While the SADC region has significant quantities of minerals, and these are the drivers of the member country’s economies, the mining sector is experiencing the same problems as its counterparts worldwide.
With increasing energy demand, fluctuating precious metals markets, a shifting exploration landscape, subdued commodity prices and a gradual – not steep – recovery forecast, among others, the region will still have to find answers if it is to survive, never mind be sustainable.
The inaugural SADC Africa Mining Conference explored these opportunities through the insights from various industry experts.
The industry is in a tough place, concurs Roger Baxter, CEO of the Chamber of Mines of South Africa. He believes the big challenge is that we continue to use conventional mining methods while we view modernisation as a threat; one that will do away with people. The answer, he says, is far more complicated than that and if we are to realise the potential of the SADC region we will need to migrate to modernisation.
“Modernisation holds massive cost benefits and will mean that mining can contribute to the economic development of region as a whole. If we modernised we would have 11 large gold mines and nine platinum mines that could be mined safety.”
However, without it what we have is a rapidly depleting resource that is costly but with declining jobs and limited export opportunities.
In fact the opposite is true. With modernisation, bigger ore bodies can be mined, job losses will be slowed down, skills will be developed, investment will flow in, and, if we manufacture the technology here, it will further mitigate job losses. “While this will take time – about 20 years – the impact on growth will be significant.”
Charles Siwana, CEO of the Botswana Chamber of Mines, says mining companies need to position themselves into the lower quartile of the cost curve. He acknowledges that this is an easy statement to make, but a difficult one to carry out.
Next he says we need to tackle the infrastructure constraints we face, such as power interruptions. “Both the private and public sectors need to make themselves attractive to attract FDI. The private sector must indicate its ability to have a sustainable business that yields high returns, while governments must facilitate a conducive environment for such funds.”
The biggest opportunity for the region, in his opinion, is to beneficiate its raw materials instead of exporting them. “Africa has a history of exporting its raw materials and then importing the beneficiated goods back at a higher price. This has to stop.”
He adds that this will also help to close the gap when commodity prices do rise.
Mining community development is not succeeding, despite legislation and the intent of policies, with the benefits not being seen by the supposed beneficiaries.
So says Deepa Vallabh, director: cross border mergers & acquisitions: Africa & Asia, Cliffe Dekker Hofmeyer. She has counselled mining companies for 17 years and, in her experience, the social labour plan (SLP) of many mining companies is a tick-box exercise, not a strategic plan for long-term sustainable development.
Government shares her view that community development as not working. “If the community is not seeing the benefit or correlation than it means it is not working and this includes mining communities that form part of the equity structure. When mines have sustained losses no dividends are paid. To properly benefit communities, long-term investment is needed.”
Given the above, she says there are other questions that also need to be asked. “When it comes to community development, what is the end goal of that community… do they want to stay there, or is it about developing skills that will take them to urbanised areas?”
If urbanisation is key for our future growth, she asks, why are we continuing to develop communities as if they are going to live there forever? It will only be there for as long as the life of the mine.”
South Africa has launched an association for young, mainly black entrepreneurs to boost the processing and manufacturing of rough diamonds, the mines ministry said on Tuesday.
Manufacturers and middlemen who buy rough stones, polish and resell them to retailers struggle with a stronger dollar and liquidity problems, having to rely on bank loans to cover purchases until they can sell their finished goods.
Launched at the first South African Diamond Indaba, the South African Young Diamond Beneficiators’ Guild aims to help start ups led by mainly black entrepreneurs to cut and polish diamonds.
The government in Africa’s second largest economy is pushing to revitalise industrial capacity by encouraging companies to process or add value to minerals – a process referred to as “beneficiation” locally – before exporting them.
Processing diamonds could help ease unemployment which stands at around 25 percent, although analysts say this is higher.
Global diamond demand growth has declined over the last few years owing to slower interest from China. Mining companies have slashed output in response as they also battle rising costs.
South Africa’s diamond manufacturing industry now employs about 200 workers from a peak of 4,500 about 20 years ago, losing ground in Africa to Botswana, the ministry and industry players said.
“South Africa has been muscled out of its status as the world diamond destination. We have to re-capture that legacy,” Dolly Mokgatle, chairperson of the diamond mining conference said.
Mining in South Africa contributes about 7 percent to the gross domestic product and is the world’s fifth largest producer of rough diamonds.
President of the World Federation of Diamond Bourses Ernst Blom told delegates that processing of the precious metals locally had to be economically viable for companies and that South African mining industry should introduce measures such as tax incentives to attract investment.
“Enabling firms to process diamonds means costs have to be reduced on them to make it profitable for them to do so,” he said, adding that South Africa had to cut the red tape related to diamond mining and to align costs with global peers.