Programme Director and MEC Mahlangu
Invited guests
Ladies and gentlemen
I want to start by thanking the Gauteng government for organising this important conference and I am pleased that I am able to participate in today’s activities.
If one looks at the position papers and statements of the leadership of this country since the watershed ANC Stellenbosch economic meeting of 1993, you will see that they have all been raising questions that are highly pertinent to our future as a nation. And one in particular. This concerns the fact that our country’s vast mineral resources, about 54 different types, estimated at $2.5 trillion (excluding energy commodities such as coal, oil and gas) are being exported largely as raw ores, alloys or metals rather than beneficiated products.
We have been working through a complex set of policy interventions to correct this export of our raw materials in a manner that does not advance the socio-economic interests of our country. We need to remind ourselves that over the past 130 years mining has provided the foundation for a number of industries that either supplied it or used its products. This can be found in a cluster of industries that included, amongst others, energy, financial services, water services, engineering services, specialist seismic as well as geological services - and many others that are world class and owe their existence to the mining industry.
As a matter of fact, Johannesburg as we know it owes its existence to the mining sector! And, Gauteng GDP is amongst the top five largest in Africa, once again thanks to the mining industry. It is therefore important that the Gauteng Government is hosting this conference to seek ways to rekindle the glorious years of the place of gold that caused South Africa to dominate the world supply of gold and diamonds for almost the entire 20th century. It was Lenin who said that the role of revolutionaries is not just to understand the world but rather to change it. We can speak about the past – both beautiful and ugly - until we are blue in the face, but that of its own will not take us anywhere, and certainly not forward. What will take us somewhere is when we are able to use the past, to learn lessons from it and never to repeat its mistakes. We need to employ knowledge, not just information or anecdotal recollection, to take command of the world we live in. And, let us always remember what Bacon said with such effect: "Knowledge is power".
We have reached a point where our people expect their government to address their major challenges confronting them in this century – and not those of 1884 when gold was found on the then Witwatersrand.
We inherited a bankrupt fiscus, a declining and sanctions-bound South African economy in 1994 and we were able, through tremendous effort, to ensure that there would be macro-economic stability. We brought a firm hand to managing our economy within the time period that even most Latin American economies have not achieved in decades since the end of dictatorships. Our story is impressive by world standards, and it is seldom taken into account by the Jeremiahs.
So today is about how we respond to the imperatives of job creation and related ills. We have to deal with the stubborn legacy of poverty and inequality affecting mainly our army of unemployed young people. So we believe that beneficiation offers us a real chance to get the lives of these young people back on track. We must not just send raw ores into the world. We must use out skill and commitment to change that flat-earth approach.
Beneficiation is about maximising socio-economic benefits from our country’s mining industry, and more broadly from its vast and diverse mineral endowment. Such benefits may take the form of jobs created, economic growth and activities generated, taxes accrued to the state, and socio-economic benefits flowing from the mining sector and its associated 3 Department of Mineral Resources activities. There must be a shower of benefit accruing, which will reach the very corners of our economy and our national life.
However, more often than not, for many commentators, their understanding of beneficiation is confined to the benefits derived from minerals’ industrial applications, processing and, more generally, the downstream uses for the commodities. This narrow definition of beneficiation does not fully capture the national interest of our country. Our vision goes way beyond that.
South Africa has a long history of beneficiation and some of the examples include, among others, the establishment of the steel industry in 1913 and the subsequent commissioning of Union Steel, Pretoria Iron and Steel Works in 1918; the development of the ferrochrome industry in Witbank, now Emalahleni, in 1960; the establishment and development of the petrochemical industries such as SASOL, government and big business cooperating to create ALUSAF in 1992; Platinum Group Metals, which applied it in the autocatalysts (mid-1990s) and monolith manufacturing in 1999, and so on. The mining industry has also been pivotal for the establishment of world-class R&D institutions such as MINTEK, Council for Geo-Science, and broadly the presence of globally-recognised engineering services in the country.
Although South Africa has steadily improved its ratio of beneficiated to primary products exported since the 1970s, these ratios are still well below the potential suggested by the quality and quantity of its mineral resources endowment. This is happening at the time when the demand for our commodities is driven mainly by China and India, and in the emerging economies more broadly. During the recent global economic and financial crisis, the growth in developing countries such as India and China confirmed the assertion that the world has entered a new growth phase that will precipitate a long-term high demand for natural resources, goods and services.
