11 May 2022: The second day of the 2022 Mining Indaba came to a close with the conference having hosted South African President Cyril Ramaphosa who delivered an insightful speech on the prospects that lie ahead for the mining sector. Although decidedly positive in his outlook, Ramaphosa remained cognisant of the delicate balance between risk and opportunity upon which the future of the industry depends.
South Africa’s mineral licensing system under scrutiny
As day one of the conference highlighted, infrastructural development is key to the development of the sector. In addition, however, the process of issuing mining and water-use licenses must be expedited as a matter of priority.
This is the opinion of Mazars Audit Partner and National Head of Mining, Thinus De Vries who advocates for much-needed change in government processes regarding the issuing of licenses.
Each morning, De Vries will be offering daily insights to round up the previous day’s proceedings.
As he elaborates, “in the past, the inefficiency of South Africa’s mineral licensing system has served as a deterrent to prospecting and exploration; and indirectly to foreign investment. In Operation Vulindlela – the government’s project aimed at addressing challenges in the electricity, water, transport and telecommunications sectors – we see that feasible solutions are within our grasp. Operation Vulindlelahas made significant strides towards meaningful and actionable policy reform. Herein lies an opportunity for the sector to use these changes to gain a competitive advantage in the global market at a very strategic point in South Africa’s post-pandemic recovery.”
Weighing up different sides of the global appetite for investment into SA mining
South Africa’s mining sector faces significant administrative challenges in tandem with issues relating to shifting market demand, climate change and geopolitical uncertainties. Despite these impending risks, the industry showed growth of 11.8% in 2021 – the largest rate across all sectors in the country. Going into 2022, the South African economy was carried on the shoulders of this commodity boom albeit defects in the country’s railway system curbed the potential of this upsurge to assist South Africa in finding stable ground.
Against this backdrop, South Africa’s rock-bottom ranking in Fraser’s most recent Investment Attractiveness Index (IAI) became a disheartening reality for mining companies and role-players along the mining supply chain. On this point, De Vries argues that, “we cannot claim that South Africa is truly ‘open for business’, if we do not act decisively as the private sector to highlight the opportunities that exist for foreign investment not only directly into mining but also in mining technology.”
As an example of this, De Vries points to innovations such as Anglo American’s hydrogen-powered truck, which he argues, “is a paragon of a better, greener future for mining in South Africa. Private sector players need to use these kinds of innovations to emphasise South Africa’s potential as an exporter of green energy technology – inventions such as these are our chance to become a world leader. Engineers could apply the same design thinking to trucks and trains going forward. Here we see a microcosm of the bigger picture that our mining sector represents unbridled potential in and of itself, but also as a wellspring for emerging sectors and economies.”
Spotlight on just energy transition
Maintaining an affinity with the theme of this year’s Mining Indaba which centres around the sustainability of the industry, day two discussions were underpinned by a consensus that Environmental, Social and Governance (ESG) mandates and frameworks need to align with the rapid advancements being made in mining technology. Along with the global movement toward creating a low-carbon future, South Africa faces its own unique set of challenges that involve making the just energy transition.
In Africa, where energy poverty remains a significant hurdle to economic progress, there is a need for industry leaders to home in on both the environmental and social aspects of sustainability. This is the opinion of De Vries, who concludes: “In the post-pandemic context, South Africa’s road to economic recovery must be paved by solutions that consider both societal and ecological dimensions – these two paradigms are closely linked. The mining industry needs to lead the just energy transition and serve as an example of socioeconomic development that; in the words of the President, ‘leaves no one behind.’”