BLUEPRINT FOR RECOVERY 2024
Part 7: It’s the new scramble for Africa’s resources, and South Africa is messing up – badly
In 2017, Pravin Gordhan urged South Africa to ‘join the dots’ between corruption and the Zuma administration. John Matisonn joins those dots in this eight-part series. In this instalment, he spells out that South Africa needs a whole new strategy that embraces minerals, energy, climate change, local manufacture and job creation – and a minister whose credibility gives confidence that we are in safe hands.
The new scramble for African mineral resources has reached the southern tip of Africa. China, France, the US and Russia have staked claims, and South Africa’s black empowerment partners are taking their share.
It could be the biggest boost to the South African economy since 1994. But it also threatens our climate change policy and commitments to Paris Agreement decarbonisation targets.
And we could still mess it up.
The DA’s shadow mineral resources and energy minister, James Lorimer, compares enormous new finds of gas and oil in southern Africa to the impact of the discoveries of diamonds in Kimberley in 1867 and the Witwatersrand goldfields in 1886.
This potential bonanza will test whether we are in control of our sovereignty or victims of the latest neocolonial invasion and rampant grift.
Government’s poor record of managing mining will not be fixed in weeks or months.
First, the good news.
In Virginia, Free State, the US government’s International Development Finance Corporation loaned $500-million to Renergen, which is already producing helium and liquid gas. This field has one of the biggest concentrations of helium in the world. Its gas is replacing imports from Mozambique and has the potential to convert trucks from diesel.
France’s Total’s northern Mozambique gas field is considered the biggest deposit in the world after Qatar’s.
Total and the UK’s Shell, the oil “super-majors”, have poured billions of rands into gas fields off the coast of Namibia right on the border with South Africa, where they are already finding viable deposits.
Total and Shell have found enough gas and oil offshore just inside Namibian waters that Lorimer projects could reap Namibia’s government as much revenue as Norway gets from its oil industry in the next 10 years.
And in Mpumalanga, Australia’s Kinetiko Energy this month announced a very large discovery of gas in Secunda. Like the offshore finds, the percentage of successful “hits” with each exploration well has been exceptionally high, bringing confidence that this gas field will also be profitable and could provide work to miners worried about losing their coal jobs.
Geologists I spoke to were a little more cautious, waiting for announcements based on confirmed technical reports which are expected in the next two months from both Kinetiko and the Namibian fields.
They warned of the inevitable hype of miners striking that dreamed-of pot of gold. But even they were hugely impressed by the Namibian results, where seven or eight wells have been sunk and all found oil, desirable light oil low on undesirable sulphurs or tars.
Global mining houses prefer working in Namibia because they find it faster and easier to deal with.
Based on geologists’ reports, Total believes oil and gas stretch well into South African waters and will begin drilling south of Cape Town next year.
Meanwhile, thousands of zama zamas eke out a living in disused mines in Kimberley, around Johannesburg, the Free State and Mpumalanga, because mining jobs have been in long-term freefall in the democratic era.
South Africa’s gold production peaked more than 50 years ago. Over that time, shafts have closed, leaving men from the hinterlands of the Eastern Cape, Lesotho, Mozambique and Zimbabwe out of employment and with very little to return home to.
Many think jobs declined naturally because our mines are old. That’s not true. The missing factor is exploration. Exploration has slowed down markedly in South Africa.
Exploration using new methods finds new deposits on every continent. Former South African mining houses join the global players to establish new mines elsewhere.
Exploration collapsed over decades because of decisions made in government. South Africa is considered increasingly unattractive to investors compared with other mining countries, including Namibia.
The Fraser Institute measures investors’ perception of South Africa as a mining investment destination. By 2019, Namibia and Botswana ranked in the top two in Africa; South Africa was 12th out of 15.
For the past two years, South Africa ranked in the bottom 10 global mining jurisdictions, at 57 out of 62 in the overall Investment Attractiveness Index in 2022. The year before, it was 75th out of 84 jurisdictions.
Little wonder that experienced, unemployed mineworkers become zama zamas. They have the skill to find ore in the least hospitable, abandoned workings. It may be their only bankable skill.
South Africa needs more than better policing to contain zama zamas. It needs an overarching strategy that embraces mining, energy, climate change, local manufacturing and job creation – and foreign policy.
In 2018, Ghana, Mali, Côte d’Ivoire, Burkina Faso and Democratic Republic of the Congo got more exploration funding than South Africa.
Some of these places provide very tough living conditions, even lawlessness, but mining houses prefer them because dealing with their authorities throws up fewer obstacles.
With our century-and-a-half of experience in large-scale mining, South Africa should be the model for the region. Instead, mining houses look with envy to Namibia, Zambia and elsewhere.
