The business sector in South Africa is extremely concerned at the lack of investment in the mining industry due to unclear policy direction, delayed exploration licence approvals, the energy crisis, and logistics challenges.
THE BUSINESS sector in South Africa is extremely concerned at the lack of investment in the mining industry due to unclear policy direction, delayed exploration licence approvals, the energy crisis, and logistics challenges.
Business Leadership South Africa (BLSA) has warned that the mining sector is facing unprecedented challenges, especially due to the energy insecurity and more than a decade of regulatory chaos.
BLSA CEO Busi Mavuso said the rapid deterioration of Transnet’s ability to move output across the country and through the ports, meant a considerable decline in earnings.
Mavuso said there was a lack of expansion investment by South African miners, but even more concerning was the near absence of exploration spending.
She said this meant the industry was in a terminal state, with only existing mines being slowly mined out and no new ones opening.
“Mining investment has been weak for some time as companies have held back amid uncertainty over energy availability and the future direction of legislation and regulation,” Mavuso said.
“Amendment bills have proposed extreme resource nationalism, giving the state unpaid interests in some sectors and the power to ban exports of key minerals, among many other changes.
“It is quite unclear which of these might end up becoming law and it is totally understandable that no one is committing billions of investment in these circumstances.”
According to the Fraser Institute’s annual Investment Attractiveness Index, South Africa ranked in the bottom 10 global mining jurisdictions for the second consecutive year in 2023, and placed 57 out of 62 countries.
South Africa now ranks behind Mali and the DRC, with continental leaders Botswana now rated as the 10th most attractive mining destination in the world and Morocco 16th.
Mavuso also said that the performance of the Department of Minerals Resources and Energy (DMRE) had been dismal, with not one of the 2,525 mining licence applications received in the current financial year having been finalised as of December.
“We have also endured endless delays in the procurement of a new cadastral system to record mining activity across the country, one of the major reasons for inefficiencies in rights processing,” Mavuso said.
However, the DMRE last week said it had finalised 2,041 applications in the current financial year, and committed to being efficient and transparent in processing mining applications.
This comes as Richards Bay coal exports last year were at a 30-year low due to falling rail volumes, with Transnet delivering 48 million tons against a contracted volume of 60 million.
Volumes of iron ore have also been falling dramatically with Transnet exporting 51 million tons against a target of 60 million, also a historic low.
The National Treasury has estimated that the economic cost of rail inefficiency last year was about 5.5% of gross domestic product.
In 2022, the Cabinet adopted the White Paper on National Rail Policy in a bid to restructure the rail market, including granting third-party access, the establishment of the independent Economic Rail Regulator (TER), and the vertical separation of Transnet.
The policy further contemplates the development of the Private Sector Participation Framework and it alludes to the National Rail Master Plan, anchored in the National Transport Master Plan (2015).
Webber Wentzel partner, Scott Edmundson, said the government’s intention was to codify the policy through the Economic Regulation of Transport Act which will form the roadmap for rail reform, sector liberalisation, and economic regulation of transport.
“The rail reform roadmap is a much-needed, clear, sensible, and achievable economic solution (even though the timing seems optimistic), but the political risk lies in the possibility that the progress of the TER Bill through Parliament is delayed in a fractious political environment during an upcoming election year; in ill-conceived requirements and conditions for slot sales and third-party access; and protectionism of the status quo by impacted stakeholders,” Edmundson said.
– BUSINESS REPORT
