Programme director
Her Excellency High Commissioner Mohau Pheko
Consul General
Distinguished guests
South African Mining Stakeholders
Members of the media
Ladies and gentlemen
Greetings
The Prospectors and Developers Association of Canada Convention has become one of the highlights in the calendar of the global mining industry. It brings together various players under one roof but from our point of view, it brings investors who are always looking for opportunities. It is therefore an honour for me and my fellow compatriots who are here this afternoon to say: South Africa is such an opportunity and we are open for business.
The recent evolution of South Africa’s socio-economic and political environment is nothing short of a miracle. The transition to a democratic dispensation was characterised by a constructive dialogue and sheer political will, through a process driven by dedicated countrymen and women who sought to bestow human dignity, basic economic and political rights to the majority of the country’s population. It is the outcome of this dialogue and continued political will to date that advanced the country towards a market democracy, imbued with national developmental priorities.
During this transition, the country stabilised its inherited fiscal and monetary disorder through introduction of prudent macro-economic policies, incrementally opening the economy through trade and capital control liberalisation, and strengthening the institutions that support democracy. The people of South Africa enjoined the government with the responsibility of rewriting and modernising the country’s policies and laws to integrate the previously excluded majority into the mainstream economy. Consequently, the country has since moved from fiscal deficit in excess of 9 percent of gross domestic product (GDP), double digit inflation and a counterproductive substitution industrialisation model, to a more balanced budget.
At the same time inflation levels were reduced to less than half pre-democracy crisis levels and began an economic growth trajectory that averaged 3.3 percent per annum, after more than two decades of economic stagnation.
It is important to understand and appreciate the afore-stated socio-economic and political context of South Africa, within which the mining industry is not insignificant. There are those amongst our countrymen who are opposed to progressive changes in the country and are seeking to maintain pre-democratic status quo.
They deliberately distort the country’s programme of reform at international platforms thus sowing seeds of uncertainty and instability regarding the South African investment climate. It is precisely for this reason that the South African government has embarked on this international investment community engagement process in collaboration with protagonists and beneficiaries of the country’s mining industry atmosphere to shed light on their first hand experience.
The mining industry underwent a significant process of regulatory reform consistent with the aforesaid socio-economic and political landscape. This reform was premised on the principle of co-determination with key stakeholders here today, in keeping with the broader national agenda of reconciliation and reform.
This approach is part of the architecture of the democratic state as envisaged by the ruling African National Congress when in 1992 wherein it stated that:
…the democratic state will have ultimate responsibility - in cooperation with the trade union movement, business and other organs of civil society - for coordinating, planning and guiding the development of the economy towards a sustainable economic growth pattern...
It is therefore not unreasonable to state that the current regulatory framework in South Africa is a product of all mining stakeholders, the custodianship of which resides with government. This regulatory framework is imbued with strong elements of competitiveness and transformation, albeit the collective did not have the benefit of jurisprudence at the time of its development.
After six years of implementation, we have established that the overall architecture of South Africa’s regulatory regime is sound and relevant, although we have also noted that there are few ambiguous provisions within the law that have created room for multiple interpretations.
This is further corroborated by a number of litigations recently leveled against my department. Nevertheless, such litigations confirm the depth and breadth of democracy in South Africa. Any juristic or natural person who feels aggrieved in the process of law implementation, may not only appeal such within the provisions of the law, but have an option of pursuing an independent judicial process. There are not many mining jurisdictions that are characterised by such elements of democratic prowess.
Having said, we have embarked on a robust process of overhauling our entire mining regulatory process in order to further enhance both predictability and certainty. This process began in earnest some 18 months ago through our well established multi-stakeholder task team known as Mining Growth, Development and Employment Task Team (MIGDETT), which is constituted by government, organised business and organised labour.
The work of the task team has recommended a handful of critical areas of regulatory provisions that require attention in the process of amendments. These areas include, albeit not limited to:
- strengthening the construct of legislation to remove identified weaknesses such as ambiguities in some of the provisions
- clarifying the consultation process precedent to submission and processing of right application
- streamlining the licensing processes to a virtual “one-stop-shop” for all mining requirements, including environment and water use licensing
- strengthening provisions that sanction non-compliance appropriately
- strengthening provisions to improve working conditions (mine health and safety) and our performance in this regard.
We have also published the amended mining charter in September last year, with improved clarity on requirements as well the scorecard. I am proud to also announce significant progress we have made since my pronouncement in February last year that we will embark on a process of streamlining our administrative process in order to shorten the time it takes to process prospecting and mining right applications to six and three months, respectively.
In September last year, I imposed a moratorium on the prospecting applications in order to audit issued prospecting rights, clean-up our database and work towards introduction of an on-line application system. This process culminated with the launch of the mining cadastre system on 7 February this year, which is scheduled to go live when the moratorium is lifted later this month. The mining cadastre system will further enhance transparency in the application process and assist us with our intent to simplify and expedite right application processes.