The story of mining since 1994 is a story of unintended consequences that have to be admitted to be fixed. From 40% of world mining in the 1980s, we now make up less than 5%.
The policies and practices that have to be turned around:
- An end to constant policy change and instability.
Investors will not easily put billions of dollars in the ground if the next minister might change the shareholding terms. Many companies accepted a need for black empowerment partners, though they would have preferred otherwise.
But, after investing, the threshold was raised from 25% to 30% and many thought it a bridge too far. And wondered what the next surprise might be. Insensitivity to investors’ costs is fatal.
A government that wants to attract investors must set long-term policies and impress on their political parties and voters the importance of being reliable. Promised enforcement must be credible.
- Red tape. There is a backlog of more than 5,000 mining, prospecting and permit applications. With all that the government spends, resources must be shifted to cut the backlog urgently. A minister concerned about the loss of jobs involved should have at least a weekly report, demanding a credible, monitored path to removing the waiting lists. Botswana processes a mining licence in 40 days; South Africa takes 350.
- The collapse of Transnet’s rail services was a devastating additional blow to mining. The Minerals Council SA has said if the rail network were operating at full capacity, with a few minor enhancements the country would realise R151-billion more in bulk mineral sales.
- Be alert to unintended consequences. The replacement of jobs by technology accelerated after the Marikana shootings, fuelled by technological advances. Companies often respond to policy changes or political pressure by replacing staff with new technologies.
What could change?
Lorimer would clearly handle the portfolio very differently, but in reality, the ANC would have to be weakened far more than seems realistic for an opposition minister to get the post, let alone have a free hand.
This stew – billions of dollars in investments, the global climate crisis, jobless South African mineworkers, electricity failure and a dysfunctional government – requires complex trade-offs.
Climate change is real. Millions of jobless are real. Everybody’s electricity needs are real. The need for investment is real. And the potential for instability (Islamic violence in northern Mozambique was precipitated by the Total gas find) and the resource curse are also real.
Mining cries out for a thoughtful, trusted champion capable of keeping all these balls in the air; to make trade-offs that are realistic without any hint of a personal interest in shares or colleagues with shares in the outcome.
Big strategic plans that currently don’t exist will be needed to chart a path that allows South Africa to produce fossil fuels that foreign countries are supplying as part of a planned journey to wean the country off them. We want to be responsible about climate change, but not have to import oil from fellow BRICS members, for example.
Gas has great value in the interim. It’s needed to fill in when the wind doesn’t blow or the sun doesn’t shine. Batteries have a shorter life. It’s less environmentally damaging than petrol as fuel in trucks. But it does emit carbon.
The best outcome for most South Africans will inevitably be a compromise. It won’t be possible to satisfy environmental purists without causing unemployment, and it won’t be possible to keep using coal the way we have.
It requires a truly disinterested, steady hand whose word is copper-bottomed.
The minister of mineral resources and energy needs to know, or have advisers who know the sector intimately, both South Africa’s and global trends that affect us.
Special support must be given to strategically important minerals that have renewable energy applications such as rare earths, manganese, platinum, copper, graphite and nickel.
South African research papers have been raising these issues for years. A theme in many was to link climate policy to economic development and to anticipate a skills shortage in new fields.
Yet change is either absent or years too late.
Around the same time new research studies on these lines went public, in September 2019, Mineral Resources and Energy Minister Gwede Mantashe was in Perth, Australia, promoting mining investment to an audience including some of the most important mining companies in the world.
Somehow his speechwriter confused an April Fool’s joke on the Smart Energy International website and had Mantashe say that a valuable new mineral, Hazenile, was “discovered in abundance in the area between the crypt and throne room caves in the Congo (sic) Caves in the Western Cape”.
A minister focused on development should know every one of the many minerals that give South Africa a competitive edge. The mistake revealed more than just a misquote.
A “listening” – and decisive – government must reach agreement with business and trade unions to produce viable policies, with guarantees of long-term policy certainty during which the government undertakes not to make supplementary changes.
Millions of jobs, climate change and national prosperity are at stake in South Africa’s choice of mineral resources and energy minister.
All involved South Africans should discuss the developmental trade-offs we need to make to bring back jobs and play our part in climate change. No government will get there without public support.
The minister’s credibility is worth gold. DM
Next: Fixing agriculture and the information economy
South African journalist, author and policy consultant John Matisonn’s book Cyril’s Choices, An Agenda for Reform, explains how South Africa’s missteps led to the current malaise and how to change. It is based on four years in the Mandela administration, on the SABC interim board in 2017, work in the United Nations as chairperson of the Electoral Media Commission in Afghanistan and acting project manager of the UN’s election project, and a lifetime study of successes and failures in national economic turnarounds that started at the University of Chicago, where he studied the cases of Japan and Russia.