Alarm bells for one of South Africa’s biggest employers

The Minerals Council South Africa has warned against government intervention in the country’s minerals sector, saying it could lead to lower mining production, fewer investments and fewer economic and job opportunities. 

This was in response to comments made by Mineral and Petroleum Resources Minister Gwede Mantashe about the government’s potential interventions to encourage the beneficiation or value-addition of the country’s minerals. 

Mantashe made these comments in a speech delivered as part of the debate about President Cyril Ramaphosa’s Opening of Parliament address.

The minister said these beneficiation measures could include taxing primary mineral exports, an incentive scheme for beneficiation processes, such as a finite tax holiday, or an electricity tariff linked to commodity prices. 

The Minerals Council, representing companies responsible for 90% of South Africa’s annual mineral production, said that it supports beneficiation when it makes economic sense.

As such, it welcomes the call for a policy environment that better supports these processes. 

However, the organisation emphasised the importance of careful consideration before implementing export taxes or restrictions on raw minerals, as these could have unintended negative effects.

Minerals Council CEO Mzila Mthenjane pointed out that if South Africa lacks a competitive advantage in beneficiation– such as expertise, affordable electricity, a modern manufacturing base, or competitive labour – export restrictions could reduce mining production. 

This would lower the profitability of primary extraction, discourage investment, and ultimately harm jobs and economic opportunities.

The council warned that restricting exports might reduce interest in both local and international investments in mining, especially for minerals primarily suited for export or bound by existing contracts. 

Instead of creating jobs through beneficiation, such measures could lead to job losses, reduced tax revenue, and a weaker position for South Africa in the global commodities market.

The Minerals Council advised that any efforts to encourage beneficiation should consider whether it makes economic sense.

The decision would be based on factors like South Africa’s location, resources, and the feasibility of beneficiation processes either within the country or in neighbouring regions.

“In addition, our favoured approach to encourage beneficiation would include, firstly, a coherent, efficient and stable regulatory environment that encourages investments in exploration,” Mthenjane said. 

This could be done “through transparent and expedited processes leading to the construction of new mines and expansion of existing operations for a longer life and sustainable jobs”.

“This will unlock significant growth opportunities for South Africa, expanding its role into the production of critical minerals and supply to enable the transition to a low-carbon future, both domestically and abroad.” 

Mthenjane also suggested protecting existing beneficiation activities. 

This includes precious metals refining, ferrochrome, manganese alloys and steel manufacturing, which will be critical to developing a nationwide ‘construction site’ – a goal Ramaphosa has set for the new government – and inclusive economic development to create jobs.

Mthenjane said South Africa urgently needs investor-friendly policies to re-industrialise the economy, attract investment, and develop skills. 

The council highlighted the challenges posed by rising electricity costs and unreliable power supply, which have particularly harmed energy-intensive industries like ferro-alloy smelting. 

Without basic reforms, attempts to develop a critical minerals mining sector will face the same difficulties as existing industries under current legislation and fragmented government priorities.

The Minerals Council is involved in the National Energy Crisis Committee (NECOM) and the National Logistics Crisis Committee (NLCC) to help stabilise electricity and transport services and encourage structural reforms that allow greater private sector participation. 

While there has been progress in electricity generation, improvements in rail and port operations are still needed.

Overall, the Minerals Council supports a “carrot” approach – removing obstacles and creating a favourable policy environment – rather than a “stick” approach like export taxes, which could harm the primary mining sector and hinder inclusive economic growth, the government’s main objective.