AMN - Paving the way forward in South Africa – comment by Yolanda Torrisi

The question of how to encourage South Africa’s mining industry to reach its full potential was top of mind last week at the Investing in African Mining Indaba conference. Although resource nationalism remains a concern, participants were able to build on the new sense of hope that was a feature of last year’s conference and outline thoughts on the way forward.

Picking up on SA President Cyril Ramaphosa’s ideas for how mining can be a win-win for communities and companies, the Minerals Council South Africa welcomed the government’s commitment to ensuring the nation’s mining industry reaches its potential.

The government signed its fourth Mining Leadership Compact just before Indaba, signalling its firm commitment to good governance and co-operation with the industry.

Minerals Council chief executive officer Roger Baxter backed the push towards collaboration, saying: “We need to get investment back in mining. A collaborative approach is needed to develop and implement solutions that will see our industry grow and thrive in the future for the benefit of all.

Baxter said the mining industry was willing to play its part while corporate leaders at Indaba explained how.

Access to infrastructure is a constraint that has limited mining and development projects, and supporting the Eskom public power utility company is one way forward. Another was to improve access to ports, rail and other vital transportation infrastructure. Or install alternative energy supplies, like Gold Fields plans to do at Granny Smith gold mine.

The mining team at Standard Bank highlighted access to cheap, reliable power was likely to remain a key success factor for mining companies this year as investment in captive power generation capacity grew.

South Africa’s mining industry contributed 6.8% to the country’s gross domestic product (GDP) in 2017, compared with 7% in 2016. In real terms, the industry was estimated to have expanded by 3.7% in 2017, contributing R312 billion to GDP, partly due to an increase in production.

Standard Bank Group head of mining & metals Mark Buncombe has noted a recovery over the past 18 months. “Efficiency improvements and portfolio and asset optimisation are expected to continue into 2019 as companies remain committed to moving down the cost curve in response to the 2013 to 2015 downturn.”

Looking forward to 2019 and beyond, Standard Bank expects the nation’s Mining Charter will accelerate activity in South Africa and lead to an influx of capital.

Buncombe tipped more merger and acquisition activity this year as a follow-on from the Barrick-Randgold merger late last year.

The bank believes a global increase in demand for coal, chrome and manganese and the cash balances of miners will make corporate investors more willing to consider the public-private partnerships South Africa will need to advance its projects and install necessary infrastructure.

The bank also expects to see new investment in South Africa’s bulk export infrastructure with solar power to replace diesel at key mine sites.

Change is afoot in South Africa and the wider economies of Africa and companies would do well to consider how these reforms can benefit their plans and projects going forward.

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