Already a global mining powerhouse, South Africa has entered a new resources boom that has seen the country’s financial fortunes bounce back powerfully from the effects of the COVID-19 pandemic.
Nearly half the world’s gold and one-third of all minerals are in Africa. Beneath the surface of Africa lies a wealth of mineral resources of enormous value. In 2019, the continent produced almost 1B tonnes of minerals worth US$406B.
According to the United Nations, Africa is home to about 30% of the world’s mineral reserves. At US$125B per year, South Africa is a clear regional leader in generating the most money from its mineral resources.
With the strong support of South Africa’s government, the nation is reaping the benefit of sky-rocketing mineral commodity pricing and increasing new investment. President Cyril Ramaphosa recently told the 4th South Africa Investment Conference that the majority of new investments of R332B (approximately US$70.6M) raised at the event was aimed at the resources sector. “There are investments that are breathing new life into mining, one of the country’s oldest industries and still one of its most important,” Mr Ramaphosa said.
“Through these investments, we will be expanding our production of platinum group metals and other minerals that are vital to the emerging technologies of the future. It is pleasing that there are several investments in metal fabrication and other manufacturing.
“The investments in steel, vanadium, aluminium, and other manufacturing plants all contribute to our ongoing effort to add value to the minerals that we mine and to create jobs.
“The challenge in these circumstances is to use investment in infrastructure for the mining value chain to improve conditions for all of our producers and our communities. Our new investments in mining must mobilize resources from outside of the government and contribute to broader economic development,” said Mr Ramaphosa.
We will be expanding our production of platinum group metals and other minerals that are vital to the emerging technologies of the future
New investment approach
That positive view on mining was reflected in the president’s 2022 State of the Nation Address. The Minerals Council of South Africa (MCSA) welcomed the president’s commitments in that address which outlined measures to meet the key challenges to the economy that the MCSA has identified as obstacles to investment, inclusive growth, and job creation.
The MCSA said the wide-ranging measures the president unveiled to bring private participation into the key mining support areas, such as the generation of electricity, onto the railways, and into ports, will add critical infrastructure.
It also welcomed the appointment of Sipho Nkosi, a former president of the then-Chamber of Mines, to head a team in the office of the presidency to cut red tape in government departments. The MCSA says is vitally important appointment will assist in removing unnecessarily complicated hurdles that have held up billions of rands’ worth of mining investments.
“There are more than 4,000 mining and prospecting rights within the Department of Mineral Resources and Energy awaiting approval. Minerals Council members have R30B in approved capital projects that could proceed quickly if these outstanding prospecting, mining, and related licenses are resolved quickly,” the Council said.
“We need to move from theory to practice and focus on the issues that will make a real difference right now. We have run out of time to keep doing the same things that simply have not worked and which have in fact pushed us into this economic crisis,” said MCSA CEO, Roger Baxter.
“We cannot have a business-as-usual approach. We must have a structural break and do things completely differently to get growth back to 5% per annum. We need the government to completely change its view of how investments work. It must move as quickly as possible on the critical issues President Ramaphosa has identified,” said Mr Baxter.
Mining boosts revenue
Meanwhile, the “booming” mining sector is bringing positive news on a number of financial fronts in South Africa. South Africa’s preliminary tax collection recently exceeded its budget estimate for a second consecutive year, buoyed by windfall mining-company profits and the easing of COVID-19 lockdown measures.
The South African Revenue Service collected R1.56T in the fiscal year through 31 March 2022, R16.7B more than projected in the February budget, representing a 25% increase from the prior fiscal year. Corporate income taxes accounted for almost 21% of the total tax take with high prices and rising global demand for commodities boosted mining-company profits in South Africa.
While the Treasury in February projected that tax revenue for the fiscal year that started on Friday 1 April is expected to reach almost R1.6T, the ongoing commodity price leaps coming on the back of Russia’s invasion of Ukraine could see the target revised higher.
Platinum power
Data recently released by Statistics South Africa showed that mining production rose 5.2% in November of 2021 compared with the same month in 2020. Platinum group metals (PGMs) were the main contributor, with production surging 38.1% over that period. Mineral sales overall increased by 22.2% year on year.
Statistics South Africa said mining production in South Africa rose 0.1% year on year in January of 2022, after a downwardly revised one per cent fall in the previous month and largely missing market estimates of a 3.45% growth. Higher output levels from manganese ore (19.6%), gold (7%) and diamonds (16.3%) were offset by a decline in iron ore (-13.4%). On a seasonally adjusted monthly basis, mining production increased 5.4%, following an upwardly revised 5.5% decline in the prior month.
Mining in South Africa is a major source of foreign exchange and jobs and the new commodity boom appears to be fuelling investor confidence.
International’s ratings agency Moody’s recently upgraded South Africa’s credit outlook to stable from negative.
“High commodity prices have boosted profitability of companies in the mining sector, which contributed to a 58% increase in corporate income tax in fiscal 2021 (FY2021, ending 31 March 2022), or 2% of GDP higher than planned in the initial budget. At the same time, for the first time in many years, the government limited the growth of its wage bill to 1.6%, well below inflation,” Moody’s said.
Mzila Mthenjane, head of stakeholder affairs at Exxaro, says platinum is a big part of the country’s resources boom: “I think you would have seen that from the R770B (about US$500M) that has been achieved with the South Africa investment drive that I think mining consists of about R150B of that. And we saw some of that being pledged by some of the mining companies across different sectors of mining, with platinum driving the largest component of that investment drive.”
One of the major new South African mining developments is Sedibelo Platinum Mines (SPM) expansion at its Pilanesberg Platinum site (PPM), situated 207km west of Johannesburg.
SPM is expanding operations at PPM into contiguous deposits of Sedibelo Central, Magazynskraal and Kruidfontein – known as the Triple Crown properties with an estimated resource base in excess of 60M 4PGE ounces, considered one of the world’s largest undeveloped PGM deposits. The expansion will include the construction of a 110,000 tonnes beneficiation plant, employing cost and energy efficient Kell Technology.
New activities at the project will extend the mine’s life by 30 years, from 2030 to 2060, and transition operations from open pit to underground. The first ore is expected from the underground operation by 2025.
