Programme director, Honourable host Minister Smith
Ministers and commissioners here present
Members of the diplomatic corps
Captains of industry
Government officials
Esteemed ladies and gentlemen
It is fitting to congratulate the organisers of the Africa Down Under conference for continuing to convene a high calibre delegation from the mining industry, with particular interest in Africa and facilitating a high level of knowledge exchange among stakeholders in the industry.
South Africa held its fourth consecutive election this year, demonstrating its commitment to democratic principles. Since the advent of this democracy in 1994, the country has deepened this democracy and the fiscal regime has also been quite resilient.
We have grown our economy at an unprecedented level. South Africa continues to develop meaningful partnerships with countries within the region and the continent through various structures, with the ultimate intention of harmonising our mining regulatory framework. South Africa’s well developed financial infrastructure enables prospective investors into the rest of the continent.
Pursuant to the outcome of the elections, it is fitting to confirm that the Department of Minerals and Energy has since been split into two focussed departments of mineral resources, which I am heading and the Department of Energy, headed by Minister Dipuo Peters.
In respect of processing mining right conversions, there are major challenges that cause delays in the finalisation of conversions emanating from the Department of Mineral Resources and the applicants. The department has an internal challenge of capacity to process these applications in time. The split presents an opportunity for the department to strengthen requisite resources.
The delays in processing these conversions is further compounded by poor content of applications submitted to the department, particularly alignment of social and labour plans to local economic development initiatives in host communities and labour sending areas. There is also lack of comprehensive plans to address appropriate skills development and local procurement. The investment on environmental scanning cannot be over emphasised to gain a full appreciation of the generic requirements, including legislation and resources. This proposition is not inconsistent with the generic practice in other parts of the world.
The new Department of Mineral Resources remains focussed on continued implementation of key government policies. The 2008 bilateral investment statistics indicate that Australian companies invested over a billion Australian dollars in South Africa, the bulk of which represents mining. We seek to further deepen this relationship with Australia so that we can unlock the mineral resources of the continent to address the inherent socioeconomic challenges. We further call upon investment in the mining sector across the African continent.
This conference takes place at the depth of the global financial crisis, which started to show its effect in 2007. The financial literature indicates that documented financial crises date as far back as the Tulip crisis in 1630. There have been a dozen of crises which have come and gone. This financial crisis will also come to an end, albeit the effectiveness of the recovery levers will require countercyclical interventions from all stakeholders to ensure optimal benefit when the economic upswing returns it therefore can no longer be business as usual.
The impact of the financial crisis
In South Africa, mining remains an important contributor to the country’s economic growth, with an average of 50 percent of the country’s export earnings being derived from mining, while the sector also remains an important contributor to the countries GDP. This emphasises the importance of the industry to South Africa.
At the start of the global financial crisis, some analysts projected job losses in excess of 100 000 in mining during the first year of the economic slump. In response, the South African government immediately initiated a process to mitigate the impact of the global financial crisis on our mining industry.
As a result, a tripartite task team comprising of all stakeholders in the mining sector, represented by government as well as organised labour and business was initiated.
This collaborative work is rooted in the Departmental led Mining Industry Growth, Development and Employment Task Team (MIGDETT). The team was tasked with developing recommendations that would ensure optimal development of the mining industry to benefit South Africa beyond the financial crisis.
To date, job losses in the mining industry have cumulatively peaked below thirty thousand. This happens at the time when aggregated commodity prices have dropped by an average of 40 percent during the tenure of the crisis, with job losses representing less than 5 percent of total jobs in the sector. This demonstrates the efficiency of the tools we are able to develop as a collective in the industry.
Mining Charter review
The Mining Charter represents an agreement among all industry stakeholders, which entailed specific targets of transformation, including the transfer of part-ownership participation in or benefiting from existing or future prospecting and production operations to historically disadvantage South Africans.
The Mining Charter stipulates that “it is government’s stated policy that whilst playing a facilitative role in the transformation of ownership profile of the mining industry, it will allow the market to play a key role in achieving this objective.” Embedded in the Charter is also an agreement to review progress after five years of implementation, ending October this year. The department is at an advanced stage of finalising the progress attained to date, which will inform the outcome and direction of the review.
We have appointed an independent service provider to quantify the progress made to date against the commitment of the Charter Pillars, conceivably an onerous task, but a very important process for all stakeholders. We are intending to soon announce the outcome of the charter review.
