ONLINE EDITION INDUSTRY SNAPSHOT
SA MIN NG www.samining.co.za
EDITION 1 – JANUARY 2021
New Venture Mining eyes JSE listing PwC flags funding opportunities Manufacturing sector takes a hit
COMMODITIES ARE PRICES REACHING OUTLOOK UNSUSTAINABLE HIGHS?
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In the news Finance Environmental management Manufacturing Products and services
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INDUSTRY UPDATE 4
Gary Nagle to succeed Glencore’s Glasenberg First six claimants receive silicosis benefits Sedibelo Platinum Mines in 60moz expansion drive
10 JUNIORS STRUGGLE TO MAKE ENDS MEET
New Venture Mining Investment Holdings hopes to list on JSE in the next two to three years, says CEO Godfrey Mocwane.
FEATURES 6
8
COMMODITIES OUTLOOK
Are commodity prices reaching unsustainable highs? The CRU Group weighs in.
FLAGGING FUNDING OPPORTUNITIES
PwC’s Andries Rossouw highlights the funding opportunities available to miners.
14 MANUFACTURING SECTOR HIT HARD BY PANDEMIC
The manufacturing sector, which accounts for just under 14% of GDP, has taken a massive hit from the COVID-19 pandemic, says Manufacturing Indaba event organiser Liz Hart.
CONTENTS
FROM THE EDITOR
ONLINE EDITION INDUSTRY SNAPSHOT EDITOR Nelendhre Moodley 011 280 5782 moodleyne@samining.co.za
Light at the end of the tunnel yet?
ONLINE EDITOR Stacey Visser 011 280 3671 vissers@businessmediamags.co.za
ART DIRECTOR Shailendra Bhagwandin 011 280 5946 bhagwandinsh@arena.africa
ADVERTISING CONSULTANTS
Nelendhre Moodley
W
hile we are being rocked by the second wave of the COVID-19 pandemic and life seems rather bleak at the moment, global financial services company Morgan Stanley recently shared some good news. The company has projected strong global GDP growth of 6.4% for 2021 – led first by emerging markets and by the reopening of economies in the United States and Europe. Added to this, the World Bank’s forecast of 3.3% growth for South Africa in 2021 is a much-needed boost to our flagging spirits. However, growth for the sub-Saharan region is predicted to be more subdued at 2.7%. Coupled with this good news is the strong demand for most metals, which
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adds some sunshine to the dour mood. To give insight into how commodities are performing, Industry Snapshot chatted to the CRU Group, which flagged soaring commodity prices and questioned whether these were reaching unsustainable highs (pg 6). But it is not all sunshine and rainbows for junior miners, who seem to be caught between a rock and a hard place as they struggle to make ends meet. New Venture Mining Investment Holdings highlights a few key challenges the industry is facing and gives insight into how the industry is coping (pg 10). Industry Snapshot also caught up with PwC Africa’s Andries Rossouw to find out exactly where the funding opportunities lie for those looking to access finance to grow their business (pg 8).
Noël van Breda 011 280 3456 / 082 717 1962 noelvb@samining.co.za Ilonka Moolman 011 280 3120 moolmani@samining.co.za
PRODUCTION CO-ORDINATOR
Gail Mortinson 011 280 5369 / 011 328 2226 gailm@arena.africa
SUB-EDITOR Andrea Bryce BUSINESS MANAGER Claire Morgan 011 280 5783 morganc@sahomeowner.co.za GENERAL MANAGER MAGAZINES Jocelyne Bayer
SWITCHBOARD 011 280 3000 SUBSCRIPTIONS Gail Mortinson 011 280 5369 gailm@arena.africa
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INDUSTRY UPDATE
SEDIBELO PLATINUM MINES IN TRIPLE CROWN EXPANSION DRIVE Platinum group metals producer Sedibelo Platinum Mines has announced the expansion of operations at Pilanesberg Platinum Mines (PPM) into contiguous deposits of Sedibelo Central, Magazynskraal and Kruidfontein – known as the Triple Crown properties with an estimated resource base in excess of 60 million 4PGE ounces, considered one of the world’s largest undeveloped PGM deposits. The first ounces from Triple Crown are expected to be extracted in 2023. The Triple Crown expansion will be mined simultaneously with ore from the existing openpit UG2 and Merensky operation, using two separate decline shaft systems, the company said. Sedibelo also announced the construction of a 110 000-tonne beneficiation plant at PPM, employing cost- and energy-efficient Kell Technology. Kell reduces energy consumption by some 82%.
ANGLO AMERICAN PLATINUM
COMPLETES THE ACP PHASE A REBUILD
GARY NAGLE TO SUCCEED GLENCORE’S IVAN GLASENBERG Diversified miner Glencore’s CEO Ivan Glasenberg will retire as CEO during the first half of 2021. He will be succeeded Gary Nagle who will relocate from Australia to Switzerland to work with Glasenberg to effect the transition, the company said. Nagle joined Glencore in 2000 in Switzerland as part of the coal business development team. He was heavily involved in seeding a portfolio of assets to Xstrata in 2002, in conjunction with its initial listing on the London Stock Exchange.
