Honourable Buyelwa Sonjica – South Africa Minister of Minerals & Energy – Mining Indaba Conference Speech in Cape Town

Introduction

Programme director
Honourable Ministers
Distinguished guests
Senior Government Officials

Ladies and gentlemen

On behalf of the people of South Africa, I extend to you all a warm and hearty welcome as we convene for the 13th annual Mining Indaba Conference here in Cape Town. It is apt for me to congratulate the organisers of this conference, the IIC, for continuing to successfully facilitate this level of knowledge and information exchange among stakeholders in the mining industry. I am pleased to see my counterparts from other parts of the continent as well as local and international participants at this critical juncture in the mining industry.

The past few weeks have been characterised by global economic instability, which is being underpinned by news of the looming economic recession in the USA. The mining industry has not been immune to this development, although we view this development as a short-term correction and believe the fundamentals remain in place for a prolonged demand growth for the bulk of the mineral commodities.

The African Economic Reforms

Since the late 1970s, the African countries have been in search of a policy framework to guide a continent wide fundamental socio-economic transformation that would enable them to overcome the pervasive structural weaknesses. It was not until the last decade or so, that African countries undertook economic reforms to invigorate their respective economies through positive development philosophy. In the mining sector, a number of countries have made efforts to reform their policies and their regulatory environment aimed at encouraging private sector participation, attracting new capital investments, and stimulating mineral exploration. These policy changes are intended to ensure that Africa remains internationally competitive in attracting and retaining mining investment for the benefit of all stakeholders.

It is expected that the full implementation of these mineral policies will offer opportunities for sustained investment in the mineral industry in Africa, by ensuring a competitive business environment and the removal of barriers to entry. To this extent, many African mining countries have taken this principle through the African Mining Partnership (AMP), which is a project based forum of all Africa’s Mine Ministers aimed at driving New Partnership for Africa’s Development (NEPAD) initiatives for mining and mineral related activities. The AMP is committed in pursuing mining and minerals policies which will significantly contribute to poverty reduction and economic development.

Ministers, Honourable guests, Ladies and gentleman, the mining industry have built and still continue to build the economies of this continent. Africa remains a leading producer of many critical commodities, such as diamonds, gold, platinum, chromium and vanadium. More importantly, the continent remains significantly under explored, albeit with known reserves that surpass the rest of the world in terms of volumes in the ground, grades, ease of mining, etc. These reserves require your investments and skills to help further build the continent and to rid the unacceptably high levels of poverty.

African Mining Partnership (AMP)

The mining industry in Africa is at an important juncture. The changes that are taking place on the continent are intended to bring about greater levels of peace and stability, the greater push towards democracy on the continent, and the NEPAD programme to improve infrastructure, health care, human development and industrial capability amongst others, will all have positive ramifications for people doing business in Africa. These changes must result in a shift away from mining being tainted with a contributory role towards the conflicts and undemocratic practices that have been pervasive in many African countries over the past few decades.

The changes we are seeing in Africa form part of a global movement that recognises the need for change in trade relations, the environment and the eradication of poverty. Although, Africa is endowed with mineral resources, currently, only 10 percent of the continent’s global trade basket is made up of trade conducted between the countries of Africa. Mining is seen as the most likely activity that can expedite economic development in Africa.

The fifth plenary of the AMP was completed on the 2nd of February 2008. One of the key outcomes of this plenary is the adoption of a new project that will guide the formation of the African Mining Policy, which will be seeking to harmonise mining across the entire continent. This policy framework is aimed at moderating mining legislation across the vast and commodity rich continent to attract further investment in the sector while optimising the benefit for the African people.

To date, almost 20% of the global exploration budget was spent in Africa, indicative of the commitment by mining companies to the advancement of the economic state of Africa and equally by African governments in creating an enabling investment environment for mutual benefit. This positive sentiment is also being underpinned by increasing political stability in the continent, which is fundamentally driven by African leaders for the benefit of Africa herself. I further encourage you to plan your value-adding programs for the respective commodities to leverage optimal benefit for all stakeholders in the continent. The African century has indeed started.

REACH

The REACH policy has been adopted by the EU with effect from 1st June 2007. We continue to participate in the lobbying efforts currently underway to canvas for certain amendments to the policy that will make it easier for developing countries to conform to the requirements of REACH, without detracting from its main aims. We are also analysing the potential ramifications of its implementation. We believe there may be opportunities created for producer countries to not only process locally produced ores, in an environmentally sustainable manner, but to also source primary ores from other countries for processing and exporting as value added and REACH compliant products to destined countries.

The post REACH adoption classification of nickel carbonate product as carcinogenic 1 category from level 3 carcinogenic without supporting research is worrisome. If the EU is allowed to continue with this classification, a wrong precedence could be set for the REACH policy framework to be used to justify re-introduction of trade barriers. The African Mining Partnership (AMP) was unanimous in condemning this classification of nickel carbonates, supporting the call by other producer countries for the EU to delay this ambiguous decision until such time that the research is conclusive.

The South African context

Since South Africa’s democratisation in 1994, the economy has been resilient and growing consistently to date. Several government interventions have been introduced to create an enabling environment for further economic growth. This is intended to benefit not only a selected few but, will allow broader participation of previously disadvantaged South Africans. To this end, the Accelerated Shared Growth Initiative in South Africa (ASGISA), which is a collaborative strategic intervention and co-ordination effort among the government, the business community and labour, aims to achieve an annual economic growth rate of 6% by 2009, and to halve the country’s scourge of unemployment and poverty by 2014. This initiative comprises a limited set of interventions that are intended to serve as catalysts to Accelerated and Shared Growth and Development.

