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Mining Drives Economy Despite Regulatory Hurdles

Chief Economist Highlights Mining's Key Role in South Africa

by Adenike Adeodun

The mining industry plays a vital role in boosting the South African economy, despite facing considerable operational and regulatory challenges. Hugo Pienaar, the chief economist of the Minerals Council South Africa, provided an in-depth analysis of the sector’s importance, revealing that it contributed over 6% to the country’s gross domestic product (GDP) and accounted for between 55% to 60% of South Africa’s exports as of 2023.

However, Pienaar also emphasized that the industry’s economic impact could be further improved with significant improvements in government administration. In 2023, the mining sector paid out nearly R180 billion in salaries and wages and contributed R2.3 billion to socio-economic development through just 12 of the Minerals Council’s members.

These members, which represent a significant portion of formal mining employment, invested heavily in training and development, spending R5.1 billion in one financial year across various mineral sectors such as gold, platinum, coal, diamond, and iron ore. Therefore, it is evident that the mining industry is a cornerstone of South Africa’s economy, not just in terms of economic contribution but also in its socioeconomic impact.

Mzila Mthenjane, the CEO of the Minerals Council, has emphasized that the mining industry’s contributions to social upliftment through employment and community infrastructure investment are often ignored or underappreciated. Additionally, the mining sector’s involvement in rural development through infrastructure maintenance and providing crucial services like water supply is not given enough recognition.

To address this lack of awareness and to increase public knowledge, the Minerals Council has launched an information-sharing campaign called #MiningMatters. The initiative aims to highlight the positive impacts of mining across the country.

However, despite these efforts, it is crucial for corporations, including mining companies, to increase their contributions to address national challenges like energy insecurity, logistical bottlenecks, corruption and crime. Pienaar noted that there is still a pressing demand for these firms to step up and make a difference.

Mining companies have been taking proactive steps in the area of energy reform. The government’s recent electricity reforms have made it easier for mining companies to generate their own power, which has helped to enhance national energy security. These investments in renewable energy not only support the grid but also create opportunities for socioeconomic development and additional community benefits.

However, there are still challenges that need to be addressed, particularly in terms of infrastructure. Grid transmission constraints are a major bottleneck that not only affect the mining sector but other industries as well. The logistics sector, for example, is starting to take steps towards greater private participation, which is expected to eventually enhance mining productivity and export figures.

Pienaar has emphasized the serious consequences of crime and corruption, which not only affect mining operations but also sabotage critical infrastructure such as rail and electricity. These challenges require a more efficient police force and better management of national resources.

Furthermore, the chief economist has discussed the high cost of doing business in South Africa, which is mainly due to steep electricity tariffs, excessive bureaucratic red tape, and difficulties in extending mining rights. These are significant obstacles that need to be addressed. In addition to this, the future of exploration projects is uncertain until an effective mineral cadastre is implemented. The current system is slow and dysfunctional, which particularly hinders junior mining companies that are eager to explore new opportunities.

The Department of Mineral Resources and Energy (DMRE) is currently working on a new mining cadastre system, but there is no clear timeline for its implementation yet. Pienaar emphasized that the mining industry’s profitability and efficiency could be significantly improved with better operational performance from state-owned enterprises and more streamlined regulatory and administrative processes from the government.

Although the mining industry in South Africa is a significant contributor to the national economy and community development, it faces challenges such as infrastructural inefficiencies, regulatory hurdles, and socio-political issues. The Minerals Council, led by individuals like Pienaar and Mthenjane, is committed to working with all stakeholders to ensure that the mining sector continues to prosper and contribute positively to the economy and society at large.


Source: Mining Weekly

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