Q: The pandemic clearly remains the biggest challenge to all sectors of the economy. Is the Minerals Council in any talks with the government about securing vaccines for the mining workforce? And what is the council’s position on the government’s centralised approach?
A: Our collective priority and responsibility as a nation is to get as many ‘jabs-in-arms’ as possible, as quickly as possible, to save lives and livelihoods. This is not the time for politics. This is a significant national priority and will enable many lives to be saved and for the economy to be reopened. Procurement of vaccines the world over is undertaken by governments in the first order. It is quite right, in our view, that the South African government should procure the vaccine for its citizens.
Business has stepped up, as it has done in the past, to offer its support to government in the distribution of vaccines to mining employees and mining communities. Using our significant healthcare infrastructure and capacity, the mining sector could help vaccinate as much as three million people.
Q: The pace of approval for self-generation projects is still slower than a disabled snail. Does the government lack capacity? One perception is that there are no spoils for politically-connected cadres so there is no rush.
A: The latest IRP is the guiding document/framework for the restructuring of the electricity supply industry into the future. Government is in the process of procuring more than 10 Gigawatts of new generation capacity. In the meantime, there is an emergency procurement programme to fill the gap between what Eskom can provide to the country and what is needed. There are differences of opinion in how big the supply shortfall is, and therefore how much should be procured.
Progress is being made on self-generation and last year with DMRE Minister Gwede Mantashe agreeing on the critical need to unlock private sector investment in self-generation projects. The Minister has subsequently provided a blanket exemption for companies having to obtain Ministerial Exemption for these projects. However, there are a multiplicity of other regulatory requirements (environmental authorisations, change of land use requirements) and obtaining a grid-tie agreement with Eskom to wheel on the network, which are all required before even approaching NERSA. The grid-tie Eskom process is cumbersome and takes too long as is the NERSA generating license process. If we could see the red-tape in all these requirements converted to ‘smart-tape’, we would see significantly more progress.
As mining, we can bring on stream over 2 gigawatts in new renewable energy projects if these bottlenecks can be reduced. We are in engagement with the DMRE and Eskom.
Q: What is your policy wish list now? If you had three wishes, what three policy changes would you like to see to assist the mining sector to grow?
A: Our wish list is deceptively simple:
Our first wish is that President Ramaphosa and his entire Cabinet focus on making South Africa a much more competitive investment destination, in the top quartile of the World Economic Forum competitiveness rankings.
To do so requires material structural and institutional reforms to stabilise the fiscus and public sector debt, to restructure or sell non-performing SOEs, to improve policy certainty, to reduce ‘red tape’ and make South Africa a much easier place to do business.
Unfortunately, the government’s Economic Reconstruction and Revival plan (ERRP) announced on 14 October 2020, does not really address the criticality of these structural and institutional reforms, and instead focuses on a huge infrastructure plan where government has neither the capacity nor the balance sheet.
Our second wish is the critical need for the government to unlock the potential of the private sector to grow the economy. Instead of government trying to control everything, enabling and allowing the private sector to invest and compete in key markets where government dominates (rail, ports, electricity, pipelines, etc.,), would be a complete game changer. There is absolutely no doubt in the minds of business that the current SOE model has failed miserably.
Our third wish is the criticality of promoting a much more certain, predictable and competitive policy and regulatory environment for investment into exploration and mining.
Q: The DMRE has promised to speed up approval of exploration permits. Is there any sign of a pick-up of exploration in South Africa?
A: Unfortunately, exploration in South Africa, particularly greenfields exploration, is at a very low level and this has been the case before COVID-19.
Between 2000 and 2018 Canada attracted, on average, US$2 billion in exploration dollars per annum, Australia attracted $US1.8 billion, while SA attracted only $US 194 million during the same period. In 2019, South Africa accounted for only 1% of global exploration expenditure and only 0.1% of Greenfields exploration.
There are a number of reasons for this: a lack of transparency in the permitting system, delays in the issuing of permits, regulatory uncertainty, as well as a lack of properly structured tax incentives for individuals/entities to invest into exploration in SA.
A ‘one-stop-shop’ in the application process would also greatly assist in streamlining the application process, as would a system of granting prospecting rights based primarily on the merits of the proposal.
Q: The decline in jobs in the mining sector seems to have been arrested, or at least the pace of decline has slowed. What do you attribute that to and what are your expectations for the year ahead – do you think the sector will create or shed jobs?
The mining sector’s primary focus in 2020 was managing the pandemic in an orderly fashion in order to save lives and save livelihoods. Through great collaboration with the DMRE and trade unions, a set of standard operating procedures were implemented in terms of a risk-based approach of preventative and mitigating controls, which enabled the sector to get back to work but also in a responsible manner in managing the pandemic.
Mining production is expected to be about 10% lower in 2020 due to the pandemic, but revenues improved on the back of a weaker rand and higher prices.
The industry was able to bring back about 370,000 workers out of a pre-lockdown workforce of about 440,000 people, as people at higher risk and with comorbidities stayed at home.
Going forward, continuing uncertainty around COVID-19 will continue to be a challenge. But, more than anything, the industry needs new investment to be able to sustain operations and grow.
Q: What is the current state of play of legal challenges around the Mining Charter?
In respect of the Minerals Councils application for a review of the Mining Charter, this is still at a pleadings phase. All the parties who were required to be joined to the matter pursuant to the 30 June 2020 Order have been joined. The hearing of the matter will be conducted before a full bench during the week of 3-7 May 2021. BM