Mining’s contribution to South Africa’s global competitiveness

At the 2015 Investing in African Mining Indaba in Cape Town from 9 to 12 February, the Department of Trade and Industry will emphasise the government’s strategic focus on industrialisation and improving connections between mining and the rest of the economy, writes DTI Minister Rob Davies.

krugerrands article Kruger rands, minted for almost half a century, are one example of the value the beneficiation of raw materials can add to South Africa’s extraordinary metals and minerals resources. (Image: Brand South Africa)

Minister-Davies Department of Trade and Industry Minister Rob Davies

The Investing in African Mining Indaba is an annual gathering bringing more than 7 000 leaders in the global mining industry under one roof at the Cape Town International Convention Centre, with this year’s event taking place from 9 to 12 February. The indaba includes an exhibition, conferences, meetings and onsite and offsite events, during which the industry, investors and governments discuss strategic investments.

This year South Africa has created a prestigious national pavilion co-hosted by the Departments of Trade and Industry, Mineral Resources and Science and Technology. The pavilion will also allow 20 private companies and state-owned enterprises to showcase cutting-edge products to potential investors and project promoters. The keynote address by the mineral resources minister, always a major highlight, will take place on Tuesday 10 February. On the same day South Africa will host a mining investment conference with the three ministers as panellists, where policy and regulatory challenges and opportunities will be discussed.

At the event, the DTI will emphasise the government’s strategic focus on industrialisation and improving connections between mining and the rest of the economy. South Africa aims to extend value-chain activities within the country, increase local content in the supply of capital goods and services, improve access and inputs for mineral-based products to the rest of the economy and promote the transformation of the sector. We aim to ensure that more value is added to domestic mineral products ahead of export, so as to extract greater economic value and employment from the country’s mineral resources, estimated to be worth $2.5-trillion.

In the Engineering and Metals Journal Annual Survey of Global Metal-Mining Investment 2014, South Africa featured in the top-10 planned international mining projects, coming in at eighth position. These are projects where detailed investment quantum, commodity type and stage of investment pipeline, among other factors, have been concluded. The output of South Africa’s capital goods industry has expanded consistently in real terms since 1994. Rising exports since 1983 point to the industry’s global competitiveness. However, its import penetration ratio has also been rising steeply, reaching 56% in 2012.

In September 2014 the DTI a study to assess the viability of and mechanism for a Resources Capital Goods Development Programme for plant, machinery and after-market in mining, to stimulate local content and exports of this equipment. The study will examine the sector support interventions required, identify action plans and a proposed mechanism which, if implemented, will unlock and deepen local capital goods manufacturing industries in South Africa.

It is against this background that the DTI is giving exposure to South African companies actively involved in supplying products and services to both the local minerals value chain and export markets. Products and services on show at Mining Indaba include corrosion protection liners, valves, steel tubes, pipes, enamelled covered conductors, trackless underground mining equipment, liquid storage solutions, centrifugal separators, surveillance systems, mining sensor systems and hearing protection devices.

Despite a declining contribution to GDP and employment, South Africa’s minerals value chain remains a pillar of the economy and a major global player, accounting for a significant proportion of world production and reserves. The sector contributes 8.6% – some R263-billion – to GDP, creating over 500 000 direct jobs and an additional 500 000 indirect jobs. It accounts for 50% of forex, 12% of investment and 13.2% of corporate tax receipts. South Africa is a major supplier of coal, platinum group metals, gold, diamonds, chrome, iron ore, vanadium and manganese.

Although South Africa has exceptional mineral resources, further downstream and upstream beneficiation has not fully reached its full economic potential, mainly due to structural conditions within key value chains. The DTI is at the forefront of driving the country’s industrialisation agenda, in which beneficiation is key.

So too is promoting investment in the sector using policy levers and incentives, encouraging local content throughout the minerals value chain, availing industrial financing, reducing export cargo dues on beneficiated cargo, export credit insurance, and stimulating market opportunities, especially exports into the rest of the continent and South America. South Africa will also explore support measures to increase the local value-add of inputs into the minerals value chain.

Economic forecasts reveal that the global economy is likely to continue expanding at a moderate pace in 2015, pushing demand for minerals slightly higher. Even though China and parts of Europe are still on a slow the economic growth, the US is on a rebound and Japan’s economic recovery is still on track. According to Deloitte, the mining sector appears to be coming back into favour with investors, with sector valuations, mining capitalisations and total returns showing signs of recovery.

During Mining Indaba, the DTI will also host delegations from a number of countries, including the UK, Turkey, Canada, China, India, Iran and Japan.

For more than 20 years Mining Indaba has been an important event in Cape Town, bringing over R500-million in direct revenue to the city over the last eight years, creating 4 500 direct and indirect jobs and selling 20 000 hotel nights.

Follow Mining Indaba on Twitter via the hashtag #MiningIndaba