B Sonjica: Mining Indaba

10 February 2009

Programme Director
Honourable Ministers
Captains of industry
Distinguished guests
Senior government officials
Ladies and gentlemen

A hearty welcome to this, the 14th consecutive Mining Indaba

Reuel Khoza, one of the leading business architects of the project for the
renewal of the African continent, recently wrote:
'If not us, then who?
If not from Africa, then whence?
If not now then, then when?
If not for Africa and humanity, why not?
Let Africa rise to this the quintessential challenge.
It is our date with destiny!'

Khoza wrote these words on board an aircraft bound for the World Economic
Forum in Davos in 2005, at the time when Nepad was the proverbial talk of the
town in Africa and the world. African leaders had decided that the phrase “if
not us (Africans), then who was going to change our continent for the
better?”

When Khoza boarded his plane for Davos, our economy was experiencing a
sustained level of growth last experienced in the early 1980s. We have been on
this positive growth path for the past fifteen years, with high growth levels
of 5% for the past three years, i.e. 2005, 2006 and 2007.

Travelling to Davos myself, earlier this month, I witnessed firsthand an
atmosphere far removed from the usual pomp and opulence of the place. This
Davos was a leveller. The global economic environment has significantly changed
for the worst with the financial crisis in the United State (US) speeding up
the onset of a recession in the North.

The gravity, and the contradiction, are aptly captured in Charles Dickens’s
novel, A Tale of Two Cities: “It was the best of times; it was the worst of
times; it was the spring of hope; it was the winter of despair, we had
everything before us; we had nothing before us.”

While we are concerned about the global economic developments, we are
convinced that the fundamentals of the South African economy remain strong and
have the potential, in the fullness of time, to usher in a prolonged demand
growth for the bulk of our mineral commodities.

It is a matter of academic debate whether this crisis is a market correction
of the recent and rather prolonged synchronised commodity boom or whether it
represents a total collapse of the open market system as suggested by some
scholars.

It is the leadership of this industry represented at this conference who
must find collective, veritable and mutually beneficial solutions to the
challenges imposed on us by the global economic crisis.

We, as a government, are marshalling unprecedented resources to improve our
infrastructure for the current growth and projected future commodity upswing.
For example: As a direct consequence of the crisis bedevilling this sector, my
department, led by the Director General, has initiated a multi-stakeholder Task
Team to recommend short, medium and long-term interventions. An interim report
was released on the 18th of December last year, which highlighted a number of
short term measures to minimise job losses in this important sector of the
South African economy. I urge you to implement these recommendations of the
task team, whether or not you are within the Chamber of Mines.

As President Motlanthe noted in his State of the Nation Address last week,
“our economy remains largely reliant on mining” The President continued,
“.because we are integrated into the world economy, demand for our (mining)
exports has declined; access to finance and inflows of capital have turned for
the worse; lower demand has precipitated a scaling down of production; the
creation of jobs negatively (has been) affected and in some sectors (such as
ours) retrenchments have become a reality.”

But we are urging mining companies to refrain from issuing media statements
announcing possible retrenchments even before they engage with their own
stakeholders such as trade unions.

The introduction of the Mining Charter was aimed at transforming the mining
industry, consistent with the political landscape as well as keeping pace with
global developments.

Actuated by the South African reality, we developed anchor policies in
support of the Mining Charter. This policy framework sought to address the
specific ills created by our apartheid past. Also in the Mining Charter are
provisions to review the charter after five years of implementation.

To this end, the Department of Minerals and Energy convened a multi
stakeholder mining summit late last year, intended to assess progress and to
consider amendments during the review process.

Since the promulgation of the Mineral and Petroleum Resources Development
Act (MPRDA) in 2004, some limited progress has been made towards attainment of
the objectives of the charter. To date, the custodianship of all prospecting
and exploration rights has successfully been transferred to the state. I am
pleased to report that almost all the big players with the exception of two or
three companies have submitted their applications for conversion.

There will be no extensions beyond the deadline of 30 April, and failure to
convert will not be without consequences.

We have received an unparalleled number of applications for prospecting,
exploration and mining since May 2004, peaking above 18 000 and resulting in
the development of several new projects. We are firmly committed to processing
all prospecting / exploration applications within six months, while mining
rights will be processed within a year.

The charter has not been without challenges. We have concluded a large
number of Black Economic Empowerment (BEE) transactions in the mining sector.
But only a few of these have embraced the true spirit of broad-based economic
empowerment. We have to move beyond a few familiar faces as we conclude these
deals. One of our biggest challenges is “fronting”. We shall continue to root
out this scourge from the mining industry for it is done by exploitable people
without any sense of self worth and dignity.

