It is a cliché of effective industrial policy that developing an industry works best if there is “policy certainty”. It is also one of those clichés that becomes a cliché because it is true, and nowhere is it truer than in mining, where investment decisions are made over decades, capital is committed before revenue exists, and the investor’s first question is not whether the geology is attractive, but whether the rules of the game will still resemble themselves by the time the first rock is blasted.
After years of argument, the South African mining industry was beginning to feel it was making some progress with the Department of Mineral and Petroleum Resources. The debate around the Mineral Resources Development Bill has been fraught, but it has at least been taking place in the right room, with the right department, around the right statute. Then the Department of Trade, Industry and Competition (DTIC) arrived with its new Industrial Development Strategy (IDS) ̶ and just when the mining industry thought it could see the outline of a bargain, the IDS reopened the older, larger and more combustible question of forced beneficiation.
The awkwardness lies not in the fact that government wants beneficiation. Every government in South Africa and elsewhere has wanted an increase in the local manufacturing base; it is the prayer permanently pinned to the national mining-policy fridge. The problem is that the IDS does not merely encourage beneficiation, or propose incentives for downstream industry, or suggest conditions under which beneficiation might become economically rational. It proposes that beneficiation objectives be linked to mining rights themselves, that the right to mine could, in future, be made conditional on some undertaking to beneficiate.
A critical exchange on this took place at the Junior Mining Indaba in June. Conference chairman Bernard Swanepoel read out the relevant passage from the IDS and put the question directly to Jacob Mbele, director-general of the mining department. The document called for “a review of mining legislation on the allocation of mineral rights” to enable government to attach conditions facilitating beneficiation – conditions that would be embedded in mining licensing decisions. “How is this not policy uncertainty?” Swanepoel asked.
It was an unusually revealing moment. Mbele, who had spent much of the discussion arguing that South Africa’s mining problem was administrative weakness rather than policy uncertainty, suddenly had to answer for a proposal from another department that cut directly across his own licensing terrain. His reply was careful, brief and telling: “No, it is not [the DTIC’s domain], but it’s a proposal that they’re putting forward.”
That was a diplomatic kick for touch – the kind South Africans have become exhausted by for two decades. It suggested the mineral-rights system remains the statutory terrain of the mining department, and that the DTIC’s ambitions have not yet been absorbed into mining law. But the fact that Mbele could describe it as a proposal does not mean the proposal is harmless.
The Minerals Council certainly did not treat it as such. In a sharply worded statement, it noted “with regret” the IDS proposals on chrome ore export taxes and quotas and the linking of beneficiation to mining rights. The council’s CEO, Mzila Mthenjane, described it as an “unfortunate policy intention” that, “while not yet a law”, added to the “incessant policy uncertainty” constraining investment.
That phrase – while not yet a law – is the industry’s way of acknowledging Mbele’s point while refusing to concede that only law matters. For investors, proposed laws, strategy documents, Cabinet statements, ministerial discretion and draft regulations all matter because they create a probability field around future investment. Mining investment is not frightened only by what government has already done. It is frightened by what government appears to be thinking of doing.
The Minerals Council’s deeper argument is that mining and beneficiation are separate economic activities: beneficiation is manufacturing, not mining, and cannot simply be loaded onto mining as a licence condition. The council is not saying beneficiation is bad. It is saying that if government wants beneficiation, it must create the conditions for investment in it; it must not impose beneficiation on the act of mining itself.
Chrome test
Chrome is the perfect test case, because it is where the political argument for beneficiation is most tempting and the economic argument against compulsion is most concrete. South Africa is a giant in chrome ore but has lost much of its historical strength in ferrochrome, the energy-intensive alloy used in stainless steel. On the face of it, the story seems absurd: a country with enormous chrome resources exports ore to countries that then perform the value-adding process it says it wants. But the industry’s answer is simple: the missing ingredient is not chrome ore, it is cheap, reliable electricity. Electricity tariffs have risen by more than 900% since 2008, making the ferroalloys industry globally uncompetitive. In that view, an export tax on chrome ore would penalise miners for the collapse of smelting economics rather than repair the cost base that made smelting impossible.
The DTIC may now believe that old objection has been partly answered. The government has recently moved to provide major tariff relief to ferrochrome producers, with Glencore-Merafe and Samancor receiving electricity rates that could make previously distressed smelters viable again. If the problem was electricity, the DTIC can now say it is addressing electricity ̶ and that export controls are not an isolated blunt instrument but part of a package: cheaper power, export quotas, special economic zones and a licensing regime that favours downstream investment.
Mining investment is not frightened only by what government has already done. It is frightened by what government appears to be thinking of doing
In theory, this is industrial policy in its most muscular form. In practice, it is also exactly the kind of policy mixture that makes miners reach for the blood-pressure tablets. Every additional instrument creates a new negotiation, and every negotiation creates discretion, and every discretion point becomes somewhere a mining project can be delayed, redirected, bargained over or quietly suffocated.
