JOHANNESBURG — That South Africa’s mining sector is fast becoming a relic of the past is no secret. The decline in our gold mining sector is just one example of how inflexible regulation and spiralling sunset phases, for many local mines, have resulted in the country falling lower down the global production rankings. But there is a whole alternative world of minerals to explore and with the country’s experience in mining, South Africa is perfectly positioned to exploit these. The question is, will regulators ever allow the industry to do this? – Gareth van Zyl
By David Christianson*
Demand for green minerals – cobalt, copper, zinc, nickel, graphite – is booming as battery-driven alternatives to fossil fuels take off.
But South African mining is nowhere in this race thanks to the country’s clumsy and primitive regulatory regime. At the Institute of Race Relations (IRR) we have consistently argued that South Africa’s mining industry cannot return to health unless the uncertainties epitomised by the Mining Charter and the multi-year delay in the country’s basic minerals legislation (the MPRDA) are eliminated and business-friendly reforms expedited.
In early July, Tesla Motors, manufacturer of the world’s first price-competitive fully electric motor car, finally achieved production levels of 5,000 vehicles per week. This is a significant milestone as Tesla’s long struggle to reach this promised production volume had fuelled scepticism about the viability of electric vehicles (EVs). No longer. The new technology looks set to achieve exponential growth, with all the world’s bigger motor manufacturers having announced rival programmes.
At last year’s’ Frankfurt Auto Show, VW and BMW announced that all their models would be available in electric versions by 2020. Mercedes gave 2022 as the target date for the same and said it expected to be making as many EVs as traditional petrol or diesel cars by 2025. Chinese-owned Volvo had already announced that half its production would be EVs by 2025.
This technological disruption is set to shift demand for so-called green minerals on a colossal scale. The shape of the market is still emerging with lithium-ion batteries – which also make extensive use of nickel and graphite – being the favourite in a race that is some distance from the finishing line. But carbon and manganese oxide, zinc-air and aluminium-zinc alternatives are not yet out of the picture and nor are hydrogen fuel cells which make use of considerable amounts of platinum.
A textbook case of creative destruction is underway. The case for enabling nimble actions – entry, exploration, development and disposal – by mining companies has never been stronger. The rational response to uncertainty is to get in, establish what is feasible and extract the resource as quickly as possible. Yet the Department of Mineral Resources continues to make this impossible.
The extraction of green minerals is a growth industry in South Africa’s neighbours. In May, Prospect Resources announced that it had secured $55 million for the first phase of a lithium mine near Harare and expects to produce the first concentrates for export in 2017. Another promising lithium resource is being developed by Montero Mining in Namibia. Junior miners have been investigating graphite deposits in Tanzania, Namibia, Madagascar and Tanzania.
Last year, Syrah Resources brought the Balama Mine in northern Mozambique on stream. The resource on which the mine is based is said to be the largest graphite deposit in the world, being several kilometres in length and more than 200 metres thick. Two other mines are in development in the same region (Montepuez and Ancuabe).
None of these pioneering companies are South African and none are exploring or developing anything in South Africa. Last year, absolutely nothing was spent on green fields exploration in the South African jurisdiction. South Africa does mine minerals with green applications, including platinum, zinc, copper and nickel, but it is simply not possible for mining companies to develop further in this area. The nature of global value chains ensures that these resources are exported to China, the world’s biggest maker of lithium ion batteries.
Automotive manufacturing is one of South Africa’s few successes with more than half of local production being destined for export. How sad it is that the mining industry is in no position to support inevitable technological developments in this space. As the IRR has repeatedly pointed out, the country’s minerals regulatory framework is simply too big an obstacle to innovation in the sector.
- David Christianson is a policy fellow at the IRR – a think tank that promotes political and economic freedom.