[miningmx.com] — The Chamber of Mines AGM is being held this morning.
In the heyday of the country’s mining industry, this used to be an important event on the business calendar, but in recent years it has morphed into an opportunity for some straight talking by a leading figure, often the Minister of Mineral Affairs, to the mining industry. Then some of the Chamber’s internal affairs are discussed and the officials for the next year are elected behind closed doors.
The reason for the Chamber’s status having falling so much in the past 15 years, even though it is probably the only business organisation in the country that has real research abilities, is that the scope and wealth of the country’s gold-mining industry has shrunk so dramatically in this period.
The figures are fairly well known, but for the sake of clarity: Gold production has fallen from more than 500 tonnes a year to below 200 tonnes, and South Africa, for decades the world’s leading gold producer, has now dropped to fourth spot on the list behind China, Australia and the USA.
The slow decline of the gold industry has been accompanied by lots of hardship. All the main role players – mining entrepreneurs, trade unions, suppliers and supporting manufacturing industries – have suffered.
Nevertheless, the stature and importance of the Chamber is not at all in line with what we have known for a long time: South Africa is one of the richest mining countries in the world, if not the richest – even though our gold resources is largely depleted.
WEALTH OF RESOURCES
Few things illustrate this better than the Citi Group report two years ago in which the bank’s analysts did a worldwide survey of mineral resources, excluding oil and gas. They found that South Africa has mineral reserves to the value of $2.5 trillion – $2.3 trillion of this being platinum reserves – which, in terms of minerals, makes us the richest country in the world.
We also have the world’s largest chromium and manganese reserves – and both these minerals are essential in the manufacture of steel and stainless steel. The value of these essential materials for steel increased in leaps and bounds in the past five to seven years as the industrialisation of China and India picked up momentum.
In view of this, the Chamber of Mines AGM should be an event that is preceded by weeks of speculation. On the national calendar, it should take second place only to the opening of Parliament.
The reality is that the Chamber’s roots are in the gold mining industry, out of which it developed, and to a lesser extent in the coal-mining industry. Coal actually only entered the picture in the second half of the previous century when Eskom started stimulating coal production in order to generate electricity on a large scale – mainly to supply power to the mining industry.
Platinum plays a lesser role in the Chamber.
Incidentally, not many people today still realise how dependent the country is on coal as a source of energy. More than 70% of the coal mined in South Africa is used by Eskom to generate electricity.
The fact is that minerals are still by far South Africa’s most valuable resource and that mining will remain our most important economic activity and creator of wealth for many decades to come.
Things will no longer be as simple as they were with the gold industry, but that’s a good thing too, because if we want that $2.3 trillion of platinum reserves to become more than just solid rock beneath the surface, we will have to have a new Chamber of Mines that focuses on the platinum group metals.
The National Economic Development and Labour Council (Nedlac) is playing an increasingly smaller role in the debate on economic development. The main reason for this is that Nedlac was created when the downturn in the gold industry started gaining momentum.
That was a depressing time for the mining industry, and the architects of Nedlac did not give this sector anything like the recognition it deserves.
Nedlac should be reconstructed around the mining industry. It’s fairly clear today that, unlike the mining industry, the manufacturing sector suffered enormously in the recession period since August 2008. The sector will have great difficulty recovering the export markets it lost since then, but if the manufacturing industry could be developed as a downstream branch of the mineral enrichment programme that the Government wants to apply to the mining industry, the picture could change.
However, mineral enrichment and manufacturing are out of the question without access to cheap and readily available energy sources.
Chromium producers have already started emigrating because of electricity prices. Role players in this sector say South Africa is at a crossroads. Unless the availability and prices of energy improve, we are going to lose more and more business.
The plans to supply the future demand for electricity with nuclear power as the source of energy can therefore not be financed by electricity rates. What’s needed will have to be project financing. The most likely solution for this is in the mining industry.
It’s probably anathema to many businesspeople, but central economic planning on a Nedlac-type of forum in which the mining industry plays the leading role is the only way in which we are going to find answers for our economic challenges. And if this is voluntary economic planning, the chances of success are virtually guaranteed.
For that we need the Chamber of Mines ten times over.