FIRST SIX CLAIMANTS RECEIVE SILICOSIS BENEFITS The Tshiamiso Trust has made the first benefit payments since its establishment to six claimants, the trust said. The six claimants are all individuals who are suffering from second-degree silicosis and who have already received compensation from the government’s Medical Bureau for Occupational Diseases. They therefore had available clear medical evidence required to complete a claim. Each recipient received R250 000. With this test successfully concluded, the trust is now in the process of equipping 56 claims lodgement offices around South Africa, Lesotho, Eswatini, Mozambique, Botswana and Malawi, and training the staff who will deal with claims.
60moz
Resource base of Sedibelo’s Triple Crown properties
Anglo American Platinum has successfully completed the rebuild of the Anglo Converter Plant (ACP) Phase A unit, with the first converter matte ready to dispatch to its Base Metals Refinery for the next stage of processing. The ACP Phase A is now in ramp-up and on track to be operating at full capacity by the end of 2020. As a result of the early completion and a safe and stable restart, the company has upgraded refined production guidance for 2020 to between 2.6 million and 2.7 million PGM ounces (previously c.2.5 million PGM ounces). Natascha Viljoen, CEO of Anglo American Platinum, said: “We were able to procure and deliver long lead-time items to site six months ahead of schedule, despite the impact of COVID-19 on supply chains, enabling us to bring forward the rebuild to the end of 2020, ahead of our initial expectations of Q2 2021.”
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SA MINING INDUSTRY SNAPSHOT
JANUARY 2021
AP VENTURES WELCOMES IMPLATS AS A NEW INVESTOR Platinum producer Impala Platinum has become a limited partner and advisory board member in AP Ventures’ Fund II. AP Ventures’ investment strategy is focused on companies developing technologies that are capable of sustainably solving global challenges such as renewable energy integration and resource scarcity. A key area of focus is the decarbonisation of transport, mining and heavy industry. AP Ventures is the only fund of its kind offering investors access to the innovative, fastgrowing companies built on the properties of platinum group metals, the company said. Implats is the seventh limited partner in AP Ventures.
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COMMODITIES OUTLOOK – COVER STORY
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ARE COMMODITY PRICES REACHING UNSUSTAINABLE HIGHS? By Zanna Aleksahhina and Will Young – multi-commodity analysts at CRU Group
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ommodities have come through COVID-19 with remarkable strength with many prices ending the year well above year-start levels. In every market there are winners and losers. CRU looks to 2021 with optimism that market fundamentals will support prices, but which commodities are supported, and which are trading at unsustainable highs?
Prices for many commodities have soared above the 90th percentile cost. – ALEKSAHHINA
Two key end use sectors for commodities are construction and automotive. Automotive production was one of the hardest hit manufacturing sectors during the pandemic, when it was on already on a weak footing. Complex supply chains suffered severe disruptions, social distancing closed showrooms in many countries and uncertainty about the future reduced demand. Lockdowns have been less disruptive for the construction sector activities. Moreover, COVID-19 has had a disproportionately smaller impact on the income of potential home buyers, who have kept their jobs and benefited from government stimulus. COVID-19 has hurt commercial real estate, particularly office and retail space, where pre-COVID-19 trends towards working from home and online shopping have accelerated.
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SA MINING INDUSTRY SNAPSHOT
JANUARY 2021
Steelmaking – rekindled prospects The steel industry was not in a good place going into 2020 and saw a margin-tightening divergence as steel prices collapsed and the costs of raw materials rose. The impact on supply was global and came quickly as mills instituted capacity curtailments and lower operation rates.
© ISTOCK – allanswart
While commodity demand has largely recovered in China, the rest of the world is still on the recovery path and lockdowns are still threatening supply chains across the globe. The latter months of 2020 brought encouraging news on vaccine development. Multiple candidates appeared showing 70-95% efficacy rates in Phase III clinical trials. The UK became the first Western country to authorise the Pfizer/BioNTech COVID-19 vaccine in early December. CRU expects most of the population in advanced economies to be vaccinated through 2021; however, it will take longer in emerging economies.
Prices must come down – or costs must rise sharply Commodity prices are quick to fall in down markets but can also be quick to rise. Many price benchmarks ended 2020 well above year-start levels. Prices for many commodities have soared above the 90th percentile cost, driven by insatiable demand from China, investor speculation and extraordinary liquidity injections to support the global economy through COVID-19.
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High stocks and supply growth will constrain manganese price recovery.
CRU Group A business intelligence company focusing on the global mining, metals and fertilisers markets. CRU provides consultancy, market analysis, business analysis, news, data and conferences services.