After more than a century of mining activities, the mining industry continues to play a pivotal role in the country’s economic landscape. The industry is an important foreign exchange earner for the country. Although the sector’s contribution to the national GDP has apparently declined since the early 1980’s, the decline must be understood in the context of faster growth pace in other sectors such as manufacturing and services.

Mineral production has been a major contributor to foreign exchange earnings and employment in South Africa. During the past, the gold sector accounted dominantly for all mineral related income. To this end, gold has fallen from its eminent position as the main contributor to mineral sales, as a result of which employment in the mining industry contracted significantly since 1986. Employment in the mining sector decreased cumulatively by 17.1 percent from 553 116 in 1997 to 458 534 in 2006. However, I am pleased to say that since the promulgation of the Mineral and Petroleum Resources Development Act (MPRDA) in 2004, employment trends are increasing again, breaching the half a million point in the third quarter of last year. The level of investment in prospecting as well as in mining has increased exponentially last year making South Africa one of the best destinations for investors.

As I mentioned at my inaugural address of this Indaba last year, we will continue to amend the MPRDA. Significant progress is being made to this effect and an announcement of proposed changes is imminent. We will also be assessing the impact of the Mining Charter in preparation for its review, which will be done in consultation with the all stakeholders by 2009. All holders of the old order mining rights must submit their rights for conversion before 30 April 2009. I would therefore urge all holders affected not to wait until the last minute to submit. We as the DME are ready and waiting for those applications.

Beneficiation

With mining industry activities ongoing for well over a century in this country, there has been limited value addition or beneficiation of some of the commodities produced in this country. The conspicuous low levels of value addition for the bulk of strategic mineral commodities in South Africa, coincident with the period of mineral exploitation extending beyond 100 years, is consistent with trends in other emerging producer countries which, tended to supply western countries with primary ores at relatively low prices. These ores are typically processed in those countries to finished goods, with up to 10 times multiplier in value of the latter as compared to the original ores. Some of these finished goods tended to be imported back into South Africa at these high prices.

South Africa loses on the revenue that it desperately needs to address socio-economic challenges but also; it becomes too expensive for South Africa to re-import finished goods that have been processed elsewhere in the world. As government sets specific targets of growth, I am convinced that as a collective in this industry, we all have a contributory role to play towards attainment of ASGISA, which seeks to attain a 6% economic growth by 2009 and halve both unemployment and poverty by 2014. Such goals cannot be achieved, unless deliberate policy intervention, such as our beneficiation strategy, which seeks to transform the industry from being almost purely resource based to being knowledge based, are sought and implemented urgently, as the known reserves are rapidly being depleted.

This year we will be looking at the beneficiation of strategic minerals such as gold, platinum group metals, chrome, iron ore, manganese and heavy minerals. This beneficiation intervention strategy seeks to fundamentally change behaviour in order to facilitate a seamless and enabled beneficiation environment for affected minerals. As they say: “If you can’t measure it, don’t do it”, we are continuing to record a steady growth in the processed mineral sector. Processed minerals reached the highest of R43.4 billion in 2006 showing an increase of 15.7% compared with the preceding year. The figure exceeds revenues from primary mineral sector, indicative of the critical role of beneficiation in creating new and sustainable sectors in our economy.

Draft Mineral and Petroleum Resources Royalty Bill

The Mineral and Petroleum Resources Royalty Bill initiated intense debate at its inception a few years ago. I am pleased to announce that significant progress has been made to date, in consultation with all stakeholders. In December of last year, the draft Bill was released by our Minister of Finance, incorporating critical input from affected parties. Comments received to date on this draft Bill have been encouraging and we envisage that this Bill will be finalised before 2009.

Mine safety

I would also like to reiterate the government’s position on mine safety. The country’s safety records in the mining sector are far from being impressive. Several fatal accidents continued to occur in our mines, resulting in closure of some of the operations last year. We are not going to compromise on improving the safety of employees in the sector. This culminated in the Presidential intervention, requiring a safety audit for all of our mining operations in the country and indeed indicative of the extent to which we seek to improve the country’s safety records in the mining sector.

Energy situation

South Africa recently experienced unprecedented levels of electricity demand resultant from faster than expected economic growth. Provision for electricity supply consistent with the economic growth levels had not been sufficiently made, as a result of which there have been large scale shortages of electricity throughout the country. I concede that this situation impacts negatively on the planned output of the country’s mining operations and thus urge all of the current miners to continue their commitments to be energy efficient and innovative in their respective mining operations, while we persist in securing adequate supply in the medium term. I therefore assure you that the permanent solutions to this challenge are being sought, in consultation with all stakeholders, including the mining industry as one of the largest consumers of the country’s electricity supply.

Already the government has released a national response plan which deals with the mandatory provisions, the incentives and the support programmes that will be introduced to increase energy usage efficiently. This will allow for economic growth to continue on the basis of efficiency in the short and medium term whilst we increase our reserve margin by bringing on stream new capacity in the long term. Eskom’s moth-balled power stations will also be recommissioned to address the situation in the medium term.

Within the context of the current energy situation in the country that is confronting us, it is clear that we need to strive towards the timeous development of projects that provide us with an integrated power and energy solutions. We therefore welcome the development of projects like the Springbok Flats Energy Complex which by its very nature enables us to address several strands of energy equation, namely the production of uranium, the development of a coal to diesel plant and the development of a significant coal generation power plant.

Conclusion

Your Excellencies, Ladies and gentleman, we have an agenda before us and I invite you all to participate fully in the discussions over the next few days. With these words, I wish you success in your deliberations and let us work towards ensuring that Africa’s renaissance is expedited through mining. We cannot do it without you. This will form an integral part of the continent’s growth and an everlasting peace.
I thank you.

Date: 05/02/2008
Source: Department of Minerals and Energy
Title: SA: Sonjica: Mining Indaba Conference

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