2023 was an extremely challenging year for the global mining industry. In South Africa, the challenges were so multi-faceted and far-reaching that the sector has been forced to adopt crisis-mode management, and this has become the normalised way of managing South African mines. Will this continue in 2024?
Beech is a highly accomplished mining, natural resources and infrastructure specialist. He provides multi-disciplinary services with a particular focus on health, safety environment, regulatory and criminal, but has also been involved as a lead commercial lawyer in a large number of significant mining transactions. He is recognised as a leading expert in his field.
Says Beech, “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 concerning its deteriorating infrastructure. This has had a significant impact on the South African mining industry’s ability to mine its minerals cost-effectively, consistently on a sustainable basis and to getting these minerals to market.
“Congestion at South African ports is exacerbated by both the road and rail infrastructure and management of the shipping and transportation services through state-owned enterprises. South African mines cannot get their product to market on a consistent, sustainable basis. Even where the product is sold locally, South Africa’s road infrastructure has deteriorated so rapidly over the past 12 to 18 months, that the capital and operational cost of transportation has escalated exponentially, including as a result of rising fuel costs, tolls, costs of employment and the ever-rising costs of trucks and spares.”
He adds that additional challenges facing the South African mining industry include high levels of criminal activity; illegal mining; rising costs of employment; increased community activism in support of demands for the mines to provide services (which should be provided by the South African government); commercial contracts; and red tape bureaucracy and inefficiency, which means that applications for rights to prospect and mine (and the related environmental authorisations) can take years before they are processed and granted.
A missed opportunity
It is a well-known fact that Africa has vast mineral reserves including 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, Democratic Republic of Congo, Gabon and Zimbabwe.
With the accelerating pace of transition to renewable energy sources and decarbonisation, demands for the ’battery’ or ’green’ minerals have increased exponentially. “Africa’s mining and natural resources sector should already have benefitted significantly from increased demand for these minerals and for the safe haven mineral, gold.
Unfortunately, the continent 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,” adds Beech.
While some countries, such as the Democratic Republic of Congo, Tanzania and Zambia, appear to have implemented programmes which support investment and increased benefits from mining and beneficiation, Beech states that few other African countries have done so successfully.
“While some of the reasons for this are country-specific, there are some common reasons including policy and regulatory uncertainty, bureaucracy, graft and corruption, security concerns and infrastructure constraints (water, electricity, roads and ports).“
He points out that South Africa is an example of a country where the mining and natural resources sector has been throttled for these reasons, and there does not appear to be an end in sight. “Furthermore, the uncertainties surrounding the 2024 elections in South Africa also adds to the complexities surrounding the mining and natural resources sector.”
Industrial demand for PGMs was at record levels in 2023 and is anticipated to continue into 2024. With South Africa’s vast reserves, PGM miners in South Africa may possibly have a particularly good year or two ahead.
“The increased industrial demand is a result of the use of PGMs in various applications such as the production of specialised glass and fibreglass. Ironically as more wind farms are built, the demand for fibreglass and platinum-containing facilities for the manufacturing of fibreglass, which is used for turbine blades, is increasing. PGMs are also a critical component of hydrogen technology (electrolysers and stationary fuel cells),” says Beech.
Key challenges for 2024 Beech explains that the shift to a focus on ESG highlights the imperative for sustainable operations, but it also raises concerns because of the broad interpretation and application opportunities around ESG and the lack of consistent metrics on performance against ESG principles.
“In our experience, there have been instances where spend on ESG has not been efficient, and it is time for the mining industry to re-assess the metrics against which sustainability will be measured, going forward.”
According to Beech several key challenges will continue to hamper Africa’s mining and natural resources sector in 2024. This includes supply chain constraints, which include infrastructure constraints, exponential increases in costs of doing business (including employment costs), cybercrime and cyber-attacks, geopolitics (including security and safety risks) and constrained access to capital.
“Key trends from 2023 will also continue this year including ESG considerations, the effects of climate change, cyber attacks and crime, illegal mining, graft and corruption,” adds Beech.
And now, for the good news Beech believes that there are several positive trends that will also continue into 2024 including the development of artificial intelligence, process automation and workplace productivity initiatives.
In addition, South Africa’s mining industry remains one of the country’s largest employers. As well as being a significant employer, South Africa’s mining industry supports a number of parallel industries and funds both local and national economies.
According to Beech, 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 vital to the future of mining in South Africa for various reasons including cost efficiency, safety and sustainability.
“A fundamental cornerstone of collaboration is transparency, which, unfortunately, there is simply not enough of at this stage. Proper collaboration can result in local, regional and continent-wide benefits including around infrastructure (getting the minerals to market), trade incentives and enforcement of programmes that prevent illegal mining and transportation of illegally-mined and beneficiated minerals.
“Recent examples of collaboration have not yet had a good 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 concludes.
Source: Mining Review Africa