K–
– YOUNG Commodity prices are on a rollercoaster ride CRU’s commodity price basket indexed to 100 on 3 January 2020
62% Fe US HRC
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Cu Ni Au Zn Al Mn
100
HCC Brent
60 20
Jan
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Nov Dec
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DATA: CRU, LME, LBMA. Week-End Prices. Updated 18 December 2020
However capacity was fast to come back online and in mid-December just 5% (130Mt annualised capacity) remained disrupted. The current uplift in steel prices in line with rising demand has created opportunity for cash generation. Steelmaking raw materials – Divergence in the cost base Iron ore prices surged in December, breaching $150/dmt, driven by Vale’s call for lower and supply disruptions in the Pilbara. This, in combination with robust demand and low inventories in China, will keep prices sustained at high levels in the short term. The price of metallurgical coal in contrast has been falling as China restricts imports. CRU believes seaborne coal prices have reached the “floor” as prices are close to the industry variable costs. As a result, many coal producers are struggling to break even, which is leading
to supply cuts from high-cost producers. Going forward, CRU believes that Chinese coal import restrictions will ease in 2021 Q1, which will trigger a gradual recovery in coking coal prices. High stocks and supply growth will constrain manganese price recovery. As a result, CRU expects that the market surplus will grow in 2021. So far, the tensions between China and Australia seem to have had little impact on manganese trade. Chinese stainless production and ferrochrome consumption is back to pre-pandemic levels. Base metals – Enhanced margins on FX and oil price volatility Production of base metals is highly profitable at current price and cost levels, particularly for those exposed to high by-product credits such as gold and PGMs. Producers benefited from lower costs in US dollar terms as exchange rates depreciated. Rising operating costs in 2021 driven by a weakening US dollar is not enough to impair margins for miners. However, a higher oil price and weak US dollar could www.samining.co.za
bring high-cost copper miners up against the ropes in 2021. Precious metals – Financial Stability from Covid-19 Free cashflow generation in the precious metals mining sector is strong, but in contrast to previous cycles miners are maintaining capital discipline and strong balance sheets. Acting as the safe haven of the financial investment community, gold received impetus to break the US$2 000/oz barrier in 2020. Supported by a weakened macroeconomic environment, gold’s prospects remained robust into 2021. Where next for commodity markets? As the world looks optimistically for a fast vaccine roll-out, CRU is looking at the bigger picture. In 2020, COVID-19 tested our macro themes of FX, China rebalancing and ESG. As CRU looks to 2021, the next topics for the discussion will include: global trade policy, carbon emissions and China’s FiveYear Plan. n
SA MINING INDUSTRY SNAPSHOT
JANUARY 2021
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FINANCE
FUNDING OPTIONS © ISTOCK – Dave Primov
WHERE ARE THE OPPORTUNITIES?
By Nelendhre Moodley
A
ccess to project finance remains a key challenge for most miners. Industry Snapshot recently caught up with PwC Africa Energy Utilities and Resources leader Andries Rossouw to chat about the funding options available to miners. What will 2021 look like in terms of project finance for mining companies? On the back of higher rand commodity prices for precious metals, a number of mining companies are settling debt instead of incurring new debt. Balance sheets are certainly strong in most cases and due to the conservative gearing position will support future development needs and ability to obtain funding for new projects. Unfortunately capital expenditure in SA is still at 15-year lows in real terms and there seemingly isn’t much need for project funding. Existing projects such as De Beers’ Venetia diamond mine project are generally being funded from group resources and not on a project-specific basis. It will be interesting to see what funding will be used for projects such as Orion Minerals’ new Prieska project that recently completed a bankable feasibility study.
their mandates for returns in a shorter time frame. However, good performance by the mining industry since the lows of 2016 might entice interest. In 2020 Royal Bafokeng Platinum entered into a $145-million streaming transaction on gold, a by-product to its primary PGM production. Streamers that have traditionally operated in the precious metals space have performed very well on the back of high precious metals prices. They could potentially play a key role in the South African context where higher prices could incentivise future project development. As the world is facing an even faster energy transition and developed economies have identified this transition as an oppor-
SA MINING INDUSTRY SNAPSHOT
JANUARY 2021
Where are areas of opportunity/green shoots for African and South African miners? In South Africa, the under-exploration and demand for minerals to support the energy transition provides opportunities
Private equity has significant funds available for investment. – ROSSOUW
Where should miners look for funding to develop/expand projects? We know that private equity has significant funds available for investment. Their ventures into mining in the past have generally been limited to supporting transactions on existing mining operations as opposed new project developments. The long-term nature of mining project developments generally doesn’t fit into
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tunity for infrastructure development to drag their economies from the COVID recessions, there might also be opportunities for funding of essential minerals from these available funds to support the transition. The opportunity to create a tax flowthrough scheme for SA mining companies can support additional equity investment into the sector. With various industry players supporting the initiative, we believe it could bring a significant positive economic.
