment to local development. When the mine slows down the town grinds to a halt. That’s a dangerous and unsustainable model.

The smarter approach is to develop strong, localised supply chains that not only feed the mine but stand on their own. That means taking real procurement spend and channelling it into capable SA suppliers, especially in mining-adjacent towns. If we do that well we create something that lasts beyond the mine itself.

Business must lead

The Mining Charter already sets local procurement targets at 70% of goods and 80% of services. The department of mineral resources & energy isn’t shy about pushing this agenda, but we all know compliance targets don’t build industries. That takes real investment and long-term planning.

The government should help by creating incentives, fixing logistics and easing the path for SMEs, but business must lead with procurement orders, partnerships and people on the ground helping build supplier capacity.

This is just good business. Local suppliers shorten lead times and reduce currency risk. They’re often more responsive, and when they succeed the mine’s social licence to operate gets a huge boost.

Here’s how we make localisation real:

• Find the business value. Localise because it improves reliability, cuts logistics headaches and makes long-term sense. That’s the story we need to be telling in boardrooms.
• Align demand. One mine alone can’t build a gearbox plant, but 10 might. Mining houses need to co-ordinate demand in key categories (chemicals, spares, electrical) and work together to create viable supplier markets.
• Back local suppliers. Give them contracts, mentorship and time to scale. If the skills or equipment are missing, invest in them as we would with any other strategic supplier.
• Start small, scale fast. Choose one or two categories and pilot a new approach. Prove it works, then go bigger. We need momentum.

Transition means evolving. The same companies and communities that powered the previous century can also build the next if we give them the tools they need.

The towns of Emalahleni and Lephalale already have the infrastructure, the work ethic and the local knowledge. What they need now is investment in factories, skills and supplier networks. With that they can shift from coal extraction to manufacturing, services and logistics and become case studies in how to transition right.

Regional hubs 

Mining companies, government and financiers should come together to build regional industrial hubs, starting with provinces most exposed to the transition. These hubs could house shared facilities, skills academies and supplier incubators, all anchored by real procurement demand from nearby mines. This is how we derisk localisation — with infrastructure and scale.

We’re not short on policies, but we need leadership. Mining has a proud legacy in SA and it must also have a future. That future can be built here, by South Africans, in mining towns old and new. The sooner we stop treating localisation as red tape and start treating it as a strategy, the sooner we can build the kind of economy we keep saying we want.

• Swanepoel, a former CEO of Harmony Gold, chairs the Coal & Energy Transition Day. Reddy is a partner at global management consultancy Kearney.