What does the future hold for SA’s mining industry?

INDUSTRY INSIGHT

What does the future hold for SA’S MINING INDUSTRY?

Roger Baxter, CEO of Minerals Council South Africa, was among the keynote speakers at the 2022 Joburg Indaba, which took place in October. His address focused on the future of South Africa’s mining industry and what was needed to unlock its full potential. South Africa’s mining industry has often been associated with the sunrise By Dineo Phoshoko

Before beginning his address, Baxter shared his experience after returning from an overseas trip to Australia and compared his airport encounter in Australia to his arrival back home in South Africa.

He explained that in Australia, the check-in process at the airport was mostly automated and had an automated passport queue that, according to Baxter, was efficient. “[I] got back to O.R. Tambo. There was a queue right outside the area where the passport office [was]. It took me half an hour just to get through the passport queue. When you come into that venue and you look at the lighting, half the lights don’t work, none of the escalators were working.” He added that the passport officials lacked excitement in welcoming foreign travellers to South Africa.

Sunrise vs sunset industry

In his address, Baxter mentioned that he’s often confronted with the question of whether South Africa’s mining industry is a sunset or a sunrise one. In his response, Baxter explained that he looks at South Africa and sees the country on the same competitive level as the likes of Australia, which also has a dominant mining sector. “We have an incredible capability. We just seem to spend a lot of our time disabling that capacity as a country.” He emphasised the significance of the mining sector in South Africa. He explained that despite the many challenges faced by the country, there were many opportunities for the mining sector to excel. According to Baxter, the opportunities lay in the country’s mineral resource endowment, as well as the material pipeline of skills from world-class educational facilities, to name a few. Regarding a pipeline of skills, Baxter explained that Australia’s Queensland state no longer offered mining and engineering degrees at any of its universities. “We’ve got a surplus of mining engineers coming out of our universities that we can’t employ because we are not growing our sector fast enough. We should be doing something about

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that. In some areas, we’ve got fantastic infrastructure; we’re just not meeting the service levels on that infrastructure that we need.”

Limitations holding the sector back

Baxter’s keynote address was indicative of the fact that South Africa’s mining sector did not reach its full potential because of various constraints. He highlighted a few, which included crime and security, red tape, policy, logistics and energy.

Transnet Freight Rail (TFR) and Transnet Port Terminals (TPT) have faced many challenges that have had severe consequences on the mining industry. As a result, iron ore, coal, chrome and manganese rail deliveries are below target. Baxter also pointed out that there was a decline in rail deliveries – due to crime and cable theft (including 1 500 km of copper cables in five years), onerous government procurement rules, vandalism, idled locomotives bought in a corrupt transaction, poor maintenance, and falling productivity at rail depots and ports.

“I’ve got to admit, I think the Transnet leadership team have enabled a lot of discussions to take place,” said Baxter, adding that the Minerals Council was working closely with the state-owned rail, port and pipeline company to try to find ways to make progress. “We need to start looking at what models work around the world, and we need to adopt them in South Africa. [Among] the models that really work around the world [are] proper private-public partnerships. We’re in the business of exporting bulk commodities to the world. Rail and ports are a critical component of our business models.”

According to Baxter, one of the solutions to resolve the rail and port constraints involves private sector involvement and partnerships on essential railway corridors and ports to achieve targets and then focus on growth. He also mentioned that all parties agreed that a holistic solution is needed to resolve the challenges at Transnet. This included an urgent need for real partnerships – between bulk mining companies, rolling stock providers, Transnet (TFR and TPT), and government – which are focused on jointly agreed-on solutions that benefit all parties and the country.

Resolving the challenges would lead to improved rail and port services, which would in turn unlock multiple opportunities for the mining industry. According to 2021 figures, the rail and ports sector employed 459 000 people. Baxter mentioned that this number could increase to approximately 500 000 direct jobs from expanding bulk mineral exports. He added that the expansion of iron ore, coal, chrome, ferrochrome and manganese export capacity could result in R151 billion of extra exports. An increase in exports also leads to an increase in taxes to approximately R27 billion.

Energy crisis

The year 2022 was a record-breaking one in terms of load-shedding in South Africa. September 2022 saw the return of Stage 6 load-shedding (which first took place in 2019). Another unpopular milestone was when South Africa endured the longest period of load-shedding since it first started in 2008. Again, Baxter spoke positively of engagements between the Minerals Council and Eskom. “On the Eskom side, if I look at the energy-related issues, we’ve had significant engagement with the Eskom team, and I must say we’ve had some tremendous progress made.”

In finding solutions, Baxter mentioned that improving performance was critical for South Africa to compete on an international playing field. “The solution to South Africa’s energy crisis is not Eskom. Eskom is part of the solution. The solution to South Africa’s energy crisis is private sector investment.”

Baxter added that there were many global opportunities presented by the Just Energy Transition. “There’s a view that 90 000 coal mine workers are going to suddenly be without jobs. The coal mining industry is going to play a significant role in South Africa’s energy evolution over the next 30 years. I don’t think anybody should kid themselves; coal will become a smaller component of the energy mix over time, but it will remain a significant export base and an employer of people in the industry.”

Baxter concluded by highlighting that a lot of work was being done with government to address various issues, including security, getting a world-class cadastral system in place and a better exploration plan to improve the country’s mining industry.

Resolving constraints in the rail sector could unlock many opportunities for South Africa’s mining industry