Our observation in respect of transformation since the promulgation of the MPRDA and the Charter is that there has been limited progress. The Mining Charter intent must be understood within the context of dynamic transformation and that this transformation does not have a shelf live ending in 2014, it is not an event but rather a process.
The role of communities in mining has been less than adequate, with only a few pockets of excellence which we anticipated would demonstrate the value of community participation and would be widely adopted as a model for effective community participation. It is very critical that in areas where mining activities takes place constitute meaningful community participation to ensure sustainable mining project development.
We are enjoined by Section 100 of the MPRDA to publish both the Codes of Good Practice and the Housing and Living Conditions Standard documents within five years of the implementation of the MPRDA. I am happy to announce that we gazetted both documents by 30 April 2009. However, I acknowledge that some stakeholders have raised concerns in this regard and my department is engaging them with a view to finding a lasting solution to this problem.
Mineral beneficiation
Guided by an appreciation that minerals are a finite resources but creativity continues to be unlimited, we have embarked on the development of a beneficiation strategy. This is essentially intended to support national programmes such as the national industrial policy framework, among others. I am certain that as we embark on our beneficiation route, all stakeholders will leverage benefit from the country’s comparative and competitive advantages.
This proposition is a natural progression from a resource based economy to a secondary and tertiary economy, which is consistent with other developed economies in the world.
Accordingly, this strategy will present opportunities for investment in the country by South African and foreign investors, as per the beneficiation of the Platinum Group Metals, which grew from less than 2 percent in the latter part of the 1990s to just over 20 percent in 2008. It is our intention to increase the value addition per capita in South Africa, contributing to job creation, skills development, poverty eradication and economic growth.
Financing
The South African government established and supported the Developmental Financing Institutions (DFIs). Given the significant contribution of the mining sector to the country’s economy, it has become apparent that DFIs should focus more on the financial support of prospective mining projects.
Mine health and safety
The levels of death, ill health and injuries at mines remain a serious concern for my Department. The industry stakeholders have in the last year managed to record a welcomed 24 percent improvement in levels of deaths due to mine accidents when compared to the previous year. Since the beginning of this year, there has been a reverse in the gains made on the safety of mineworkers.
Conceivably, the maturity of the industry requires us to tackle Mother Nature even deeper in her bowels to extract minerals. We have introduced two critical amendments to the Mine Health and Safety Amendment Act which will enhance the State’s ability to tackle the mine health and safety challenge of high injuries, ill health and fatalities. The amendment introduces stricter sanctions for non compliance to health and safety standards by individuals and corporate bodies as well as prosecution. This amendment is significant in that it provides a platform upon which the critical question of capacity to effectively enforce health and safety regulatory requirements can be addressed.
The Mine Health and Safety Amendment Act came into effect on 30 May 2009. The amendments emulate generally accepted practice in developed mining jurisdictions, but we are generally confronted with vehement opposition for introducing such progressive legislation by the very companies from these jurisdictions.
Security of electricity supply
South Africa recently experienced an unprecedented level of economic growth, which resulted in the deficit of energy supply in the first quarter of 2008.
Various government interventions led to a delicate balance in the electricity supply and demand. South Africa has been spoilt with not only the most abundant, but also the cheapest electricity in the word. This has inadvertently created a culture of inefficiency in technology design that supports our industries and the economy, as well as general population inefficiencies in the consumption of electricity. We have embarked on energy saving initiatives, which are bearing fruits. The recent increases in electricity tariff still places South Africa in the lowest cost quartile in electricity pricing, from which a significant investment opportunity in the country is still abound.
The quantification of the several coal reserves in the country indicates that the life of coal mining will extend beyond 150 years at the current depletion rate. This confirms that South Africa can ascertain a continuous supply of electricity for project development, given the current configuration of the country’s electricity generation infrastructure. In addition, the country is at the advanced stage of increasing our energy mix.
Conclusion
In conclusion, I wish to express my sincere appreciation to the government and the people of Australia for their gracious hospitality and indeed the efforts being made by Australia in developing the mining industry in Africa. The crucial message is that Africa as a whole is open to business and we invite Australian business to investigate, evaluate and develop mining opportunities in the continent’s mining industry in partnership with Africans. I would also like to indicate that South African companies are now ready to invest and develop Australia’s mining prospects in partnership with Australians.
Thank you.
Issued by: Department of Mineral Resources
3 September 2009
Source: Ministry of Minerals and Energy (http://www.dme.gov.za/)