So companies in this province will realise, hopefully early on, that the stability in Southern Africa and more broadly in sub-Saharan Africa, presents additional prospects not just to invest in those economies but also to serve as a market for our beneficiated products. The same can be said of infrastructure investment which will come after stability has been further enhanced – something that SADC and the African Union are still working on at the moment.
The same advantages are visible when one sees the potential arising from the demand in Asia. And this can be done with a significant local value-add with strong linkages with other sectors of the economy. In this regard, in 2008 gross revenue from sales of all minerals mined in South Africa amounted to just below R300 billion. Of that just over R86 billion was generated from processing of base metals, precious metals and other minerals, which represented 11 percent of the total volume of minerals produced.
This represents a national opportunity lost in export revenue and employment creation opportunities. The Gauteng Government, working with the national Government, and the business community all working together, can effectively work on the detail of ensuring that this province takes advantage of the recently approved beneficiation strategy to create opportunities in this province beyond the reach of others who see this being done only through jewellery manufacturing.
It certainly cannot be correct that we do things as we have always done them. This calls for imagination and lack of complacency on the part of all the affected role players. Mining is a long term project and consequently those who are involved in it do so because they know that it will take time to reach their targets. In this regard, that is why on our side we are stabilising the regulatory framework and improving on our efficiency levels so that we can create a situation where our destination becomes even more attractive.
Beneficiation means that companies have to embark on their activities for say 50, 100 or so years. For example, for almost 20 years the east rand was the hub of manufacturing yellow machines and other major equipment for the mining industry. Bell and other local manufacturers have lost considerable market share due to central buying of the equipment which takes place at the head office of the major mining houses, be they in London, Zurich, Sydney, or elsewhere.
We have to take advantage of the comparative advantages we have and build on the excellent work in projects such as Colombus Stainless Steel, Saldanha Steel, Iron Ferro-chrome smelter and others. We need to improve on our weakness of failing to translate the production of base metals into large scale fabrication.
In this regard, why is it that South African mining and prospecting companies fail to take advantage of considerable prospecting opportunities and establish the necessary industries and laboratories here in Gauteng or elsewhere in the country to evaluate ore samples? How do we explain the fact that South African-based mining and prospecting companies take the bulk of their samples – in some cases almost 80 percent of such work – meant for processing again to UK and end up paying millions of pounds for it when all they need to do is to establish the required laboratories equipped with the relevant infrastructure , use it at an excellent university like the Wits or the North West University.
Extensive prospecting in sectors such as PGM, Gold, Manganese, and Chrome entails fees, in some cases, running into 100s of millions of rand - so we have to ensure that we curb outflows from such investments and ensure that South Africa has the capacity to do this kind of scientific work at home. By so doing, we beneficiate and add to the local job creation, local value generation as well as the expansion of domestic skills base. In essence, we need to build a beneficiation strategy that is fit for the demands of modern day South Africa.
Broadly speaking, we can maximise our socio-economic beneficiation in the following categories: supply chain industries; extraction and processing; application and downstream industries; as well as related industries with multiplier effects across the economy.
We are currently finalising an action plan that will lead to the successful execution of the beneficiation strategy for our country. In this regard it is important to mention that the nature of beneficiation would differ from segment to segment. For example, policy interventions in the supply chain industries may lead to a great deal more semi-skilled and skilled jobs created than the promotion of mineral processing, which may well be initially heavily capital intensive. Likewise, the establishment of basic infrastructural logistics will have impact much wider than the beneficiation of the mineral reserves of the country.
Of particular significance is the role of metal exchanges in securing institutional governance and a regulated environment for our major mineral resources. Metal exchanges are multi-faceted interventions that lead to substantial socio-economic and financial/fiscal benefits to the country. In the context of the prevailing global battle for control of key mineral resources, it is imperative that South Africa creates effective institutional platforms for extracting maximum socio-economic benefits from those minerals where the country has an adequate share of global reserves to play a catalytic role in market shaping and outcomes.
I am inviting you to join us on this exciting and rewarding journey. Together we can deliver on the promise of a better tomorrow for all our people.
I thank you.
