Investment Strategic Workshop
11 June 2007
1. Introduction
Honourable Deputy President,
Distinguished guests,
Ladies and gentlemen,
I wish to extend my warmest welcome to you all to the mining investment
strategic workshop, a first of its kind where we have invited all the role
players including our bulk service providers like Eskom and Spoornet. It is the
feeling that we have in the mining industry that the way to successes is by
involving all who play a role, either direct or indirect to our industry.
2. Strength of the industry
I would not like to overemphasise the important role this industry plays in
the over all economy of the country. As we all know, the mining industry in
this country started over a century ago, following discovery of outcropping
gold deposit hosted in the Witwatersrand basin in 1886. A year later, alluvial
diamonds were discovered in what has become the Northern Cape Province. These
two discoveries marked a significant turning point for the country's economy.
Entrepreneurs, investment and skills flocked-in from many parts of the world to
build the country's sector to a leading position. Many more discoveries of
other minerals were made later and have since been mined. To this end, the
mining industry remains the cornerstone of the country's economy and continues
to contribute significantly to the economic growth, job opportunities and
foreign exchange earnings. It provided the original drive for the extensive
infrastructure that currently sustains the country's secondary and tertiary
economic sectors. The mining industry is a well established and resourceful
sector that possesses a high degree of technical expertise and has the ability
to mobilise capital for new development.
Mining and quarrying in real rand terms contributed cumulatively in excess
R760 billion from 1997 to 2006. During this period, the country's cumulative
investment in all sectors amounted to R1,8 trillion, of which mining
contributed R157,5 billion or 8,5 percent. Mining investment increased by 8,3
percent from 2004 to 2006. However, mining contribution to total investment
decreased from 7,9 percent in 2004 to 6,1 percent in 2006, largely resultant
from larger investment flux in other sectors. Over the same period, the
country's cumulative export earnings from all sectors amounted to R2,6
trillion, of which R857,3 billion or 32 percent were derived from mineral
exports. Employment in the mining sector decreased by 17,1 percent from 553 116
in 1997 to 458 534 in 2006. This cumulative decrease experienced in employment
is largely attributable to the contraction in the gold mining industry, which
has tended to cloud developments in the total mining sector.
3. Commodities boom
The current commodity boom on international mineral commodity markets, which
started some five years ago, has inspired a major increase in exploration and
mining with high rates of growth being reported from mining sectors worldwide.
However, South Africa has purportedly not exhibited comparative growth rates in
investment in the mining sector to Canada, Australia and other mining
countries. During the latter part of 2006, fundamental concerns were raised
over constraints said to divert investment in this sector away from South
Africa. These constraints are purported to have led to an estimated R5 billion
opportunity loss in mining investment. The ramifications of this loss are
severe for the country's overall growth as they thwart the contribution of
mining to the Accelerated and Shared Growth Initiative for South Africa's
(Asgisa's) targets. Consequent to these reports, I initiated a tripartite
working group consisting of my department, industry and affected labour
movements to investigate the underlying reasons that negatively impact on the
investment environment.
A summary of the findings of their desk top study, as I mentioned in my
budget vote speech, indicated the following: Geographical location of South
Africa compared to its competitors in that most of the commodities in South
Africa are mined far inland, promotion of beneficiation in South Africa when
its competitors are eager to continue supplying raw material, the advent of
democracy has made South African companies more global and therefore they can
invest anywhere and are not necessarily limited to South Africa only, the
regulatory framework and the lack of infrastructure development. A full report
compiled by this working group was tabled at the Cabinet Lekgotla earlier this
year and became a precursor of today's workshop.
4. Conclusion
As we convene here today, seeking to find resolutions to the major challenge
that we face as the mining industry that of increasing the levels of
investments into our sector, I challenge you to critically investigate where
gaps are, interventions that we had in the past whether they are still relevant
and recommend a way forward in which we should all have identifiable roles to
play.
I am encouraging a rigorous and brutally frank discussion in this session,
consistent with our theme for the day: 'Unlocking the Investment Prospects of
South Africa's Mining Industry through a constructive dialogue'. The success of
this workshop is indeed dependent on these deliberations and our commitment,
going forward.
Ladies and gentlemen, it is my hope that today, plausible and sustainable
mechanisms to attract investment into the country's mining and minerals sector
will be identified and indeed implemented. Again ladies and gentlemen, you are
all welcome and madam Deputy President, we are honoured by your presence.
Issued by: Department of Minerals and Energy
11 June 2007
Source: Department of Minerals and Energy (http://www.dme.gov.za)
