Minister Xu Shaoshi, Minister of Land and Resources
Ministers from Australia, Angola, Canada, and Nigeria
Members of the Diplomatic Corps
Government of the People’s Republic of China
Investment Community
Ladies and Gentlemen
May we thank the government of the People’s Republic of China for inviting us to participate at this gathering. We welcome this opportunity to put forward the views of our government and the people of South Africa with regard to the important issue of mining and its contribution to the economies of our two countries.
Recognising the significance of trade volumes between our two countries, His Excellency, President Jacob Zuma signed a comprehensive strategic partnership agreement with His Excellency, President Hu Jintao on 25 August 2010. The partnership agreement covered areas ranging from political dialogue, trade, energy, investment, mineral exploration, agriculture, as well as collaboration at a global level between the two countries.
Since the signing of this strategic partnership agreement, we have witnessed an increased in appetite by Chinese companies in our mining sector, a move which signals confidence in South Africa as one of this country’s preferred investment destinations. It is also encouraging that such companies are willing to comply with our country’s laws.
During the occasion of my recent visit to this country when I accompanied our Deputy President, His Excellency, Kgalema Motlanthe, our two countries signed a Memorandum of Understanding (MOU) in the areas of geology, and mineral resources. Since the signing of this MOU, we have since agreed on a number of technical visits that must take place to strengthen our relationship.
Against the backdrop of the above mentioned initiatives, my government is committed to creating a favourable and globally competitive mining sector in South Africa. Domestic and global investments into our economy are very much part of the equation. This republic in general and the Chinese mining investors in particular have an important role in this phase of South Africa’s mining and industrial expansion.
Taking advantage of the joint expertise that is located in this partnership we will be able – jointly - to use this as a springboard to access mining projects in other jurisdictions. It is worth noting that the South African government took a decision last year, actively to participate in the mining sector, through the creation of a state owned mining company (SOMCO) which is a vehicle in the hands of the state that will be used to advance our country’s national strategic objectives.
South Africa’s mining sector contributes about 8% to the Gross domestic product (GDP), and this increases further to 18%, when taking into account the indirect effect of mining on our economy. South Africa ranks amongst the top 10, in terms of the production of minerals such as manganese, iron ore, gold, chrome and ferrochrome, PGMs, and others.
An analysis of the value of South Africa’s mineral exports to China for the past four years indicate a compounded annual growth rate of over 50%, which is projected to grow even more as this growth is very much linked to the galloping growth of the Chinese economy.
As South Africa, we serve as a gateway into Africa as evidenced by an increase in the number of global mining and investment companies that are continuously setting up offices in our country and using these to expand beyond our shores. According to the World Economic Forum global competitiveness report of the period 2009/10, South Africa is ranked number six in terms of financial markets sophistication, and ninth in terms of the strength of investor protection, out of 133 countries.
Prudency of our fiscal policies in the period after 1994 has brought about the much needed macro-economic stability, which has enabled our country to weather the storm brought about by the global economic crisis. Far from it, in order to cushion our economy from the blows of the global financial instability, and as a response to the slowdown of our economy, our government introduced large-scale and far-reaching figure of over US$100 billion- infrastructure investment financing.
The pattern of economic growth, likewise, has been fairly stable. Whilst our economy experienced a sharp slowdown during 2009, the consequent recession was however short-lived. Our economy has registered sustained recovery ever since the first quarter of 2010, and indications are that it will end the year with an average growth rate of 3%. Our economic analysis suggests that the resources sector will remain a key anchor for the growth and development of the economy for this period and for years to come.
Responding to the effects of the global economic crisis of 2008, a multi stakeholder task team comprising government, business and organised labour identified constraints to growth of the mining industry as well as a set of short to medium term interventions that are needed to ensure sustainable growth and meaningful transformation of the mining industry.
Working through the Mining Industry Growth, Development and Employment Task Team (MIGDETT) we identified constraints that ranged from infrastructure, lack of beneficiation policy for South Africa, skills shortages, as well as regulatory issues.
A set of interventions were subsequently put in place to address these. The work of this task team culminated in the finalisation of the strategy for the Sustainable Growth and Meaningful Transformation of the South African Mining Industry, which was approved by government as a plan for the growth and development of this sector. This strategy represents an over-arching plan for growing and maintaining the competitiveness of our mining sector.
South Africa is well endowed with a considerable mineral resources base, estimated by Citibank at 2, 5 trillion US dollars (excluding energy resources such as coal and uranium). Job creation has become an imperative for the government of South Africa particularly taking into account the fact that we have a challenge of an unemployment rate of over 75 % of our young people. This invariably exacerbates what we have aptly named the evil triplets of unemployment, inequality and poverty.
Our country’s mineral wealth therefore needs to be leveraged upon to deal with these evil triplets. The beneficiation strategy was therefore developed to provide a framework to translate our country’s comparative advantage, conferred by the vast mineral endowment, to a competitive advantage for the downstream mineral beneficiation industries.
This strategy was approved by our Cabinet during June this year. Five different value chains have been prioritised from the commodities that are selected in the strategy. Our government has further mandated my department to work with other relevant stakeholders to come up an implementation plan for these five prioritised value chains, namely:
- the iron and steel value chain in which the following mineral commodities will be beneficiated; iron ore, chrome, manganese, nickel as well as vanadium
- energy commodities value chain to ensure energy security which will focus mainly on coal, and uranium
- auto catalytic convertors and diesel particulate filters where platinum group metals will be beneficiated
- pigment and titanium metal production and;
- jewellery manufacturing to increase the levels of beneficiation of platinum group metals, diamonds and gold.
