South Africa’s mining sector and the cost of crime

South Africa’s mining sector and the cost of crime

With illegal mining now costing the South African economy around R21 billion a year, according to the Institute of Security Studies (ISS), mine owners are under mounting pressure to tighten up security.

Add to this increasing violence between competing, heavily armed syndicates and it’s a ticking time bomb for undersecured mines, warns the ISS in an article titled “SA must dig deeper for a solution to illegal mining” .

The stakes are high: according to the Minerals Council of South Africa, the mining sector contributed R351 billion to the country’s domestic product in 2018. Further, it’s a major employer in a country where joblessness is desperately high, providing work for more than 453 500 people last year.

Digging down Illegal mining is a lucrative enterprise, say ISS researcher Richard Chelin and programme administrator Naomi Tite, with tentacles that often extend to human smuggling and trafficking, illegal weapons and explosives, tax evasion, money laundering, corruption and gangrelated activities.

Compounding the problem is South Africa’s legislation (specifically the Mineral and Petroleum Resources Development Act) which aims to regulate artisanal mining, but has little effect on illegal mining.

Illegal mining is not clearly defined in legislation, they say, adding that the police’s Directorate for Priority Crime Investigation has identified gaps in the law relating to the transportation and/or possession of precious metals and diamonds in transit areas. In effect, it means that illegal miners can only be charged with trespassing, and fined as little as R50. Since illegal mining is so often linked to organised crime, the syndicates need to be targeted by the police – but the challenge, of course, is finding the leaders. The only way this is going to happen is through inter-agency collaboration between law enforcement, the mining industry, and the Department of Mineral Resources and Immigration, maintain Chelin and Tite.

Reasons and challenges The Minerals Council of South Africa says illegal mining is on the rise, gaining momentum on the back of a troubled socio-economic environment characterised by unemployment, poverty and the entry of large numbers of illegal immigrants into the country.

Illegal mining takes place on the surface as well as underground, and at operational as well as disused mines, which presents a host of concomitant challenges for security providers. Illegal miners not only put their own lives at risk by working in abandoned shafts and travelling up to 4km underground where they live for days, the Council says, but they pose a risk to others too.

Known colloquially as “zama zamas” in South Africa, the Council estimates that there are as many as 14 000 illegal miners currently operating around the country. They are often armed and known to set booby traps and ambushes for security and rival criminals. “Law enforcement agencies have limited resources to stem illegal mining. Illegal miners openly flout personal health and safety to open cement-plugged shafts with explosives on abandoned mines or live underground for extended periods of time, without necessary protective gear, once they have gained access to operating mines.”

“They then pose severe risks to legitimate mine employees, safety protocols, shaft infrastructure and stability, equipment, and ultimately the business,” continues the Council. “Primarily as a result of their illegal mining activities feeding into the illicit trade of precious metals and diamonds, coupled with the lucrative high financial returns, compared to routine lawful employment, these zama zamas continue risking their lives, and the lives of others, even though the real economic value of their efforts is not realised. This has created a lucrative secondary informal syndicate market supplying other commodities, which include food, liquor, prostitutes and mail, among others. Because they serve organised crime bosses, the miners taking these risks do not often realise the real value of their efforts as the crime bosses take the bulk of the profits.”

Five tiers According to the Minerals Council, South Africa’s illegal mining market is a wellmanaged, five-tier syndicate system.

The first tier consists of the underground workers, many of which are illegal immigrants, who do the physical mining. Many have worked in mines previously, and many use chemical substances to primitively refine the product.

The second tier refers to the buyers on the surface around the mines who also organise the first-tier illegal miners, and support them with food, protection and equipment.

In the third tier are the regional bulk buyers, who in most cases have permits issued in terms of the Precious Metals Act 37 of 2005 to trade in precious metals.

The fourth tier includes the national and sometimes international distributors who hide behind front companies or legitimate exporters.

In the fifth tier are the international receivers and distributors who usually work through international refineries and intermediary companies.

The Minerals Council believes that the only way to deal with the problem is by focusing on the supply and demand side of illegal mining. “All five levels of the syndicates need to be addressed,” it maintains. “While local police and mine security deal with the first two tiers, the Minerals Council, assisted by the Standing Committee on Security (SCOS), the South African Police Service (SAPS), the National Co-ordinating Strategic Management Team (NCSMT) and the Department of Mineral Resources, is working to identify and deal with the next three levels that constitute the buyer market nationally and internationally. This work is undertaken hand-in-hand with international agencies such as the United Nations Interregional Crime and Justice Research Institute (UNICRI), European police, Interpol and international embassies.”

“Collaboration is key,” maintains the Minerals Council, which says it has seen a new trend in illegal mining encroaching on the diamond fields of Kimberley as well as chrome mining in Limpopo in the last year as well as evidence of illegal mining in the coal industry.

Industry trends In its 11th annual report on issues transforming the future of mining, Deloitte Touche Tohmatsu Limited refers to a value conundrum that’s emerging on the back of a changing mining environment. It’s a challenge that’s going to require mines to “re-envision their corporate strategy, strengthen their risk management, and … push the boundaries on their digital transformation… making technology a strategic priority”, says the organisation.

Predicting that technology and artificial intelligence (AI) will play key roles in identifying risks at enterprise level and transforming the supply chain, report author Philip Hopwood, Global Leader – Mining and Metals Deloitte Touche Tohmatsu Limited, says further that advances in finance platforms, sensor technology, autonomous vehicles, cloudbased solutions and analytics are paving the way for the design of a digital mine.

A double-edged sword Cybersecurity specialist GECI International is also anticipating increasing take-up of technology in the mining sector. In an article titled “Mining automation, IIoT, raise cyber risk” (LINK), it says South African mining operations are set to embrace next-generation automation and Industrial Internet of Things (IIoT) systems to cut costs and increase production.

“However, it warns, failure to implement tight security controls against cyberattacks will make them vulnerable to “crippling shutdowns and threats to human safety”.

Mike Bergen, the South African representative for GECI, says: “Mines are starting to adopt IIoT and intelligent automation across the entire pit-to-port chain, from autonomous vehicles to robotic drilling, and all of these new technologies

are connected. Unless this new smart mine environment is built on a foundation of industry-specific cybersecurity, mines risk financial losses, threats to human health and safety and even complete shutdown. With margins as tight as they are, no mine can afford this risk.”

“Cybercrime is a sophisticated and lucrative business, but mines have tended to lag in terms of cybersecurity,” he continues, citing EY Global Mining and Metals Cybersecurity Leader Michael Rundus as saying 54 per cent of mining companies had experienced a significant cyber incident in the past 12 months.

“Cyber risk has become such a major threat to the sector that EY lists cyber risk among the top five business risks facing the mining and metals industry. And attacks on industrial facilities are taking place all the time, costing industries billions,” Mr Bergen says.

The attack on Swiss/Belgian mining and metals processor Nyrstar early this year, is a case in point. Mr Bergen says it shut down parts of its IT systems across its operations, with undisclosed losses.

“This is typical of many such attacks, the losses not being disclosed or purposefully trivialised as “insignificant” by the embarrassed victims,” he says, adding: “As mining operations embrace digitisation and IIoT to optimise their processes, they are increasingly opening themselves up to the risk of attack by cyber criminals, activists, and even possibly competitors or national enemies.

“So, automation is a double-edged sword, and mines need to make cybersecurity a top priority.”

Illegal gold mining in Nigeria. Source: Wikipedia commons