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$145-million Value of a streaming transaction that Royal Bafokeng Platinum entered into
for mining growth in the Northern Cape and further potential in the Bushveld Complex. Recent years of high exploration in the Democratic Republic of the Congo have now come to fruition with the development and ramp-up of a number of mines. Declining copper grades in the rest of the world provide further impetus to development in the copper belt. Resolving energy needs and improving mine-to-market infrastructure could support significant growth in this area. The high gold price has again highlighted the lack of new large-scale gold
projects. West Africa stands to gain from development in this area. As countries have realised their dependence on mine production during the COVID pandemic we hope that investor-friendly regulations will support future growth. “New” mining territories such as Nigeria that realise the need to diversify from their oil-dependent economy could provide interesting mining opportunities for the future. How important is mining to economic recovery? Mining is likely to be the backbone of the
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EMERGING MINERS
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HARD PLACE
Juniors struggle to make ends meet By Nelendhre Moodley
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unior miner New Venture Mining Investment Holdings hopes to be listed on the JSE in the next two to three years as a multicommodity exploration, mine development and operations, and metals company, says CEO Godfrey Mocwane. The chrome and granite-focused miner currently operates a small chrome mine outside Zeerust, has a prospecting right for chrome also outside Zeerust, operates a granite quarry and recently received a mining right for another granite mine. Both granite mine projects are located in Brits in North West. “We target projects where we are able
to process the minerals down the value chain so that we do not export jobs but rather generate income in-country to boost South Africa’s GDP.” Given that New Venture Mining Investment Holdings is a well-established entity, having been founded in 2002, Industry Snapshot took the opportunity to chat to Mocwane about the challenges that junior miners face. Way too many challenges Junior and emerging miners play a crucial role in developing a strong pipeline of projects to ensure a healthy state of the mining industry; but the sector continues
Government funding institutions should be equipped to establish fit-for-purpose funding vehicles for juniors.
Granite quarry in Brits NW Province.
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– MOCWANE
SA MINING INDUSTRY SNAPSHOT
JANUARY 2021
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to face an uphill battle when it comes to meeting regulatory compliance and avenues to access funding. The challenges, according to Mocwane, are associated with the implementation of the Social and Labour Plan, excessively high costs of applying for prospecting rights, mining permits and mining rights and the inexplicable delays in the issuing of these rights and permits and compliance with the Mining Charter 2018. “In terms of procurement requirements, we find that the targets (legal requirements in terms of the Mining Charter 2018) for procurement spend on mining goods is 70%, while that for services is 80% on total mining services spend. “This 70% and 80% target must be procured from historically disadvantaged persons (HDPs) or companies owned by HDS. This is an extremely steep ask on junior miners, in terms of securing these mining goods and services, monitoring the process and ultimately reporting on it, in terms of the charter. “The requisite for free-carry shares to communities is also a challenge as most of the lower-level junior and emerging miners are entrepreneurs. They themselves are always in need of funding from investors (in the form of equity and a bit of debt). The entrepreneur needs minimum 51% of equity to manage the company fully, while investors need 40% to 70% of the project, as the risk is too high,” he explains. In addition, accessing project funding is extremely difficult given that the majority of commercial banks in SA are highly
Chrome processing plant outside Zeerust.
The DMRE SAMRAD application system allows applicants to see which minerals have been applied for beforehand, which saves on money, time and effort. – MOCWANE
risk-averse and unwilling to fund mining prospecting projects and junior and small-scale mining projects. “Government institutions like the IDC, DBSA, NEF, SEFA and PIC only look to fund junior miners that already have a Competent Person’s Report and/or Bankable Feasibility Study (BFS) documents in place and/or are listed entities. The majority of the junior and emerging miners with assets amounting to less than R50-million and/or annual income of less than R50m do not have a CPR or a BFS, as it’s too expensive for them to do.” As such, junior and emerging miners are often forced to rely on private or self-funding mechanisms to progress their projects to the CPR level and rely on a combination of venture capital and equity funding to progress their project to BFS level, and/ or operational stage. “Junior miners have to depend on personal funds as well as family and friends just to get their mining operations started. Once a mining right, a mining permit or prospecting right is obtained from the DMRE, some junior miners opt to sign shareholding and/or product off-take agreements to ensure that their project is able to get off the ground. This is especially true in the case of junior miners progressing commodities such as chrome, manganese, iron ore, coal and diamonds.” The way forward Although the junior mining operating environment is difficult, recently government has been proactive in trying to assist the junior mining sector. “Initiatives in-
clude making available mineral assets to all in South Africa who want to apply and allowing prospective applicants access to the DMRE SAMRAD application system. “This allows applicants viewing access to see which areas and minerals have been applied for and by which company, before they apply, thus saving the applicant money, time and effort. Moreover access to the portal is free of charge. Most importantly though, the majority of DMRE regional offices are open for walk-ins for junior and emerging miners requiring free assistance related to the minerals application process,” Mocwane explains. He notes though that there is much more that both government and the mining industry can do to help the junior mining sector access/acquire and progress projects and importantly, encourage new entrants to join the sector. “For instance, mining majors and medium-sized mining companies should consider letting go of smaller pockets of mineable ground that they are harbouring or have placed under care and maintenance for an extended period to junior, emerging and small-scale mining companies who can mine these economically. “It would also be beneficial to this sector if the larger players legally handed over older and/or less profitable shafts/ mine workings to the DMRE or junior and emerging miners, rather than selling the assets which carry huge environmental rehabilitation liabilities at exorbitant prices to the junior miners. “Moreover, instead of handing funds from initiatives such as the social labour www.samining.co.za
CEO Godfrey Mocwane.
