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Mining Indaba 2020: Vague Promises leave South Africa’s Mining Industry Insecure

By David Christianson
12 Feb 2020
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Mining Indaba 2020: Vague Promises leave South Africa’s Mining Industry Insecure

An article published online by the conference organisers sums up the limitations of events like the Investing in Africa Mining Indaba (‘the mining indaba’) held in Cape Town from 3-6 February 2020. ‘Governments are leading the way at the mining indaba’, it read. Indeed, there were many African governments pressing the investment case for their own jurisdictions. But national exposure at a networking event was hardly going to convince any hard-nosed mining executive in the absence of a solid investment case. In fact, it was likely that a fudged presentation by a national mining minister would do more harm than good.

This was arguably the problem with the host country’s efforts. South Africa’s Mineral Resources and Energy Minister, Gwede Mantashe, addressed concerns about electricity supply in his Opening Address. Energy security has been the dominant concern of the industry as supply utility Eskom has faltered in recent months.

Load shedding was reintroduced in December last year at an unprecedented Level 8 (shutting down Sibanye Gold, Impala Platinum and Harmony Gold among others) and is expected to continue at level two (i.e. 2 000 MW offline) for the next 18 months. Big industry players have long been advocates of ‘embedded’ generation options where they would generate their own reserve supply and sell the excess back into the grid.

At the Indaba, Minerals Council of South Africa CEO Roger Baxter reiterated a claim made previously, that the industry could install 1 500 Mega Watts of generating capacity in the next nine to 36 months. Mantashe appeared to speak to the problem, saying that his department was ‘in the process’ of revising Schedule 2 of the Electricity Regulation Act to enable self-generation.

But the minister did not address key questions: would the cap on self-generation without a licence be lifted from 1 MW to 10 MW as was suggested by the government’s energy advisor Anton Eberhardt last year? What about production capacity beyond 10MW? Most importantly, would embedded electricity producers be able to sell excess production back into the grid? At what price? This is a question big mines need to have answered so they can model the costs and benefits of embedded generation.

Mantashe was even less specific on his second big suggestion that government would create a new power generation venture ‘ideally’ in partnership with the private sector. This came as a surprise to both the Minerals Council, which represents the industry, and (apparently) to Eskom CEO Andre De Ruyter who has had two meetings with energy intensive users this year. Speaking separately, Mantashe’s Director General, Jacob Mbele, said the second power generation venture was ‘just a concept’.

Mantashe, interviewed by CNBC, was unperturbed about red tape issues. ‘If you say there is red tape when you have not tested it you are aspiring to see red tape’, he said. He promised to ‘unblock bottlenecks on a project-by-project basis’. This degree of micro-management is not what an industry desperate for policy certainty is looking for.

The industry and the minister seemed even further apart on the Mining Charter. In the same interview the minister said ‘if they’re not ready (to implement the Charter’s provisions) they’re in the wrong business. But the Minerals Council apparently still plan to challenge the Charter in court.

Elsewhere there was positive news on the red tape front with Dr. Kgosientso Ramakgapa, the recently appointed Director-General of the President’s Infrastructure Investment Office, telling the Indaba that he had a mandate to cut red tape. This would apply particularly to facilitating ‘big ticket investments’. Beyond these, the concept was to introduce a ‘single window’, the purpose of which is to deal with all local, provincial and national government permissions and licences at a single point.

South Africa still experiences negligible green field investment in mining projects and very low levels of exploration. The pipeline is dry and production continues to fall – down 2% in 2019 after dropping 1.8% in 2018. Other African countries, notably Ghana, Botswana and Sierra Leone, spoke a good investment story at the Indaba.

In this competition for investment capital South Africa is not looking strong. During the Indaba, AngloGold Ashanti confirmed the sale of its South African assets while putting its efforts (and R3.25 billion) into Obuasi gold mine in Ghana. It will ‘replace South Africa with Obuasi’ said CEO Kelvin Dushnisky. It’s going to take more than the vague promises potential investors heard at the Indaba to reverse this trend.


About the Author(s)

David Christianson

David Christianson

David Christianson is a Political Analyst based in Cape Town. He is a contributing editor for WHAM! Media and has also been an assistant editor of Finance Week, analyst at the Small Business Project, researcher at the Urban Foundation, and lecturer at Rhodes University as well as the universities of Natal and Cape Town.

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