President Cyril Ramaphosa: 2022 Investing in African Mining Indaba

10 May 2022

Keynote Address by President Cyril Ramaphosa at the 2022 Investing in African Mining Indaba, Cape Town International Convention Centre

This Mining Indaba is taking place at an important moment in the global recovery from the effects of the COVID-19 pandemic.

Across the world, almost every industry is having to adapt to new circumstances, confront new challenges and be prepared to seize new opportunities.

The mining industry in Africa is no different.

As it responds to the effects of the pandemic, the mining industry also needs to manage the risks and potential benefits of rapid technological change, shifting market demand, climate change and geo-political uncertainty.

Like all other industries, the pandemic caused significant disruption to mining operations.

But once again, the industry has shown its resilience.

In South Africa, mining registered growth of 11.8 per cent in 2021, the highest across all industries. Last year the sector recovered production to almost pre-COVID levels.

This was the result of significant collaboration between the Department of Mineral Resources and Energy and the Minerals Council South Africa, including efforts to keep the sector operational during the hard lockdowns in the pandemic’s early stages.

After more than 150 years, mining remains a critical pillar of our economy.

Mining is a significant contributor to export earnings, it is an important source of foreign direct investment, and directly employs nearly half a million people.

And we expect mining’s significance and contribution to our economy to grow.

Like many other parts of our continent, our country is abundantly blessed with vast mineral deposits that form the basis of the most important applications used in society and economies today.

Mining companies see the potential in South Africa.

At the fourth South Africa Investment Conference earlier this year, investments valued at around R46.5 billion were pledged towards mining and mineral beneficiation.

Despite the great prospects for South African mining, we face significant challenges.

It is a matter of grave concern that South Africa has fallen into the bottom 10 of the Fraser Institute’s Investment Attractiveness Index rankings.

We are currently standing at 75th of 84, which is our worst-ever ranking.

This ranking underlines the fundamental reality that South Africa needs to move with greater purpose and urgency to remove the various impediments to the growth and development of the industry.

We understand very clearly the need to fix to the regulatory and administrative problems.

We need to clear the backlog of mining and prospecting rights and mineral rights transfer applications, put in place a modern and efficient cadastral system, and implement an effective exploration strategy.

We understand very clearly the need to significantly improve the functioning of our railways and ports, and the vital importance of ensuring a secure and reliable supply of affordable electricity.

These tasks are at the forefront of our economic reconstruction and recovery efforts.

Since the last Mining Indaba, we have made significant headway in driving a programme of policy reform for the network industries that are inextricably tied to mining and its operations.

This programme is being coordinated through Operation Vulindlela, an initiative of the Presidency and National Treasury, working in partnership with the Department of Mineral Resources and Energy and other departments.

An important area of progress is regulatory reform to facilitate new electricity generation by the mining and other sectors.

Regulations have been amended to allow companies to invest in new generation capacity of up to 100 MW without needing to apply for a license.

We are working to further cut red tape for the registration of projects, to accelerate environmental approvals and to strengthen the capacity of Eskom and municipalities to link such projects to the grid.

According to the Minerals Council South Africa, around 4,000 MW or R65 billion of such electricity generation capacity investment is in the pipeline.

South Africa’s energy landscape is being fundamental transformed to introduce greater competition, more diverse energy sources and greater energy security into the future.

The unbundling Eskom into separate entities for transmission, distribution and generation is on track, and is set to be completed later this year.

Operation Vulindlela is working with the Department of Water and Sanitation to implement a turnaround plan for the issuing of water use licenses, something that is critical to mining operations.

We are working towards a target of 80 per cent of all applications being resolved within 90 days.

On Transnet, the publication of the White Paper on National Rail Policy outlines our plans to revitalise rail infrastructure and to enable third party access to the freight rail network.

We have heard the calls from the industry for private operators to be allowed to operate the country’s dedicated coal, iron ore and manganese lines. 

We hope that such proposals will be discussed at the Indaba, drawing on the experiences of other countries.

Working together with the industry and other stakeholders, we are strengthening the capacity of our security services and law enforcement agencies to tackle illegal mining, cable theft and general damage to infrastructure.

We value our ongoing collaboration with the Minerals Council South Africa to resolve these and other challenges facing the industry.

According to companies surveyed by the Minerals Council if these regulatory hurdles could be resolved, they would be prepared to increase their investments by 84 per cent over the next five years, over and above existing capital investments.

We are committed to mobilising the necessary resources and providing the necessary incentives for a new wave of exploration, particularly of the minerals required for the global energy transition.

