KEYNOTE ADDRESS BY THE DEPUTY MINISTER IN THE PRESIDENCY, MR BUTI MANAMELA, MP, ON THE OCCASION OF THE BARCLAYS AND ABSA MINING SHOWCASE 2017
RADISSON BLU HOTEL, CAPE TOWN
6 FEBRUARY 2017
Programme Director;
Deputy Chief Executive of Barclays Africa Group Limited Mr David Hodnett
Executives and eminent delegates
Members of the local and international investment community
Members of the Diplomatic Corps
Distinguished Guests
Ladies and Gentlemen
I must convey sincere apologies from Minister Jeff Radebe, who could not grace this occasion due to other pressing national responsibilities. He was looking forward to addressing this occasion but circumstances beyond his control made it impossible for him to be here today.
We are gathered here today in the backdrop of a volatile world economic environment. The global economic growth has significantly slowed, and this poses major risks for national economies especially in the developing world.
South Africa is not in a vacuum. We are part of the developing world and we are affected by the changes that take place in the global economic environment. The negative trend in our economic growth manifests itself in the triple challenges of poverty, unemployment and inequality.
As a nation, we are below the targets set out in the National Development Plan (NDP), which seeks to create a better and more prosperous society by 2030. We need to engage in drastic measures to ensure that we eliminate abject poverty, widespread unemployment and gross inequalities amongst our people.
After two decades since the dawn of freedom and democracy in South Africa, poverty rates remain high and inequality as severe as ever.
We are grappling with the challenge of reaching the ambitious NDP targets, which include dropping the poverty rate from 39% to zero, and creating 11 million jobs.
The main victims of the negative trends in unemployment rates are the youth and this spells a bleak future for our society. The current unemployment rate among the youth (aged 15–35) stands at a staggering 38%. The major risk with these figures is that high youth unemployment rate breeds restlessness, crime and substance abuse, among other negative effects.
The challenges that we face are, however, not insurmountable. We need to develop and implement effective strategies now so that future generations inherit a better and more prosperous South Africa. Government alone cannot bring lasting solutions to the myriad challenges that confront our society today. We must join hands and combat unemployment especially among the youth.
South Africa is a country with a mixed economic system primarily driven by the private sector. It is reported that approximately 75% of our economy is in the hands of the private sector. This places the private sector as a very important partner in our efforts to find solutions to the economic challenges that confront us as a nation.
A healthy cooperation between government, the private sector, labour and civil society is a fundamental element if we are to change our economic environment. This is the nexus that would propel us forward as a nation.
It is against this backdrop that I feel honoured to be part of the Barclays and ABSA Mining showcase today. We should use this platform to explore viable ways in which we can attract investment and enhance growth of our economy. We must be able to reflect on the overall impact of mining in the economic condition of the various sectors of our society especially the impoverished communities.
The mining industry is one of the major catalysts in economic development and has been the cornerstone of the South African economy for many decades. Despite the myriad complex challenges that confront the industry, it remains of vital importance to our economic growth.
We know that Johannesburg would not have developed into the economic hub that it is today if it was not for the gold mines in the region. Mining continues to be a significant contributor in our economic landscape. Since the discovery of gold in the nineteenth century, the mining sector became the key engine of development in South Africa with large mining houses. These companies drove investments in mining related research and development, industrial capabilities for capital goods inputs, the core economic infrastructure as well as in agriculture, retail and financial services.
Many of these mining companies unbundled after 1994 and some shifted their primary listing from South Africa in anticipation of major regulatory reform.
This has resulted in the sector being fragmented across the value chain with limited investment in new technologies to both enhance competitiveness and expand.
Despite a number of setbacks in the mining industry, the sector remains extremely strategic to the South African economy. In 2015, the sector directly contributed 7.7% to South Africa’s GDP, was responsible for over 25% of South Africa’s merchandise exports (40% if one includes beneficiated materials) and attracted 15% of the country’s foreign direct investment. Presently the industry employs 460 000 people directly, although jobs in associated industries and through the induced effects of mining provide another 900 000 jobs
Notwithstanding the track-record of over one hundred years of mining, the quality of existing reserves is estimated to be more than R35 Trillion, exclusive of energy commodities (coal and uranium) as well as the residual exploration potential for discovery of additional mineral resources using current exploration technology and techniques.
Greenfield exploration has declined to well below a percentage of the global share of exploration expenditure from its former pre-eminent highs of 5 percent.
Although the commodity price environment is much changed compared to the end of 2015 and early 2016, the environment remains challenging for the mining industry. Estimates put the net aggregate loss of the South African Mining sector at R37 billion in 2015.
Presently, with low commodity prices, the industry is in a dire state - more than 40% of the SA platinum mining industry and 31% of the gold mining industry is loss making. The bulk sectors such as coal, iron ore and manganese ore have on average 50% of its operations break-even to loss making. This downward trend has led to closures and retrenchments in a number of companies.
The sustainability of the industry is also under threat as a result of a combination of inadequate investment in innovation and technology by both the public and private sectors, a perceived uncertain and / or contradictory policy and regulatory environment as well as unstable relationships between many mines and their workforce and surrounding communities.
The industry is facing further challenges in that a significant portion of South Africa's mineral resources are not commercially minable using existing mining systems and associated technologies and easily accessible resources are reaching depletion.
The NDP offers a long-term perspective. It defines a desired destination and identifies the role different sectors of society need to play in reaching that goal. The Plan aims to ensure that all South Africans attain a decent standard of living through the elimination of poverty and reduction of inequality.
Our regulatory environment also makes a concerted effort to diversify the industry while at the same time enhancing its sustainable growth. In 2010, the Minister of Mineral Resources adopted the “Strategy for Sustainable Growth and Meaningful Transformation of South Africa’s Mining Industry.”