plan to government, mining industry heavyweights should look at using such funds to assist the junior mining sector on a soft loan basis, interim equity basis or a combination of both.” Mocwane says government should also consider providing incentives to mining majors to encourage them to help fund junior miners. This could be done through legislation such as the flow-through share model and/or vendor financing models. Financial institutions, including banks and government funding institutions, should be urged to help fund and thereby drive small-scale mining projects. This would help create needed jobs, economic growth, government taxes and thus reduce poverty and unemployment, and to a degree reduce inequality and crime. “Government funding institutions like the IDC, PIC, NEF and SEFA should be equipped with a special dispensation that includes relaxed conditions to establish fit-for-purpose funding vehicles for juniors,” says Mocwane. n
SA MINING INDUSTRY SNAPSHOT
JANUARY 2021
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COVID-19 AND THE GREEN AGENDA By Nicole Kruger and Luca Maraschin – Warburton Attorneys
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t has been approximately a year since the devastating COVID-19 pandemic began. When the virus first took hold, many predicted that the “green agenda” would be set back due to the diversion and reallocation of funds for healthcare and consequent economic recovery. However, both during the various lockdowns and the subsequent months thereafter, there have been numerous developments in the green sphere – both negative and positive. Emotive images and articles during the periods of the most draconian lockdowns suggested that there was some form of natural regeneration or decrease in anthropogenic impacts on Earth. For instance, there was a sharp drop in global carbon emissions, as well as decreased litter, better air quality and less noise pollution. This said, a number of novel negative environmental impacts have stemmed from the pandemic, and sustainable development initiatives have also been significantly impacted on by the economic downturn. The proliferation of medical waste, including PPE, and the shutdown of recycling centres are examples of such. Although these impacts may be considered to be “indirect”, the United Nations (UN) Environment Programme has found that there is a direct correlation between anthropogenic activities/ impacts and the emergence of zoonotic diseases. Thus, human stressors on the environment are causally linked to our exposure to zoonotic diseases such as COVID-19. Flowing from this, a number of international bodies such as the UN and the
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SA MINING INDUSTRY SNAPSHOT
World Health Organization have called for a “green recovery” – a sustainable recuperation that mobilises, among other things, green legislative and policy measures. A more pessimistic onlooker may have predicted that the petition for a green recovery would have remained in the abstract. However it seems that the green recovery narrative has found resonance in the international community and may in fact be adopted by some nations. Internationally there has been some indication that the green recovery has been accepted as one of the strategies
The pandemic has shown our intrinsic connection to the natural world. – MARASCHIN necessary to overcome the various consequences of the pandemic. Recent developments such as China’s commitment to be carbon-neutral by 2060, US president-elect Joe Biden’s carbon plans, and the Nordic countries expressly declaring that they will adopt the green recovery approach, are all testament to this. Initially South Africa’s response to the pandemic seemed to stall the green agenda. For instance, the directions regarding COVID-19 measures relating to national environmental management permits and licences resulted in severe delays in respect of development in the environmental sphere.
