In his magisterial book, The Founders: The Origins of the ANC and the Struggle for Democracy in South Africa, Andre Odendaal writes about the many criticisms directed at the missionary-run Isigidimi Sama-Xhosa newspaper in the 1880s. The renowned correspondent Jonas Ntsiko, known by his nom de plume Hadi Waseluhlangeni, compared Isigidimi to a warrior whose enemies had hurled so many spears in his body that it looked like a porcupine. This is a conclusion one is tempted to make with regard to mining in South Africa. Captains of industry, senior government officials, trade unions and communities all have directed attacks at the industry, to the extent that many are pessimistic about the future of mining in the country.
The pessimism has made the country one of the laggards in attracting investment from domestic and foreign investors. The perception in the mining fraternity is that South Africa is a hard investment destination. Communities in mining areas are generally disappointed with what they consider “invisible dividends”. Mining executives are frustrated with policy and regulatory uncertainty, inadequate logistical capacity and delays in the implementation of the cadastral system. In government circles, there is frustration at abrasive and intemperate attacks from the industry as well as suspicion that the sector is not fully committed to transformation.
This contested portrayal of the industry should not come as a surprise. Mining was not only at the centre of the economic modernisation of South Africa but also the industry most stratified by race and class divisions. In democratic South Africa it was expected to deal with the legacy of black marginalisation, community exclusion and hostile labour relations. Efforts to transform the industry would only be possible in an environment of sustained growth. While 1994 created positive conditions for the sector, subsequent years have seen worsening stakeholder non-alignment, lower productivity and low levels of investment in expansion and exploration.
The Fraser Institute’s 2021 Annual Survey of Mining Companies places South Africa among the bottom 10 countries in both the Investment Attractiveness Index and the Policy Perception Index, its worst placing since 2009. From an impressive high of 5.42% in 2004, South Africa now attracts only 0.76% of global exploration funds. In a Centre for Development Enterprise report comparing the years 2010 and 2018, Norman Mbazima says there has been a 10% decline in output in dollar terms, a more than 50% decline in capital expenditure and more than 50,000 jobs lost.
The perception in the mining fraternity is that South Africa is a hard investment destination. Communities in mining areas are generally disappointed with what they consider 'invisible dividends'
Yet, South Africa is endowed with natural resources required for batteries, renewable energy, hydrogen, steel and energy. It is still a significant player in gross domestic product contribution, employment and support for ancillary industries. According to the Minerals Council SA, the sector contributed R351bn to GDP, with 456,438 people employed in 2018.
South Africa’s Country Investment Strategy, released in 2022, aims to position the country as a preferred African investment destination by attracting and facilitating quality foreign and domestic direct investment. The strategy aims to realise the National Development Plan’s (NDP's) target of 30% of gross fixed capital formation to GDP by 2030, with mining among the priority industries.
Mining is not an ordinary industry. South Africa’s economic modernisation was midwifed by the mining sector. Manufacturing and ancillary sectors grew by directly supporting the industry or through investment by the mining groups in auxiliary sectors of the economy. Mining still has a major role to play in the economy, albeit in a changed form. As Joel Netshitenzhe puts it: “In the same manner that mining was central to South Africa’s industrialisation drive and broader political economy over the past century, it can play a central role in the country’s future growth and development trajectory — in a new context, much different from the mineral-based industrialisation of the previous era.”
Prevailing conditions demand perspicacity from all the key stakeholders to address the challenges. They should unite around the idea of building a globally competitive, investor-friendly sector that benefits investors, SMMEs, communities, labour and South Africans generally (through increased tax contributions due to growth).
Investing in the sector requires long-term commitment informed by policy certainty, transparency, legal predictability and regulatory sophistication. The appointment of questionable ministers and the failure of stakeholders to agree on issues such as empowerment have weakened the drive for investment. Mining, where returns are only realised after decades, needs certainty and credible commitment, which is only attained when big policy positions remain largely unchanged despite political and personnel changes.
Minister Gwede Mantashe has inherited multiple challenges from his predecessor, whose relationship with the industry had been poisonous, which dissuaded long-term investment. An indefatigable defender of the sector, Mantashe created the conditions for the reversal of at least a decade of mistrust and pessimism. The commitment of one minister, however, is not sufficient to attract investment. Long-term investors attach credibility to policy and regulatory commitment when they are valid, regardless of the character of the office bearer.
Mining needs a reimagining of its institutional architecture. The government should consider establishing a mining agency. As an independent entity, the agency would be charged with policy implementation and policy review while the minister and department will be tasked with policy formulation and enforcement. Unlike a normal government department, the agency would be relatively autonomous of political institutions, with a clearly defined political mandate.
The agency would provide long-term certainty. Decision-making would be made in the interest of mining and the country free from short-term political considerations. Policy changes would be made where sufficient reasons are provided and only if they are in the interest of the sector and the country and do not prejudice investors.
The agency should provide fertile space for personnel from different backgrounds with new skills which would ensure successful implementation of key programmes. A flexible remuneration system would enable the agency to attract the best people. The appointment of top-calibre leadership with rigorous contracts would mitigate against bureaucratic inertia, and foster innovation.
From its very constitution, the mining agency would focus on four key tasks to change the trajectory of mining.
Investing in the sector requires long-term commitment informed by policy certainty, transparency, legal predictability and regulatory sophistication
The first would be to implement a modern exploration strategy. The implementation of the cadastral system, which the mining industry has been urging for more than a decade, is a major priority. Almost all competitive mining jurisdictions have such a system. The established mining companies are no longer the only investors in exploration. Private equity funds, whose modus operandi is to invest in exploration and exit before mining operations commence, are increasingly playing a key role. Investors in exploration — both traditional and private-equity players — need certainty and a transparent path in the licensing value chain. In addition, the agency needs to be constituted as a repository of geological information to enhance transparency and attractiveness.
The establishment of a one-stop-shop centre for the mining application process constitutes the second intervention to be undertaken by the agency. The applicant will deposit only one application, with all decisions co-ordinated by the mining agency. It is frustrating for the mining sector to apply for numerous licences, such as the water licence and environmental impact assessment reports from different departments with no clear turnaround times. The one-stop concept will simplify the application process and improve efficiencies.
Policy review and advice is the third major role the agency would be seized with. Policy ownership remains the domain of the minister and the department. The agency will advise and propose reform measures and new interventions. It will formulate policy measures to deal with pressing issues such as energy security, logistics capacity increase, BEE, exploration attractiveness interventions, community empowerment and labour relations, among others.
Finally, once consensus on the policy direction of mining has been reached, regular roadshows will be undertaken to deal with negative perceptions as well as report on progress that would have been made on such pressing issues as electricity supply, logistical capacity enhancement, labour relations management, exploration strategy, tax dispensation and foreign exchange regulations. The proposed roadshows should be about the progress and interventions made as well as available opportunities for domestic and international investors.
The mining industry has been central to the economic modernisation of South Africa. It has played a direct and catalytic role in the creation and sustaining of auxiliary industries, job creation and community development. It has had challenges in the past few years, yet it has this precious opportunity of nurturing a competitive mining sector. The government, mining industry and labour, with all their differences, are committed to building a strong mining sector in South Africa.
South Africa possesses attractive and desirable minerals to support both existing and future industries. Working together, we can turn the tide and become one of the top investment destinations in both exploration financing and expansion of current projects. Successes scored in revitalising mining would spur similar interventions in manufacturing across the economy.
• Khoza is CEO of Jovial Africa Consulting & Investments
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