SA’s economic lifeboat may be tucked away in the Kalahari Desert. The US Geological Survey estimates that the country is home to 70% of global manganese reserves, much of which is under this area.
It also flags manganese as one of the only critical minerals — out of a list of 50 — without a satisfactory substitute. This may make the Kalahari the most valuable desert on earth.
Without manganese there is no steel. Iron is generally viewed as the major input for steel production but manganese, which sits next door on the periodic table, is also a requisite. Manganese removes oxygen and sulphur when iron ore is converted into iron, and is a key alloy for converting iron into steel. It’s not substitutable.
The Kalahari hosts 18 of SA’s 22 manganese mines, making it home to the largest reserves globally. Given its share of global reserves, the world therefore has a strategic interest in SA’s manganese. Australia and Gabon have far smaller reserves. While the US has some deposits, they have been flagged as low grade. Manganese ore containing more than 20% of manganese has not been produced in the US since 1970. Extraction costs are high.
SA is beginning to capitalise on its manganese. In 2021 it exported $2.9bn in manganese ore, and the production increase over the past decade has been significant, jumping 167% from 7.2-million tonnes in 2010 to 19.2-million tonnes in 2021. Export sales increased 268% over the same period, from R9.3bn to R35.3bn.
With manganese on every critical minerals list and no viable alternative, there is undoubtedly going to be increasing global attention paid to SA, which can be leveraged strategically. At a time when the world is questioning the wisdom of the SA government’s foreign policy decisions, its continuous sovereign credit rating downgrades, an electricity crisis that has left many worried about total grid collapse and a painful level of currency depreciation over the past year manganese could offer economic reprieve.
President Cyril Ramaphosa has made repeated bids to bring in more foreign direct investment, but has instead seen significant outflows of capital. Using manganese to build trade relationships with countries worldwide (notice my nonalignment) can help rebuild the economy. The Kalahari Desert could, unexpectedly, come to SA’s economic rescue.
I’ve been dabbling in the mining space for a decade now, and am regularly asked what it takes to leverage the sector for growth. My answer is straightforward: first, don’t over-intervene. SA has a tendency to do this. Look no further than the proposed water licensing regulations that would impose race quotas for water licence applications, a move that will inevitably threaten food security and could force firms to reconsider any further investments.
The economic benefits of manganese mining are evident, without intervention. From 2011 to 2021 employment in the mining sector contracted by 10.5%. On the other hand, employment in the manganese sector increased 74.2% during that same period. The next largest increases in employment lagged — 17.9% in coal, 9.9% in chrome and 7.1% in diamonds. Every other major commodity — gold, platinum group metals, iron ore, industrial minerals and other minerals — experienced a decline in employment.
Employment earnings in the manganese sector increased 307% during the 11-year period. It is one of the few numbers that has outpaced inflation (I wish I was joking). Manganese could provide an important source of state revenue and foreign exchange earnings. It can also incentivise firms to invest in necessary infrastructure to extract and export the metal, including roads, rail, electricity and water. At a time when public and private investment in infrastructure has suffered, this too offers reprieve.
My second recommendation is that there needs to be transparency and integrity around the issuance of mining licences. This needs to go hand in hand with disclosure of beneficial ownership — the person who actually owns the mine rather than the shelf company or the trust company they may be hiding behind. For example, it was recently revealed that Russian oligarch Viktor Vekselberg, an investor in United Manganese of Kalahari, has made donations to the governing ANC. This information should not be coming out after the fact.
SA’s economy is crawling through a desert with its tongue hanging out. Manganese in the Kalahari could be a lifeline. It can be leveraged to create strong trade partnerships at a time when SA has alienated a number of countries, and be an important space for investment, revenue, foreign exchange and employment.
• Dr Baskaran (@gracebaskaran), a development economist, is a bye-fellow in economics at the University of Cambridge.
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