We remain concerned about the tensions between the mining companies and
communities in the areas where mining activities take place. Such tensions are
more prevalent in Limpopo and the Eastern Cape. We believe that communities
would not oppose mining if they were real and meaningful beneficiaries. The Act
makes provision for mutually beneficial relationships between these
stakeholders, consistent with broad-based empowerment objectives of the
charter.

The social and labour plans translate into a social contract between rights
holders and communities and therefore constitute a social licence to
operate.

We are unhappy with the continued danger that is continuously being faced by
mineworkers in the execution of their daily tasks. The results of the
Presidential Safety Audit demonstrated 66% compliance with the required safety
standards. This is totally unacceptable. It is a blot on the conscience of this
important industry. We urge all mining companies, irrespective of whether or
not they are members of the Chamber of Mines, to embrace this report and ensure
that they implement its recommendations without reservation.

We need to heed the call of the President of the National Union of
Mineworkers, Senzeni Zokwana, when he said: “Mineworkers have a right to work
with the full knowledge that when they enter the mine, they will be able to go
home alive and safe.”

While the parliamentary process has run its course on the amendments to the
Safety Act, my door remains open to those players who think that these
envisaged amendments have the potential to create a flight of desperately
needed skills from our shores. We shall steadfastly continue with our efforts
to ensure that this industry is safe and in full sync with its counterparts in
other parts of the world.

I am certain that, as we embark on our beneficiation route, all stakeholders
will leverage benefit from the country’s comparative and competitive
advantages. The extent of the external vulnerabilities created by our
significant dependence on external markets will also be reduced.

Accordingly, this strategy will present opportunities for investment in the
country by South African and foreign investors. It is our intention to increase
the “value addition” per capital in South Africa to create jobs, eradicate
poverty and contribute to economic growth.

It has thus become abundantly clear that downstream manufacturing is
becoming an increasingly important contributor to South Africa’s rapidly
growing economy. We are also contributing to research and development in
supporting our beneficiation initiatives through our state councils such as
Mintek.

Mintek conceived the ConRoast process in 1994, at the same time as the start
of our country’s democracy, but it was only in 2006 that Braemore Platinum
Smelters (Pty) Ltd Resources partnered with Mintek to develop this process to
the point of commercialisation. Mintek and Braemore have just successfully
doubled the facility’s smelting capacity for the production of Platinum Group
Metals (PGMs) in Randburg.

I would like to express my appreciation to Northam and Anglo Platinum for
supplying this smelter in Randburg with their ore. Lonmin also supplied their
ore in the early days of proving the technology.

Our sustained economic growth has created a situation where energy supply
has been found wanting. Accordingly, and in order to ensure continued growth,
we are moving with speed to invest in energy supply infrastructure. These
challenges became apparent when we experienced unprecedented levels of load
shedding.

Projected economic growth means that we need an additional 40 000 MW of
electricity to support such growth. Our revised build programme indicates that
we will add at least 2 000 MW from various projects that are currently being
undertaken this year. As you are all aware that the next nuclear power plant
has been postponed, measures are in place to ensure that there will be no
shortage of electricity by 2018. Investigations have already been initiated to
close this gap. Our two projects; namely Medupi and Kusile are expected to add
an additional 7 000 MW by 2015. I am therefore confident that our energy
shortage experience is behind us.

All these efforts will be buttressed by the implementation of demand side
management initiatives to reduce overall demand by 10%. The Power Conservation
Programme (PCP), Demand Side Management (DSM) and co-generation form the
pillars of the national demand management strategy.

We, therefore, urge energy intensive industries like smelters and other
value addition processes to establish co-generation power plants from their
vast heat and gas producing processes.

In conclusion, I wish to reiterate that the impact of the global economic
slowdown on the mining and minerals industry should be viewed as a short term
scenario and companies are urged to make careful plans that will allow them to
respond quickly to another cycle of commodity boom.

We need to draw inspiration from Ruel Khoza, once again, and take our
destiny into our own hands and respond to the questions of what it is that we
can do to contribute to the renewal of the continent. There is no better time
to “rise to this quintessential challenge” than now. Now is the time. Ke
nako!

John Maynard Keynes was correct in saying that, “in the long run we are all
dead”, meanwhile, we should surely grasp the nettle. We have a date with
destiny!

I thank you.

Issued by: Department of Minerals and Energy
10 February 2009