The year 2023 proved to be an exceptionally demanding period for the global mining industry, with South Africa facing multifaceted and far-reaching challenges. These challenges have pushed the sector into a state of crisis-mode management, which has become the norm in the management of South African mines. As we step into 2024, the question looms: will this pattern persist?
To gain deeper insights into the current state of South African mining and its prospects for 2024, Mining Review Africa sat down with Warren Beech, the CEO of Beech Veltman, a distinguished multidisciplinary law firm. Warren Beech is a seasoned expert in mining, natural resources, and infrastructure, renowned for his comprehensive services encompassing health, safety, environment, regulatory, and criminal aspects. He also boasts a rich history as a lead commercial lawyer in numerous significant mining transactions.
Beech opens the discussion by acknowledging the global challenges faced by the mining industry, including cyclical demand fluctuations, volatile exchange rates, and soaring costs associated with handling and shipping. However, he emphasises that South Africa grapples with a unique crisis—an ailing infrastructure. The deteriorating state of infrastructure in the country has taken a heavy toll on the South African mining industry’s ability to efficiently and sustainably extract minerals and transport them to market.
Congestion at South African ports compounds the issue, with inadequate road and rail infrastructure and the management of shipping and transportation services by state-owned enterprises further exacerbating the problem. These challenges have hampered South African mines from consistently delivering their products to market. Even when products are sold locally, the deteriorating road infrastructure over the past year and a half has led to exponential increases in capital and operational transportation costs. Rising fuel costs, tolls, employment expenses, and the escalating prices of trucks and spare parts have added to the burden.
Additional hurdles facing the South African mining industry include elevated levels of criminal activity, illegal mining, soaring labour costs, surging community activism demanding services that should be provided by the government, complex commercial contracts, and bureaucratic inefficiencies. Applications for rights to prospect and mine, along with related environmental authorisations, can languish for years before they are processed and granted.
Africa is renowned for its vast mineral reserves, encompassing platinum group metals (PGM), copper, cobalt, iron-ore, chrome, manganese, gold, and lithium. Africa’s top mineral-producing countries include South Africa, Nigeria, Algeria, Angola, Libya, Egypt, Ghana, the Democratic Republic of Congo, Gabon, and Zimbabwe.
The increasing shift towards renewable energy sources and decarbonisation has sparked a surge in demand for “battery” or “green” minerals. Africa, with its abundant resources, should have been a major beneficiary of this growing demand and the demand for safe-haven minerals like gold.
However, Africa has squandered historical opportunities to capitalise on this demand. Beech believes that Africa now stands at the threshold of another chance to benefit significantly, especially as the energy transition gains momentum in 2024 and beyond. Some countries, such as the Democratic Republic of Congo, Tanzania, and Zambia, have implemented programmes supporting investment and reaping greater benefits from mining and beneficiation. Still, Beech notes that few other African countries have succeeded in this regard.
Common impediments to progress include policy and regulatory uncertainty, bureaucratic red tape, corruption, security concerns, and infrastructure limitations in areas like water, electricity, roads, and ports.
South Africa serves as a prime example of a country where the mining and natural resources sector has been stifled by these challenges, with no immediate resolution in sight. Furthermore, uncertainties surrounding the 2024 elections in South Africa add complexity to the mining and natural resources sector.
Despite these challenges, the industrial demand for PGMs reached record levels in 2023 and is expected to persist into 2024. South Africa’s abundant PGM reserves position its miners for potential success in the years ahead. The increased demand for PGMs stems from their use in various applications, including specialised glass and fibreglass production. Interestingly, as wind farms proliferate, the demand for fibreglass, which contains platinum, for turbine blade manufacturing is on the rise. PGMs also play a pivotal role in hydrogen technology, particularly electrolysers and stationary fuel cells.
Beech outlines several key challenges that will continue to affect Africa’s mining and natural resources sector in 2024. These challenges include supply chain constraints, infrastructure limitations, rising business costs (including labour), cybercrime and cyber-attacks, geopolitical issues (security and safety risks), and restricted access to capital.
According to a report by Mining Review, Beech underscores that key trends from 2023 will extend into 2024. These encompass ESG (Environmental, Social, and Governance) considerations, the impacts of climate change, cyberattacks and cybercrime, illegal mining, corruption, and graft.
Despite these challenges, Beech believes several positive trends will persist in 2024. These include the development of artificial intelligence, process automation, and workplace productivity initiatives. Additionally, South Africa’s mining industry remains one of the country’s largest employers, supporting various parallel industries and contributing to local and national economies.
The adoption of new technology in the mining sector presents a significant challenge due to concerns about potential job losses. However, Beech emphasises that embracing new technology is essential for cost-efficiency, safety, and sustainability in South African mining.
Collaboration holds the key to addressing these challenges effectively. Beech underscores the importance of transparency in collaboration efforts, which can yield local, regional, and continent-wide benefits, including infrastructure improvement, trade incentives, and the enforcement of programmes aimed at curbing illegal mining and the transportation of illicitly mined and beneficiated minerals.
As South African mining grapples with numerous challenges and opportunities, stakeholders in the industry must navigate the complex landscape by fostering collaboration, embracing technological advancements, and ensuring sustainable operations. Despite the hurdles, the mining sector remains a critical pillar of South Africa’s economy, holding the potential to drive positive change and contribute to the nation’s growth in the years to come.