JANUARY 2021
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Despite this reprioritisation during the initial stages of the pandemic, President Cyril Ramaphosa has entrenched the green agenda into the South African Economic Reconstruction and Recovery Plan which expressly establishes the green economy as a key intervention. Notably, this plan states that: “South Africa’s economic reconstruction and recovery effort will include a significant green component.” The president also published a notice detailing strategic integrated projects (GN 812 in GG 43547), many of which have a green focus or component. For example, a small IPP power purchase procurement programme; Phase 2A of the Mokolo Crocodile River (West) Augmentation Project: Limpopo; and the Olifants River Water Resource Development Project – Phase 2: Limpopo. The latter two of these examples could have a significantly positive impact on water availability for both existing and proposed mines in the water-scarce Limpopo region. Further to this, government intends on substantially improving South Africa’s energy security through the deployment of new renewable energy projects (GN 753 in GG 43509 and GN 1015 in GG 43734). Hence the path to a green recovery has been laid by the South African government. Although it is uncertain what the longterm impacts of COVID-19 on the green agenda will be, and whether governments will implement green recovery plans, the pandemic has undoubtedly shown our intrinsic connection to the natural world – something which has to be considered and acted on going forward. ■
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MANUFACTURING
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How important is the manufacturing sector to the South African economy? Manufacturing activities promote development as they boost the value generated in an economy by creating activity further along value chains, from raw materials to finished products. South Africa’s manufacturing sector remains one of the key contributors to directly impact employment. It remains imperative for key industry players to acknowledge the direct and indirect impact that manufacturing growth has on boosting economy-wide employment. The introduction of innovative technologies and methodologies in the manufacturing realm further increase productivity levels. In addition, manufacturing creates employment opportunities, boosts the skills of the workforce, reinforces the economy, extends developments into the wider economy, and tends to support social stability. Furthermore, manufacturing can contribute to provide a level of equilibrium between creating local competition for imports along with producing goods for export. A recent GDP report published by Statistics South Africa indicated that manufacturing currently accounts for just under 14% of the nation’s GDP. This equates to R386-billion of the
How did the sector fare in 2020? Negative growth rates in the volume of manufacturing production data were released by Stats SA owing to South Africa’s national lockdown occasioned by COVID-19 which had dire consequences on manufacturing output. Data reflects a deceleration by -16.3% in June 2020 compared with June 2019 which is concerning for local companies in both the metals and engineering cluster of industries as well as the broader manufacturing sector, especially given the need for key labour-intensive sub-industries to remain resilient for job creation and sustainability. The ban on alcohol sales had a destructive impact on the food and beverage division of manufacturing, while work interruptions and a decline in demand for steel were detrimental to facilities specialising in metals and machinery. However, despite a relative slowdown on a monthon-month basis, seasonally adjusted manufacturing production increased by 16.8% in June 2020 compared with 30.4% in May 2020. Stats SA stated that all 10 manufacturing divisions reported negative growth rates, although the metals and engineering sector, comprising the basic iron and steel, non-ferrous metal products and
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total economic value. Manufacturing is the fourth largest industry in South Africa, and within the sector, the food and beverages category is the biggest player, contributing 26% to the total manufacturing value added. Petroleum and chemical products are second, at 24%, followed by basic iron and steel at 19%.
SA MINING INDUSTRY SNAPSHOT
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T
he manufacturing sector accounts for just under 14% of South Africa’s GDP. In a bid to better understand the impact of the pandemic on the sector, Industry Snapshot chatted to Liz Hart – MD of Siyenza Events, organisers of the Manufacturing Indaba.
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By Nelendhre Moodley
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MANUFACTURING HIT HARD BY SECTOR PANDEMIC
JANUARY 2021
www.samining.co.za
metal products and machinery, saw the largest negative contributions, of 36.6%. The manufacturing outlook for 2020 is dire, especially given the need for companies to remain resilient against the backdrop of a weak economy that is additionally under constraint owing to the COVID-19 pandemic. The decline in manufacturing output remains a concern and such underperformance exacerbates the various obstacles confronted by local businesses in the diverse M&E subsectors, including a disruption of supply-chain activity since the advent of COVID-19. It remains critical for policymakers to focus on demand-side measures aimed at increasing demand, and accordingly, production for local businesses. What are some of the key challenges that the sector has faced, especially those companies related to the mining sector? The key contributing factors directly impacting South Africa’s manufacturing sector, especially companies related to mining, include the following: Political instability and insecurity. State capture, corruption and mismanagement. Infrastructure constraints. Low productivity (cost of manufacturing). Lack of skills development. Negative perceptions of potential investors. COVID-19 pandemic. Volatile exchange rates. Moody’s downgrade. Unreliable electricity supply. Weak demand.