The recently-released Exploration Strategy and Implementation Plan lays out South Africa’s plans to move to future strategic metals such as copper, nickel, cobalt and rare earths.

As a world leader in platinum group metals, South Africa is perfectly poised to take advantage of the growing demand for such metals.

At the same time, we must continue to expand the production of some of the minerals that have been the mainstay of our mining industry, and for which there is still much demand.

We are keen to harness the opportunities of the hydrogen economy.

Last week, I attended the launch by Anglo American of the world’s largest hydrogen-powered mine haul truck.

This truck will be powered by an entire ecosystem of hydrogen production centered around the mine itself.

We aim to be not only an important hub for the production and export of green hydrogen, but also of green ammonia, green iron and steel, and sustainable aviation jet fuel.

South Africa’s Hydrogen Strategy is aimed at stimulating and guiding innovation along the value chain of hydrogen and fuel cell technologies.

This will not only sustain demand for PGMs but also position South Africa to derive benefits from supplying high value-added products.

As a continent that has such a rich abundance of resources, Africa needs to beneficiate its mineral endowments for the benefit of the current and future generations.

Mining has an important role in South Africa’s just energy transition.

In our onward march towards a low-carbon future it is critical that our efforts are both realistic and sustainable.

We have resuscitated the successful Renewable Energy Independent Power Producers Procurement Programme, with plans to substantially upscale investment in wind and solar power.

We are diversifying our energy mix under the Integrated Resource Plan.

We have supporting legislation to mitigate and adapt to climate change.

In line with our just transition efforts, we are in the process of mobilising international finance as part of the effort to ensure that affected communities and existing industries are supported.

It is clear that as our reliance on coal is reduced, pathways towards new economic activity needed to be created for workers in affected industries.

As we confront the reality of energy insecurity and the development of new energy sources, it is critical that South Africa, like all developing economies, be given the necessary developmental space.

Countries on the African continent need to be able to explore and extract oil and gas in an environmentally-responsible and sustainable manner.

These resources are important for energy security, for social and economic development, and for reducing energy poverty on the continent.

It is important that as we undertake a just energy transition, we adhere to the principle contained in the UN Framework Convention on Climate Change of common but differentiated responsibilities and respective capabilities.

The growth and development of mining in South Africa will not be possible unless the working and living conditions of mineworkers and mining communities are improved.

It is important that mining companies engage with labour in the spirit of partnership and cooperation.

It is vital that mine safety and the health of workers becomes the industry’s foremost concern. On this there can be no compromise.

I wish to comment the mining sector for the financial and logistical support it has given to the roll-out of South Africa’s COVID-19 vaccination programme.

As of the start of May, more than 75 per cent of mineworkers were fully vaccinated, and 66 per cent were partially vaccinated.

Drawing on its extensive experience with managing other communicable diseases such as TB and HIV, the mining sector has been able to manage the pandemic carefully and systematically.

The partnership between government and the Minerals Council of South Africa stands as a fine example of how the private sector can support a nation’s development agenda.

In undertaking its vaccination programme, the mining industry has also demonstrated its responsibility to the communities in which its operations are located.

It is important that this commitment is sustained in all areas of development, including through the effective implementation of Social and Labour Plans, responsible environmental practices and local procurement.

The future of mining on the African continent holds great promise.

It holds great promise for investment, for industrial development and for growth.

We have a shared responsibility – as governments, as mining companies, as labour and as communities – to realise that promise.

As the government of South Africa, we are firmly committed to fulfil our responsibilities and to remove all impediments to the growth, sustainability and prosperity of the mining industry.

We are firmly committed to ensuring that mining occupies its rightful place as an industry of the future.

I thank you.

View more

The 2022 edition of Investing in African Mining Indaba, initially scheduled for 7-10 February 2022 will now take place 9-12 May 2022 at the CTICC, Cape Town, South Africa

We consulted extensively with our partners, key stakeholders across the mining value chain and government ministers. Collectively we decided, due to ongoing challenges caused by the coronavirus pandemic, that a postponement was the most practical solution and provides the highest chance of holding a physical, in-person event in 2022 so the industry can reconnect once again.

Continue reading View more

An interview with Arnold Van Graan, Analyst at NEDBANK CIB

“The biggest driver of the industry’s fortunes would, however, still be the gold price”

Next month Investing in African Mining Indaba will be hosting Nedbank CIB’s gold roundtable during the Virtual Investment Programme. Ahead of the roundtable, Mining Indaba caught up with Arnold Van Graan, Analyst at Nedbank CIB to start the conversation on what he predicts for gold in the future, how the landscape has changed and what fundamentals are likely to shape the gold sector within the next five years.