Subsequently, the Mineral and Petroleum Resources Development Amendment Bill 15 of 2013 (MPRDA) was adopted. The primary aim of the Bill is to improve the ease of doing business in the industry, including the streamlining and integration of mining, environmental and water authorisation processes. These developments will further enhance the industry to continue creating a conducive environment for investment, growth and job creation.
We are trying to create a regulatory environment that takes cognisance of both the business needs as well as the national development imperatives. We want to create a balance between the two so that no one thrives at the expense of the other.
Ladies and gentlemen, our interventions would be meaningless if we continue to perpetuate the inequalities that are entrenched in our society. We have a historical backlog of a skewed economic system characterised by exploitation and imbalanced distribution of wealth along racial lines. This calls for a radical transformation of our economic environment. In the words of Karl Marx:
“Between capitalist and communist society there lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat.”
We are now well into the third decade of the democratic dispensation in South Africa, and we cannot continue to lament the legacy of our divided past. We must accelerate radical economic transformation to ensure beneficiation of the majority of black people who suffered centuries of colonial domination, decades of oppressive apartheid rule and economic deprivation.
At the core of the radical economic transformation programme must be the creation of decent work and accelerating shared and inclusive economic growth especially in the mining industry. It is regrettable that there is not enough diversity in the ownership of mining companies.
The development of a more sustainable growth path in mining requires addressing many of the critical transformation challenges that continue to replicate themselves across the industry. The Mining Charter Assessment report of 2015 provides a number of shocking trends and concerns while the review of the Charter currently underway provides an opportunity for industry and government to draft a shared vision for the future.
The industry indicators reveal that the top 49 Listed Mining Companies had a combined market capitalization of R2,6 trillion at the end of 2014. If all the Top 49 Listed Mining Companies had 26% Historically Disadvantaged ownership as required in the Mining Charter at the end of 2014 the value of black empowered participation would have been R669 billion in 2014.
However, black ownership was R63.9 billion at the end of 2014, which is only equivalent to 2.5% of the market capitalization of the top 49 JSE Mining Companies. What this tells us is that ownership is still unrealised in the majority of Broad-Based Black Economic Empowerment transactions. A key reason is lack of profit, lack of dividends and non-payment of equity for ownership of the mines.
Our objective as government is to promote active participation and support of key stakeholders in the mining sector in order to steer the industry towards a sustainable development trajectory. We need to ensure equity in terms of ownership in the mining industry so that we can make a difference in the living conditions of the majority of South Africans.
While government has granted mining licences to diverse stakeholders, we continue to lack comprehensive data on the recipients of these mining licences. In effect, we have failed to use the issuing of mining licences as a tool for economic transformation and changing ownership in the mining sector.
We need to improve the monitoring and evaluation of mining and other forms of licensing to support transformation, broad-based ownership, improved labour relations, lower retrenchments and local procurement in the economic sector.
The challenge is upon all of us to effectively use the mining licence regime to increase transformation and improve participation of emerging miners and broad-based ownership in the sector. As government, we initiated the Operation Phakisa Delivery Lab initiatives to support mining investment, transformation and beneficiation.
Our failure to radically transform the economy to benefit the majority of South Africans has hampered growth, increased inequality and maintained the economic exclusion and marginalisation of many black people.
As we continue to review government programmes, we will accelerate our efforts particularly in the economic sector.
We appeal to the mining community to support our efforts to develop a more diverse and inclusive mining industry.
Much as we develop some of the most progressive policies and strategies, their success depends largely on the cooperation of the sectors within which we work as government. We boast one of the most comprehensive mineral beneficiation strategies, which provides a framework that seeks to translate the country’s complete comparative advantage inherited from mineral resources endowment to a national competitive advantage.
The strategy is aligned with the national industrialisation programme, which seeks to enhance the quantity and quality of exports, promote creation of decent employment and diversification of the economy, including promotion of the green economy. These strategies are underpinned by our long-term vision as articulated in the NDP.
The NDP identifies the opportunity for South Africa’s minerals cluster to develop, deepen and enhance linkages with capital goods and consumables manufacturers, suppliers of mining-related services and downstream producers, especially in the case of platinum-group metals (PGMs) and chrome ore. The NDP advocates the provision of focused research and development support to enable improved mining methods that lengthen mine life, better energy efficiency and lessen water intensity.
Distinguished guests, I trust that the deliberations that will be taking place at this showcase over the two days will shed light on the transformation trajectory of the future of mining in South Africa. We have the responsibility to revitalise investment along the mining sector value chain, from exploration to processing, and stem the closure of mines and the loss of jobs. We must position South Africa’s mining industry to exploit resources that are presently not mineable.
The positive impact of mining must be evident in the living conditions and economic prospects of mining related communities (including labour sending areas).
Communities residing next to mining operations must share in the mineral wealth of this country. We cannot be the perpetuators of a system where the people who toil the land are the most marginalised and the downtrodden.
We need to implement the NDP effectively to drive radical economic transformation through a diversified mining licence regime. Most importantly, the NDP and all the other subsidiary plans that we have for our growth path will not succeed without the support of the private sector.
We need the support and full cooperation from the mining industry stakeholders in order to steer the domestic mining sector towards a sustainable trajectory where all share in our mineral wealth. Everything that we do is in the interests of developing a thriving and more economically viable society. If we travel this road together, hand-in-hand, we are sure to go far and achieve our collective objectives.
In conclusion, I trust that the deliberations in this gathering will yield positive results for our economy. South Africa needs more trade and investment in order to meet its developmental targets. The mining sector is one of the key vehicles to take us to Vision 2030.
It is our future – make it work!
Thank you.
