David Christianson
Just how rich is South Africa’s minerals treasure trove is highlighted by the Institute of Race Relations’ new publication, ‘What Opportunities does South Africa’s Geological Endowment Offer for the Country’s Future’.
It also suggests, by implication, how much the country is missing out on thanks to a decade and a half of strategic missteps in the policy space.
The stock reference when talking about South Africa’s geological endowment is CitiBank’s 2011 US$2.5 trillion estimate for non-energy minerals. This should be considered hopelessly out of date, given subsequent shifts in demand, industrial applications and exchange rates, as well as mining patterns. In any case, it may not have been terribly accurate in the first place: A different report in the same year (2011), by the Johannesburg-based EcoPartners produced a different, directly comparable figure of US$4.15 trillion.
All that is clear is that South Africa has a terribly rich minerals endowment. We don’t know what it is worth with any degree of certainty because there has been minimal greenfields exploration since the 1980s and that shortcoming has been a product of policy uncertainty.
The IRR publication shows how De Beers waited more than two years for the licences it needed to look for further diamond deposits in the Northern Cape. These were finally granted earlier this year, but the company is still not exploring because it believes there is too much uncertainty in the jurisdiction, and will be until the Mining Charter is finalised.
At its recent results conference, diversified miner, South 32 – which owns the rump of BHP Billiton’s South African assets – said: ‘Quite honestly, until we see how the Mining Charter … lands, it’s hard to invest in exploration in South Africa.’
Nevertheless, there is still a lot happening in South Africa despite the uncertainty. The IRR Report lists 17 South African minerals of ‘Very Large Significance’. Major minerals included in the list are chromium, coal, diamonds, gold, iron, lead, mica, mineral sands, platinum, uranium and vanadium. For some reason not explained, the list describes manganese – which exceeds diamonds in foreign exchange earnings – as only ‘significant’.
Quibbles over detail aside, there is insight into the range of activities going on in South African mining. The report identifies Vedanta’s Gamsberg zinc project at Black Mountain Mine in Aggeneys in the Northern Cape as developing ‘one of the world’s largest known, undeveloped zinc ore bodies’. It also discusses two other locally abundant minerals, vermiculite and andalusite, though fails to discuss the country’s manganese riches (which account for 75 percent of world reserves).
The report notes that deep-level underground mining is in some trouble with extensive travel times to the face eroding productivity. Although the report does stress the need for adequate enabling legislation it misses a trick by not pointing out that the productivity collapse can be traced back to regulation – specifically the 1997 Basic Conditions of Employment Act.
Overcoming this government-created hurdle is of course an area of opportunity in its own right. The report emphasises that problems are sometimes simultaneously opportunities. It outlines some of the initiatives this has sparked, notably the collaborations between the Minerals Council of South Africa, the CSIR, the Mining Equipment Manufacturers of SA (MEMSA) and various government departments on mechanised mining and logistics.
The report discusses the rise of lithium-ion battery-powered vehicles and correctly identifies this as a threat to the platinum industry because it eliminates demand for catalytic convertors in auto exhausts. It also correctly notes that the contest between lithium ion batteries and hydrogen fuel cells (which use platinum), not to mention other battery chemistries, is not yet over. Anglo American platinum is using hydrogen-fuel technology in underground vehicles and is working on improvement of the technology, in partnership with Shell.
Overall, the IRR report is a reminder of how enormous South Africa’s mineral potential is and how well placed the industry is to act the moment the enabling environment can be regarded as favourable. It does contain some idiosyncratic elements, notably its references to minerals tourism as well as the potential development of mining properties, both areas that might offer opportunities but which are hardly likely to significantly shape the national economy. But the reminder of the important relationship between mining and water is welcome, especially the insight that dealing with Acid Mine Drainage offers commercial opportunities.
David Christianson is a Policy Fellow of the Institute of Race Relations (IRR), a liberal think tank that promotes political and economic freedom. Go to https://irr.org.za/