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The mining sector outperformed the JSE All Share Index and even outperformed the global mining index. – HART Record levels of unemployment, rising poverty levels and increasing political uncertainty have justifiably rendered investors cautious as they opt to seek investment opportunities abroad. In order to stimulate economic growth and job creation, government needs to offer greater commitment to support local manufacturers. Have there been any opportunities that companies in the manufacturing and mining sectors were able to take advantage of? Given the prevailing remote nature of Africa’s mine camps, the mining industry was able to implement on-site lockdowns and strict access controls in response to national lockdown laws. Furthermore, sites already enjoy a robust culture of health and safety, enabling operators to establish vigorous testing and isolation infrastructure, very often outweighing those of their respective governments. Supported by a weaker rand, mining entities (and indirectly their manufacturing counterparts) have continued to enjoy the gains in commodity prices, with the rise of platinum basket prices increases and as investors turned to gold as an investment safety net amid concerns about the pandemic and global trade tensions. These gains were achieved despite increased operating costs and lower production primarily in the second quarter owing to the national lockdown. Moreover, the mining sector again outperformed the JSE All Share Index and even outperformed the global mining index. In addition, mining stakeholders benefited from the greater returns with mining
companies reinforcing their social licence to operate in supporting their employees and direct communities, thereby laying a stable foundation for future growth. The scale and resilience of the mining industry will be given a focal place in the recovery plans of many commodity producers. South Africa’s economic recovery plan has prioritised revitalising the mining industry. The government wants to increase South Africa’s share of global exploration expenditure to 3% from 1% currently. To promote investor confidence, it is making similarly aspiring strides to simplify mining regulations and expedite approvals so that mining and environmental permits can be awarded in half the time. The mining sector proved its resilience and capitalised on opportunities during the past year. It was critical in providing support during the pandemic and will be a vital element of the strategy to rebuild South Africa, thereby being made a top priority in the eyes of the government and opening up a plethora of opportunities for the industry and the respective players thereof. What is the outlook for 2021? While it may take a great deal of time before the sector experiences meaningful growth, manufacturing output levels will progressively increase. As restrictions continue to ease and the economy commences its path to recovery postCOVID-19, demand-related challenges will subsequently dwindle and the increased demand for intermediate and final manufactured products will follow suit, invariwww.samining.co.za
ably pressing entities to increase capacity utilisation and manufacturing processes, thereby increasing sales as well as profits and margins. What are some of the future trends within the manufacturing sector owing to the pandemic? Employee safety Fundamental safety precautions such as workspace sanitisation and social distancing on the production floor will remain essential, along with scrupulous monitoring of who enters and exits their facilities and which individuals and equipment they interact with. This has led many manufacturers to insource facilities maintenance and management and to prioritise traceability, which necessitates that manufacturers retrieve internal equipment data from original equipment manufacturers. Another safety priority extends to field service. Technicians will have to be better prepared for the job so as to complete work both quickly and efficiently with limited contact. This in turn is expected to directly impact supply chain visibility as manufacturers require improved transparency from suppliers when monitoring issues and claims throughout the manufacturing process. IoT COVID-19 has rendered IoT technology increasingly relevant owing to its remote monitoring and predictive maintenance capabilities. IoT solutions enable manufacturers to safely and remotely monitor equipment performance and identify issues before a malfunction even
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MANUFACTURING occurs as devices empower technicians to formulate solutions before arriving on-site so the job is completed at a much more efficient rate. Pandemic exit strategy Manufacturers will need to plan a COVID-19 exit strategy and ultimately reset their businesses. To adapt to the “new normal” manufacturers must realign forecasts, evaluate the impact on the business, and identify where to restructure, rescale or retire. Given the extensive range prevalent within the manufacturing sector, each entity’s post-pandemic planning framework will differ from the next. Big data With IoT and predictive maintenance becoming increasingly relevant, big data is set to become a prevalent theme among manufacturers. The ability to collect data from a variety of sources, coupled
with progressively more effective cloud computing capabilities, enables manufacturers to dissect data to provide them with extensive real-time insights to their business which will stand them in good stead in reassessing their forecasting and planning frameworks and developing an efficient pandemic exit strategy.
© ISTOCK – Kuziha
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VR and AR support COVID-19 has been a major hindrance to the field service element of manufacturing companies, preventing technicians from going on-site to install or repair equipment. However, assistive technology such as augmented reality (AR) and virtual reality (VR) has made it possible for technicians to provide remote assistance by sending customers’ AR- and VR-enabled devices and guiding them through basic troubleshooting and repairs. For many manufacturers, this presents an exciting opportunity. More customers
R386-billion Manufacturing sector’s contribution to GDP
Manufacturing is the fourth largest industry in SA.
are open to this concept, enabling manufacturers to evaluate new processes and procedures with the long-term objective of making them permanent fixtures.
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Reshoring and near-sourcing COVID-19 has prompted a renewed reshoring effort, transferring business operations that were moved overseas back to South Africa – from where they were originally relocated. Reshoring enables us as a nation to rebalance our economy, create new jobs and cut our trade deficit. Similarly, the pandemic has incited manufacturers to reassess sourcing. COVID-19 has severely disrupted the global supply chain and has consequently made it increasingly complicated for manufacturers who source from other countries to acquire materials. This has motivated many manufacturers to diversify sourcing by adopting near-sourcing. Near-sourcing, also known as local sourcing, is the process by which a business brings operations closer to where its finished product is sold. In manufacturing, this generally relates to the sourcing of raw materials from domestic suppliers. Heading into 2021, both reshoring and near-sourcing are expected to be prominent trends as manufacturers endeavour to reduce or eliminate reliance on foreign materials, thereby providing opportunities for those involved on the local front. n
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BME BUILDS SKILLS IN MINING COMMUNITIES
BME strives to develop and empower communities.
Reuben Ramahlare, BME senior human resources business partner.