It must be noted that mineral beneficiation will not be limited to the mineral commodities and value chains that I have just outlined. The development of globally competitive sectors from these value chains will be derived from dedicated research and development programmes. And it is in this area, that partnerships with Chinese firms/companies will be most valued.
By developing mineral value chains to these levels, our country’s industrial base will be deepened and broadened which will contribute to the diversification mineral activities away from traditional commodities and non-tradable services.
This will be in line with the objectives of our over-arching economic policy, called the New Growth Path. It remains our commitment to make sure that whilst mining take place, its associated economic and industrial activities continue to bring about inclusive growth for our communities, particularly those that are located in the area of mining operations.
Challenges relating to the architecture and implementation of our mining licensing regime, were identified, including, amongst others, long processing times, ambiguities in the current mining legislation, and fragmentation of the permitting or licensing process, for example the water use license which is being issued by the Department of Water Affairs, environmental authorisations which are being issued by both the Departments of Mineral Resources and Environmental Affairs respectively.
As a country, we are serious in quest to create a single window for processing mineral rights as well as associated environmental authorisation and water licenses. This will go a long way to easing the administrative processes both within government as well as for the mining companies. In order to address these, we have made the following interventions:
- Initiated a process of amending the Mineral and Petroleum Resources Development Act to remove any ambiguities that create room for multiple interpretations of the law. Other areas to be covered in the amendment of the law include the mining of associated minerals, strengthening of the consultation process, partitioning of mineral rights, rehabilitation, as well as alignment with the approved Beneficiation Strategy.
- We are currently having broad discussions on the proposed amendments with industry stakeholders (MIGDETT), as well as with relevant State departments. We are consulting mine communities with an intention of strengthening collaboration between communities and mines.
- Streamlined administrative processes to shorten turn-around times for Prospecting and Mining Rights.
- Conducted a comprehensive audit of all Rights since the implementation of the Mineral and Petroleum Resources Development Act, in 2004 during September 2010. The outcome of these audits has indicated that a significant number of holders of rights that were not compliant with the law.
- Developed a new online licensing system called South African Mineral Rights Administration System (SAMRAD). This online system enables the lodgement of applications electronically, without the need physically to visit our regional offices. The system is imbued with the following features:
- accountability on the part of officials and applicants at all levels
- monitoring of compliance with the conditions of an issued Right
- improving competitiveness of the South African mining industry.
Such improvement in administrative operations, enhanced by legal reforms, will go a long way in helping South Africa to regain its global competitiveness in the sector.
Drawing from lessons from the review of the Mining Charter that was adopted in 2004, we have strengthened the amended mining charter of 2010 by establishing and promoting Social and Labour Plans that are aimed at improving the quality of life of the affected mine communities, as well as the inclusion of workers and communities in structuring the broad based empowerment deals.
The amended Mining Charter has been imbued with a firmed up scorecard, and clear reporting templates which will make it easier to assess progress with regard to implementation. The role of government in the entire transformation process is to regulate and this it will do in a manner that is conducive both to the growth and meaningful transformation of our mining industry.
We are mindful that over the past three years our mining industry has suffered from the lack of adequate infrastructure, be it electricity, roads, or export logistics at the ports. We have therefore invested a great deal of political and financial capital in ensuring that our requisite infrastructure is adequate.
Cognisant of the impact of this on the economy, government set up a Cabinet Commission chaired by our President Zuma, to ensure a successful and timely implementation of our national infrastructural programme. Whilst this is a short term intervention, our National Planning Commission is set to release its medium term programme of infrastructural development later in November 2011.
We are also concerned about health and safety at our mines. The loss of lives in our mines continues to be a great concern to me. One fatality in mining, is one too many and must not and cannot be tolerated. As government, we will continue to take appropriate measures to ensure that workers return home to their loved ones still in one piece.
In South Africa, unsafe mines or sections of the mines that are deemed unsafe are stopped in order to ensure compliance with the provisions of the law. These measures demonstrate that we do care about the plight of the workers and we recognise that they also deserve to be exposed to appropriate health and safety standards.
Having said, on behalf of the government and the people of South Africa we dip our banners in memory of the workers who so tragically lost their lives in this country only a few days ago
It is commonly acknowledged that compliance is a critical element of any regulatory regime. My department has recently established a multi-disciplinary enforcement and compliance unit which has the required expertise from across the various disciplines of the department to enable us to act in cases of transgressions and non-compliance with the commitments that have been made.
The constitution enjoins my department with the responsibility of ensuring mineral exploitation in an orderly and ecologically sustainable manner. This is important given the agreements contained in the Cancun accord on climate change.
I am accompanied to this important conference by our State Owned Enterprise responsible for the geological survey, called the Council for Geosciences of South Africa which is exhibiting at stand Number 1310, as well as Mintek, our research and technology organisation, specialising in mineral processing, extractive metallurgy and related areas which is at stand number 1104 - all of which are in Hall N3. I also urge delegates to visit the Department of Mineral Resources (DMR’s) exhibition stand which is at number 1105 (in Hall N3) for a demonstration of the SAMRAD (on-line) system.
Do take time to visit these stands. I have no doubt you will find that experience a rewarding voyage of discovery.
We march ahead confidently on the basis I have outlined.
I thank you!