2020 was a record-breaking year for gold; how do you expect it to perform in 2021?

The gold price was boosted by an abundance of bad news and uncertainty in 2020. Although 2021 is off to a shaky start, we expect the risk outlook to improve in a quarter or two, which could see the safe-haven support for gold wane. An improving global economic and geopolitical outlook and stability could see some of the uncertainty ease over the coming months, pulling gold down. However, we do not expect a total collapse in the gold price, but possibly a bit more weakness from current levels, as most of the support (lower real rates/inflation and uncertainty) has been priced in. We, therefore, have a muted view on the gold price outlook for 2021e.

How do you think the gold landscape will change in 2021? Will we see more M&A and consolidation?

With the current gold rally potentially having reached a peak, we expect the focus of management teams to change slightly, and see growth coming back into focus. And often, with growth comes M&A. Although gold companies are currently focusing on smaller, lower-risk projects, we believe we could see companies start to embark on larger projects. We, therefore, expect more capital to be allocated to growth projects and see further industry consolidation. We would not be surprised to see a large M&A deal in the SA mining sector in the coming year.

Bitcoin has had a resurgence over the past few months. Do you see Bitcoin and other cryptocurrencies challenging gold’s relevance? Is “gold old” in the minds of younger generations?

Bitcoin is gaining a lot of attention, with many investors now finding it a viable investment. Younger generations, in particular favour Bitcoin, as it gives them more freedom from institutional control, more flexibility and perceived higher returns. Tesla’s foray into Bitcoin could see Bitcoin grab even more attention from investors.

However, Bitcoin as an investment option is extremely volatile and is more suited to short-term and medium-term trades rather than long-term investors, in our view. It appears as though many retail investors see Bitcoin as a means of making a quick profit.  Gold remains a good asset class through which investors can diversify their portfolios. Gold has long been and remains the go-to traditional safe-haven asset. Bitcoin could be a good way to diversify your portfolio, but it will not replace gold, in our view.

Investors and analysts now talk of an “ESG premium” for stocks boasting strong environmental, social, and governance credentials. Which gold companies do you believe warrant an ESG premium?

We do not believe ESG matters have truly started to impact valuations yet. It appears as though the operational and financial performance of gold companies is still the major driver of valuations. The increased focus on ESG in recent years has seen mining companies moving from talk to action, in our view. We expect further pressure related to ESG matters on mining companies, which would see even more resources and spending on ESG-related matters over the coming years, and this could start impacting capital allocation decisions.

The link between ESG credentials and financial performance is becoming increasingly pertinent to the mining industry’s success. ESG has become more than just a company’s social licence to operate; it has become a non-negotiable criterion on many more fronts. We, therefore, believe companies with solid ESG credentials could start to attract an ESG premium, but even more so, we expect a lack of ESG compliance to weigh on valuations.

What are the fundamentals likely to shape the gold sector in the next 5 years?

Declining reserves remain a major challenge for the sector and could be one of the biggest factors shaping the industry over the next few years. We expect gold producers to embark on growth initiatives in order to replace reserves.  Companies that lack organic growth or exploration potential in their portfolios would turn to M&A. We, therefore, expect M&A activity to remain high, with many of the smaller miners merging to retain scale and relevance.  The focus on ESG and the global transition to clear energy could also impact the gold sector, with gold companies potentially using this to diversify into copper, while exiting certain jurisdictions that carry ESG risk.

We expect cost pressure to be a key challenge facing the sector, with the transition to renewable and sustainable energy sources adding to it. The biggest driver of the industry’s fortunes would, however, still be the gold price. A flat or rising gold price should see the sector continue to prosper and attract interest from a wide array of investors. However, in time, we expect the typical cycle of rising costs and capital expenditure to repeat itself, which could see the sector underperform the gold price.

Join Mining Indaba and Nedbank CIB on Wednesday 31st March at 13:00 (GMT) for the roundtable to discuss the points raised in the interview further. For more information, please click here.

The gold roundtable is open exclusively to approved investors and analysts of the Virtual investment Programme. To find out how to get involved with the Virtual Investment Programme, please click here.

View more

Investing in African Mining Indaba 2021

Investing in African Mining Indaba is solely dedicated to the successful capitalisation and development of mining interests in Africa.

Continue reading View more