Unemployed youth are being trained in technical skills to improve their employability and open doors to starting small businesses, thanks to BME’s partnerships with training providers. Reuben Ramahlare, senior human resources business partner at Omnia Group company BME, says this follows the signing of service agreements with local training colleges. “An important strategic focus for us is to develop and empower communities through training, as part of our positive impact in the areas where we operate,” said Ramahlare. “This includes communities near our operations in North West province, Northern Cape, Mpumalanga and Gauteng – and targets 70% women’s participation in the programmes.” Through this initiative, BME has been sponsoring the training of a range of vocational skills such as welding, plumbing
and general property maintenance. The training bodies provide learners with certificates of competence, facilitating their path to employment or self-employment. He noted that groups of learners are put forward by local municipalities and spend up to a month in training. In the case of the welding course, the successful learners are provided with welding and personal protective equipment by BME, to apply their skills in the marketplace. They are also trained in basic business skills
for starting their own small enterprises, including financial management and applying for tenders. Thirty-five candidates have been trained this year in Brits, Kathu, Middelburg and eMalahleni. The training organisations that BME has partnered with include the Mineral Mining Training Institute in Brits, Kathu and Middelburg, the Colliery Training Centre in eMalahleni and the Ekurhuleni Artisans and Skills Training Centre in Kempton Park.
TRONOX SPONSORS COMPUTER CENTRE FOR SCHOOL Tronox KZN Sands recently handed over a computer laboratory to Mbuyiseni High School at Mangezi, KwaDlangezwa. Mbuyiseni is one of the best performing deep rural schools under the King Cetshwayo District, with 363 learners, Tronox said. “We believe such projects allow for the empowerment of not only the learners and the school, but the community as a whole. This is an investment that will offer the learners the opportunity to be exposed to new and up-to-date information that can help open their world to new possibilities,” said Nozuko Basson, regional manager for Communities and Corporate Affairs, Tronox South Africa. The state-of-the-art laboratory has been equipped with 33 new computers and desks with Microsoft licensing and router for internet connection, a printer and a projector. Air-conditioning and fans have been installed to protect the equipment from heat, dust and moisture and is fully burglar-barred for safety. The disadvantages of not having internet-connected computers at the school
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means that the learners have been excluded from the ever-changing digital learning platforms available. The school will now be in a position to enhance teacher and learner relationships to become more effective because they will have access to better quality education, said Basson. Tronox is committed to making a posiJANUARY 2021
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tive impact at the schools in the areas in which they operate by providing learners and educators with equal opportunities to move away from the chalk board where teachers are the only source of knowledge, to computers, which play an important role in the transformation of education.
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CRANE AGENT WINS CONDRA ORDERS
Condra crane with extendable boom.
© ISTOCK – Kerkez
Richards Bay-based lifting equipment company North Coast Cranes & Lifting has won orders for Condra cranes to be installed in a chemical element refinery furnace and on a mining dredge. An order for two further machines is expected. North Coast Cranes is Condra’s Northern KwaZulu-Natal agent, with a mandate to install and commission machines as they arrive from the Johannesburg factory, and provide scheduled maintenance and on-call service support. The first of the two orders is for a 10-tonne, 6.5m-span Condra furnace crane. This will be a double-girder electric overhead underslung machine supporting an underslung crab and foot-mounted hoist moving between two girders arranged as an extendable boom to allow the retrieval of casting pots from an adjacent bay, the company said. The second order is for a maintenance and repair machine to be installed on a mining dredge. It will be a 10-tonne, 13.5m-span Condra portal crane of straightforward design with cantilevers to allow equipment to be lifted and lowered from adjacent vessels. The new orders will add to Condra’s substantial installed base of cranes in and around Richards Bay.
VOESTALPINE BÖHLER WELDING AND AFROX FORM JV Welding specialist voestalpine Böhler Welding and Afrox have strengthened their presence in the South African and Sub-Saharan African region through a joint venture to manufacture welding consumables. Afrox has contributed its current welding consumables factory located in Brits, in the North West province, into a new company and sold 51% thereof to voestalpine Böhler Welding. The new joint venture company will be named voestalpine Böhler Welding Africa and managed by voestalpine Böhler Welding. It will manufacture Afrox and voestalpine Böhler Welding products for South African, sub-Saharan African as well as other export.
BELL TAKES ITS TECHNOLOGY UNDERGROUND
A low-profile articulated dump truck underground.
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The latest generation Bell B30L and B35L low-profile articulated dump trucks (ADTs) deliver the lowest costper-tonne solution, more practical styling and an “autonomous ready” platform that is easily configurable for remote operation either by a handheld remote control or a more sophisticated autonomous control centre, the equipment manufacturer said. Bell Equipment product designer Shaun Tucker explained that making the truck future-proof was a key design input as “the machines generally have a long life underground and in five years’ JANUARY 2021
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time there may be more of a need for autonomous control than there is today”. “Underground haul roads don’t change and could easily allow worksites to be automated in the future, so we chose components that would open that gap for us. Additionally, the remote capability allows the machine to be operated via remote control in dangerous conditions where it might not be safe for an operator.” The Bell B30L was recently demonstrated at two open days at the Bell Factory in Richards Bay. The truck will now be tested at a local underground mine where it will join the mine’s existing fleet in a production cycle.
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