“I’m done with being insulted by power-hungry officials in the [department of mineral resources],” was the terse response I got from a SA mining entrepreneur who has found it easier operating in Eritrea, a region in North Africa notable for being pulled into the Tigray war in neighbouring Ethiopia.
“You have to want to fix what’s wrong,” he followed up, “and in Eritrea you deal with qualified bureaucrats who understand what mining is about and actually want the industry to grow and succeed, not someone with a diploma in teaching.”
It’s an attitude hardened over years of at first gradual but now, as the character Mike Campbell would say in Ernest Hemingway’s The Sun Also Rises, sudden decline.
It didn’t have to be this way. The world’s suits in hard hats descend on Cape Town for another Mining Indaba in the midst of ever more bullish forecasts for key minerals SA has in abundance of good fortune. But Australia is the lucky country. We are accursed by a benighted government, wholly incapable of digging our way out of a developmental state cul de sac.
President Cyril Ramaphosa is attending Indaba this year with a confabulation of cabinet ministers meant to show he means business. Sadly, mining people are more action than words types, so Ramaphosa will be judged on what he said in 2022 and where we find ourselves now.
Worst ranking yet
In his keynote in 2022 the president expressed his “grave concern that SA has fallen into the bottom 10 of the Fraser Institute’s Investment Attractiveness Index rankings.” We are at 75th of 84, our worst ranking yet, and the edition due out in April holds little prospect for improvement given what outgoing Minerals Council SA CEO Roger Baxter identified in an interview with Mining Review recently as four challenges hindering the growth of the country’s mining industry.
The first challenge is obviously electricity. To tackle this issue the Minerals Council, with the help of the private sector, is working towards bringing stability to the grid by investing in generation and transmission. This will be one of the biggest reforms in SA in the past two decades.
The mining sector has over 10GW of energy projects worth R160bn, set to be implemented in the next four to five years, with 100MW coming online in 2022 and a further 1,300MW this year. Incredible what the private sector can achieve if unleashed to get on with it.
The second challenge is logistics. Sadly, the score here wouldn’t even secure our infamous 30% pass. Coal out of Richards Bay is back to 1993 levels. Baxter believes the model used in Australia, where private mining companies and concessionaires run the rail networks, could be adopted in SA for better success.
Despite the president eagerly pointing to the publication of the White Paper on National Rail Policy outlining our plans to “revitalise rail infrastructure and to enable third-party access to the freight rail network”, the deployees at Transnet Freight Rail have mostly railed against the private sector’s involvement with a half-baked third-party auction, sale and leaseback scheme and hostile histrionics that would make the acting CEO of SA Tourism nod in approval.
Transnet
Paul Miller of AmaranthCX made the point last on a BDTV panel with Minerals Council chief economist Henk Langenhoven and chief inspector of mines David Msiza that Transnet is funded by South Africans through their savings, many of them in the public sector through the Government Employees Pension Fund, which is one of the largest bondholders in Transnet.
“Is Transnet not technically insolvent?” Miller asked rhetorically. “And should any asset manager be putting their savers’ money into Transnet while it’s managed as it is, where its income is not covering the interest it has to pay on its loans? Why must we wait for Transnet to practically collapse before private sector players are allowed on to the rail network?”
The third challenge is the criminal mafia that affects procurement in the mining sector. The Minerals Council says it is working with the government to find a solution.
Cadastre fiasco
The fourth challenge is red tape. SA lacks a functional minerals cadastral system and all the experts I speak to agree that the government’s approach to create a new system is unnecessary and time-consuming. Instead, existing off-the-shelf systems could be used. Until this issue is resolved venture-funded capital exploration companies will not consider SA as a destination.
The Minerals Council has assisted its members in obtaining water use licences, but still 2,650 mining licence authorisations are pending, though this number decreased from 5,000 18 months ago.
Langenhoven stresses that progress on the cadastre fiasco is probably the single most important short-term announcement the government could make. “Mining is a whole pipeline of processes, and we have to refill the beginning of the pipeline and that is all hinged on the cadastre system and the management and the quicker processing of exploration licences, of managing the mining licences better for all. Government will benefit as well because of the tax income.”
The recent health and safety milestone of the first fatality-free January demonstrates what can be achieved when we all want to fix what’s wrong. My mining albatross has flown north because the will to fix it is still not evident.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at badger@businesslive.co.za
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