AMN - Modernisation will help alleviate cost pressures in South Africa - comment by Yolanda Torrisi

An Oxford Business Group report has identified that South African mining companies need modernisation and efficiency drives to offset input-cost pressures. 'The Report: South Africa 2016' also looks at the latest developments in the government’s plans to retain a greater share of mineral value in-country, which have hit stumbling blocks in the past.

Also included in the publication is the move among mine operators to seek out alternative energy sources against a backdrop of rising costs.

The report states that with an estimated $2.5 trillion worth of proven mineral reserves, South Africa’s mining sector remains a major player in the country’s economy, despite weak commodity prices, making a direct contribution of around 8% to GDP and providing 14% of total employment.

However, the challenging external climate continues to weigh on the industry, with the current downward cycle expected to stretch well into 2016. Internal issues, such as power disruptions and infrastructural shortfalls, have piled added pressure on operators.

Kumba Iron Ore CEO Norman Mbazima told Oxford Business Group that while South African mining companies were targeting greater efficiency across the board in operations, manpower, equipment productivity and supplier rates, improvements in transport infrastructure would support their efforts.

“Currently, all iron ore goes through the Saldanha port facility, which is owned by Transnet,” he said. “We would like to see a coordinated capacity expansion of the railway and the port itself going forward.”

Norman Mbazima was upbeat about technological developments and talks with stakeholders on how best to take the mining industry forward. “However, emerging companies will need assistance if they are to fill any voids left by multinational companies,” he said.

“Mining is very capital-intensive. The industry is in need of assistance, and the entire mining chain should be closely examined to implement a new beneficiation strategy.”

The government is keen to develop key mining value chains in iron ore and steel, platinum-group metals, polymers, titanium and mining inputs. However, its efforts to step up beneficiation have come up against hurdles in the past and proved controversial. In its report, Oxford Business Group considers the options available to South Africa’s leaders as they eye a longer-term solution.

South Africa Department of Mineral Resources director general of mineral policy Mosa Mabuza says: “In most products you probably have at least five different steps in the full value chain. Our goal is not to develop all at once, but rather one step at a time.”

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com