This audit was necessitated by a number of concerns but in the main we discovered through various media reports and views by analysts and assorted observers that there was negative sentiment regarding the administrative processes of the Department of Mineral Resources.
This view was entrenched after our own dip-stick research by the Director-General of the department conducted in all the regional offices found that indeed, our systems were not responding accordingly. It was found that our administrative systems were in need of an overhaul and to remove perceived negligence. Sometimes this was misinterpreted as corruption. It was time for a cleanup and I am encouraged and saddened by the results.
I am encouraged because it helps us going forward to factor in the lessons from the study while at the same time I am saddened by the fact that the level of non-compliance is still very high.
We have also noted the recently released Fraser Institute and how it has ranked our country in the lower half of seventy nine mining jurisdictions. Those of your who have interacted with us over the past year or so would know that the report does not say anything new that we have not been saying already. We are aware of these challenges and today I am here to give you an update of what we are doing not only to increase rankings but to our value proposition as an attractive investment destination. This collective is always available to provide further clarity and share a hands-on experience on the South African mining industry’s investment climate.
We also acknowledge that the mining industry’s growth potential has been beset with challenges that thwarted its optimal potential at the time of the longest boom that was experienced at the turn of the millennium. Evidently, the industry’s extractive capacity contracted by one percent in real terms compared to an average growth of five percent in the top ten peer jurisdictions elsewhere.
The mining stakeholders are determined to mitigate such constraints in order to position the mining industry along a maximum growth trajectory. To this extent, the MIGDETT task team has developed a sector strategy that analyses in detail the current mining industry environment, identifies real constraints to its optimal development and proposes mechanisms to mitigate such limitations.
The bulk of proposed mitigations are already linked to existing plans of Government, such as infrastructure constraints in terms of electricity supply, rail and ports. For instance, the Government recently released a revised macro-economic policy framework known as “The New Growth Path”, which prioritises the mining industry value chain as one of the growth nodes of the country’s economy. To date, the mining sector is considered among the top four priorities that will help government create more jobs, when it was previously considered a sunset sector.
The strategy for sustainable growth and meaningful transformation of the sector will take the sector to the next level of competitiveness. Additionally, the growth path is emphatic on infrastructure investment intended to de-bottleneck economic growth, with the first five thousand Mega Watts electricity capacity installation scheduled for completion in 2013. At the same time, the State owned rail company has allocated almost R40 billion towards revamping existing rail capacity, whilst additional capacity requirements are being finalised. All these infrastructure programmes have factored current and future mining requirements proposed in the mining sector strategy.
South Africa has recently launched a state mining company to operate on equal grounds with the private sector, whilst also fulfilling national developmental priorities. The state-owned company will fight it out like anyone else out there in the market - like PETROSA has done in the cutthroat petroleum sector. Already, African Exploration Mining and Finance Corporation have been refused several applications during this time.
Even after a century of active mining, South Africa remains the wealthiest mining jurisdiction, with a minimum non-energy in-situ valuation of US$ 2.5 Trillion, with an economically exploitable lifespan in excess of a century. The mining skills developed in South Africa’s mining industry in the past 100 years have contributed immensely towards building and strengthening the global mining industry, with a number of global, mid-tier and junior mining companies benefiting from such skills. At the same time, our cash costs remain in the lowest quartile, with the exception of gold production which is being extracted from depths of up to 4 000 meters.
This collaborative work is already yielding positive results, with the mining industry’s productive capacity increasing by more than eight percent in 2010. All indications point towards a sound global economic recovery, with the IMF forecasting global GDP growth in excess of 4 percent by 2012, whilst developing economies are projected to achieve 6.5 percent. It is also predicted that South Africa’s economy will grow its economy at levels above 4 percent by next year.
The recent confirmation of America’s unemployment figures dropping below 9 percent further confirms the global economic recovery. This global recovery will be fundamentally underpinned by both fiscal expenditure of developing economies on infrastructure as well as household consumption, which in turn are expected to grow demand for minerals.
We are mindful and deeply regret the loss of life in the mining sector. Although there has been a substantial improvement on accidents with the lowest fatalities ever in 2010, our health and safety track record continues to be a matter of great concern. The social and economic impact to the country and families as a result of the unacceptable loss of life cannot be over-emphasised.
It has been estimated that each mine employee supports up to ten dependants that means each death has far-reaching implications. We will continuously engage with our stakeholders, as we believe that the challenges are not insurmountable especially with the cooperative and collaborative approach that now defines our engagement.
Lastly, but not the least important, it is our aim that the minerals mined in our shores need to be processed in our country as far as it is practicable to do so. Beneficiation is a natural progression from a resource-based economy to a secondary and tertiary economy. This is in line with the developmental path of many developed economies in the world. Moreover, this will present enormous investment opportunities in the country for both South African and foreign investors.
The work of mining stakeholders seeks to ensure that South Africa Incorporated is positioned to leverage optimal benefit from the emerging cycle of commodities demand. The mining industry’s development requires both local and foreign direct investment.
I thank you.
