Africa’s extractives industry faces a number of challenges in the year ahead, and in South Africa the industry appears to be in crisis mode. One of the potentially disruptive trends for the year ahead is that more countries may implement nationalism strategies, including exporting bans on unprocessed resources, and the number of calls for outright nationalisation of the extractives industry is growing.
Warren Beech, Chief Executive Officer at Beech Veltman Incorporated, will be discussing this issue at the 2024 Investing in African Mining Indaba taking place in Cape Town from 5 to 8 February. He and other panellists will discuss how mining companies have reacted to this continental shift and whether the uncertainty of access will dry up investment. They’ll also ponder what effect this move towards greater beneficiation requirements will have on existing and future mining projects, and how and where domestic capital fits in.
This isn’t the only big trend looming for the extractives industry, though.
“Last year was another challenging year for the mining industry,” Beech said. “In South Africa, the challenges have been so multifaceted and far reaching that the South African mining industry has had to adopt crisis-mode management, and this has become the normalised way of managing South African mines.”
In addition to the challenges faced by the global mining industry such as cyclical and unpredictable demand, erratic exchange rates, significantly increased costs of handling and shipping, South Africa is facing a crisis in relation to its deteriorating infrastructure. This has had a significant impact on the South African mining industry’s ability to mine its minerals cost effectively, consistently and on a sustainable basis. South African mines also cannot get their product to market on a consistent, sustainable basis.
“Additional challenges facing the South African mining industry include high levels of criminal activity, illegal mining, rising costs of employment, increased community demands for the mines to provide services which should be provided by the government and commercial contracts, and red tape bureaucracy and inefficiency,” Beech added. He noted that applications for rights to prospect and mine, and the related environmental authorisations, can take years before they are processed and granted.
Beech believes these challenges will persist, with other key trends that will continue in 2024 including environment, governance and social (ESG) considerations, the effects of climate change, cyber-attacks and crime, illegal mining, graft and corruption.
However, he says there are still numerous opportunities for Africa to benefit from its vast mineral reserves including platinum group metals (PGM).
“With the accelerating pace of transition to renewable energy sources and decarbonisation, demands for the ‘battery’ or ‘green’ minerals has increased exponentially. Unfortunately, Africa has squandered various historical opportunities to benefit from increased demand, but Africa has been given another chance to benefit significantly, particularly as the energy transition gathers further momentum, into 2024, and beyond,” Beech said.
While some countries, such as the Democratic Republic of Congo, Tanzania and Zambia, appear to have implemented programmes which have supported investment and increased benefits from mining and beneficiation, not many other African countries have done so successfully.
Beech believes that with South Africa’s vast PGM reserves, and a PGM mining sector that consists of both older and newer mines, PGM miners in South Africa could be in a good position. There are still some storm clouds on the horizon, though.
“It is an unfortunate reality that several key challenges will continue to hamper Africa’s mining and natural resources sector more broadly in 2024, including infrastructure constraints, exponential increases in costs of doing business, cyber-crime and cyber-attacks, geopolitics, and constrained access to capital,” Beech pointed out.
He also highlighted a number of positive trends that will continue in 2024, including the development of artificial intelligence, process automation, and workplace productivity initiatives.
“South Africa’s mining industry remains one of the country’s largest employers; it also supports a number of parallel industries and funds both local and national economies,” Beech explained. “This presents a significant challenge to the implementation of technological advances. Understandably, new technology is met with scepticism and significant concerns surrounding whether the introduction of new technology will result in job losses.”
New technology is, however, vital to the future of mining in South Africa for various reasons, he says, including cost efficiency, safety and sustainability. Some technology, such as the introduction of hydrogen trucks and the construction of electricity-generation facilities, attracts less resistance from stakeholders, but technology that monitors operator behaviour, fatigue patterns, productivity and related aspects typically faces severe resistance and, in some cases, active sabotage and circumvention.
“What has become even more clear in 2023 is that, for Africa’s mining and natural resources sector to succeed and to benefit from the opportunities that are being presented, collaboration is vital,” Beech said. “Collaboration is required among all stakeholders – between the mining companies and government, mining companies and communities, mining companies and employee representatives, amongst mining companies themselves, and between African countries and their counterparts in the rest of the world.”
Beech pointed out that transparency, a fundamental cornerstone of collaboration, is sadly lacking in general at this stage. “Proper collaboration can result in local, regional and continent-wide benefits, including in relation to infrastructure, trade incentives and enforcement of programmes to prevent illegal mining and transportation of illegally mined and beneficiated minerals,” he said. “Recent examples of collaboration have not yet had a proper opportunity to demonstrate whether or not they will be successful, but they are notable. These include the collaboration between the Democratic Republic of Congo and Zambia to make batteries for electric vehicles.”
Beech will be part of a panel discussion on “Rethinking resource nationalism – a cash grab or a fair share?” on Wednesday, 7 February at 2.40pm on Westin Stage 1 at the CTICC as part of the 2024 Investing in African Mining Indaba.
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