Internationally, South Africa’s DTIC is not imagining the world incorrectly. The age in which governments spoke solemnly about free markets while quietly building industrial champions is over. The US has the Inflation Reduction Act. The EU has its carbon-border mechanisms and critical raw materials agenda. Indonesia banned nickel ore exports to force domestic processing and has built a significant nickel-processing industry. Resource nationalism has moved from the fringe to the mainstream. In that context, South Africa’s desire to use its mineral endowment as the basis for industrial development is understandable, and perhaps unavoidable.
MPRD
The difficulty is that South Africa wants to play this new global game with a state apparatus that often struggles to perform the old basic one. Before a country can impose sophisticated industrial conditions, it must be able to issue mining rights efficiently, maintain a reliable cadastral system, coordinate approvals, run railways, operate ports and administer rules predictably. That was exactly the point emerging from the Indaba panel before Swanepoel detonated the IDS passage.
Similar anxieties surround the Mineral Resources Development Bill. The department presents it as a modernising measure – formalising artisanal mining, improving consultation, strengthening enforcement, aligning with the critical-minerals strategy. But to the industry, certain clauses suggest a renewed appetite for administrative control rather than simplification.
The original draft extended black economic empowerment-type requirements into prospecting rights, alarming exploration companies because exploration is the riskiest stage of the mining cycle and usually has no cash flow against which empowerment structures can sensibly be financed. That proposal was corrected, a partial retreat that confirmed both the department’s sensitivity to criticism and the industry’s suspicion that problematic clauses can appear before their practical consequences have been understood.
The second flashpoint is Section 11, dealing with the transfer of mineral rights and changes in control. If ministerial consent is required too widely, ordinary dealmaking becomes slower, more uncertain and more exposed to discretion.
For an industry dependent on raising capital, bringing in partners and restructuring ownership as geology and markets change, that can quickly become a brake on investment. The department has corrected some of the most contentious wording, but lawyers and industry bodies argue that uncertainty remains.
South Africa ought to be using the current commodity cycle to rebuild exploration, accelerate licensing, attract junior miners and create conditions for downstream investment. Instead, the DTIC has thrown a new conceptual wrench into the machine
South Africa ought to be using the current commodity cycle to rebuild exploration, accelerate licensing, attract junior miners and create conditions for downstream investment. Instead, the fear is that just as the mining department is trying to sort out the basics, the DTIC has thrown a new conceptual wrench into the machine.
There is a defensible pro-IDS case: that South Africa has spent 30 years watching its mineral endowment leave the country too cheaply while industrial capacity declines and unemployment remains at catastrophic levels; that no serious industrialising country leaves everything to the market; that beneficiation will not happen without government forcing coordination across energy, mining, finance, infrastructure and trade.
There is also a powerful anti-compulsion case: that beneficiation is not created by decree but by comparative advantage, infrastructure, energy prices, skills and investment confidence; that attaching beneficiation undertakings to mining rights risks deterring exploration and mine development; that chrome smelters did not close because miners refused patriotism ̶ they closed because electricity became too expensive; and that if government wants beneficiation, it should incentivise manufacturers, not encumber miners.
Mthenjane made an important distinction at the Indaba: political risk and policy uncertainty are not the same thing. Political risk is the risk of expropriation, coups or nationalisation. That is not the central complaint about South Africa. The complaint is more granular and, in some ways, more maddening: that rules may be clear in Pretoria but applied differently in a regional office; that statutory deadlines may exist but not be observed; that ministerial discretion is too wide; that a document can emerge from one department proposing changes to licensing logic administered by another. The IDS has touched a nerve because it seems to confirm the industry’s most persistent fear – not that government is anti-mining, but that it is internally incoherent.
The IDS may be only a proposal in relation to mining rights, as Mbele suggested, but proposals shape expectations, and expectations shape investment. If the DTIC wants to use mining rights as industrial-policy levers, it must say exactly how, through which statute, after what consultation, subject to what limits, with what appeal rights and under whose authority. If it cannot answer those questions, the proposal should be withdrawn or recast as an incentive framework rather than a licensing condition.
South Africa does need beneficiation. It does need to stop exporting so much raw potential and importing so much finished value. But it also needs mines, and mines begin with rights, certainty, capital and time. If the state makes the right to mine contingent on a promise to solve manufacturing, electricity and industrialisation all at once, it may end up with less mining and no beneficiation.
The dispute is not about the destination. It is about whether South Africa gets there by making beneficiation possible, or by making mining conditional. That difference is not semantic. It is the difference between industrial policy and industrial wishful thinking.
This article first appeared in The Mining Yearbook.
