A man uses a pick axe to dig as others search for what they believe to be diamonds at KwaHlathi village near Ladysmith, South Africa, on June 15, 2021.
The South African mining industry was once a minority-dominated sector, with occasional violent protests from the black masses.
These days, authorities have had to deal with the issue of illegal miners, with the latest case involving Zimbabweans caught underground. Initially, Pretoria adopted a heavy hand: denying food and water supplies to the miners. But after activists sued, authorities upended the tough policy by allowing in supplies.
Overall, however, the sector was known in the past for its poor working conditions, discrimination, and questionable practices. In recent times, the government tried to reshape its overall posture in mining. Many large mining companies that once dominated the scene have either moved, changed, or been acquired.
Notably, Anglo-American, the last of the major global diversified miners from that era, is now finalising its exit from South Africa by selling off legacy assets like De Beers and Amplats. With Anglo-American’s diminishing presence and the world evolving, the southern African nation finds itself having to focus on policies that prioritise the needs of its citizens. However, the government faces a challenge: it must balance diplomacy with investment policies to ensure the country maintains access to global markets, expertise, and technology that can help its mining industry thrive.
The South African government has recently expressed dissatisfaction with BHP's bid for Anglo-American. This was seen as an unhelpful message to the market since BHP is a high-tech and well-connected company South Africa should aim to attract for a successful future. The focus should be on creating new opportunities in mining and establishing strong international partnerships instead of trying to force current players to expand through government intervention.
Roy Topol, Cratos Asset Management portfolio manager said BHP did not want exposure to South Africa, which is suffering operational constraints such as ports, rail, water and electricity inefficiencies.
“They (BHP) seemed to be keen on Anglo’s highly-valuable copper assets but don’t want South African exposure, as the offer specifically excludes Kumba and Amplats, which collectively make up around a third of Anglo’s value,” Topol said.
One of the achievements since the end of apartheid is the introduction of the mining charter, which mandates that mining companies must have 30 percent black ownership. However, other policies aimed at helping South Africans secure better-paying jobs, such as beneficiation, have not been as effective. A report from the Mineral Resources Department published in 2009 stated that beneficiation was meant to help transition South Africa from a resource-based economy to a knowledge-based one. Sadly, over the past 15 years, the South African economy has been stagnant.
Recent government data reveals concerning statistics: 45.5 percent of individuals aged 15-34 are unemployed, illegal gold mining costs the economy R70 billion annually, and there was a decrease of 10,000 formal mining jobs in the second quarter of 2024, while informal mining jobs increased by 13,000.
Gwede Mantashe, the country’s Minister of Mineral and Petroleum Resources, said mining remained an essential sector of the economy, with a 7 percent contribution to GDP. It could contribute up to 10 percent in the next five years if managed properly, he said. It also accounts for 40 percent of South Africa’s foreign earnings and Mantashe believes this contribution could be increased.
South Africa has abundant coal resources, and the industry is the fourth-largest employer in the mining sector.
“There is a very strong narrative against mining, and it’s growing,” Mr Mantashe said at a mining event recently. “Half the time, mining is silent when everyone punches it. The industry must take pride in itself and articulate a more positive narrative.”
Mr Mantashe further emphasised the importance of incentivising beneficiation at its source, arguing against the exportation of jobs and profits. However, the reality is that these beneficiation policies have not yielded results in South Africa. For instance, South Africa has over 80 percent of the world's platinum group metals (PGMs), yet the local industry has faced numerous layoffs. Amplats recently cut 3,700 jobs after experiencing a staggering 71 percent drop in profits last year. If the current government fails once again to make beneficiation work, the country may waste another 15 years in its economic development.
Some experts argue that the current policy approach is not effective, and a new chapter is needed for South Africa. The country must create policies that capitalise on its natural advantages in certain asset classes before implementing disincentives like beneficiation. The global mining sector is highly competitive, with various nations vying for investments that create jobs. South Africa needs to improve its outcomes in existing asset classes; otherwise, it will struggle to develop complementary industries. Prioritising policies that support international companies with advanced technology and skilled expertise is essential.
This involves both "pull" policies, which provide clarity and confidence to foreign investors, and "push" policies, which involve diplomatic efforts to encourage foreign governments to support investments in South Africa.
By attracting companies that are leaders in production and technology, South Africa can enhance its skills base and train its workforce. It’s important to acknowledge that these companies may not specialise in beneficiation. Overall, these organisations can help South Africa maximise output from its existing mining resources. In addition, the government can take control of other critical factors by tackling corruption, investing in infrastructure, and improving state-run enterprises. By doing so, South Africa will be better positioned to face the future of its mining industry and help its citizens thrive in a rapidly changing world.
