Dark clouds gather over the industry that built South Africa

South Africa’s mining industry is facing significant challenges, exacerbated by regulatory red tape that is hampering investment in the sector.

In a recent press statement, Minerals Council South Africa CEO Mzila Mthenjane called for the country to expedite the processes of granting licences for mineral and prospecting rights.

In addition, he called for inter-departmental alignment to remove obstacles curtailing the growth of the mining industry.

“We are in an investment competition globally. We need to work together as industry, government, organised labour and civil society in the right combinations to enable the speed we need to grow the mining industry,” Mthenjane said.

“It is all about speed and how quickly companies can embark on exploration, prove up a viable reserve, and be clear in terms of stable, predictable and business-friendly regulations to develop a new mine.” 

He said the Minerals Council works with junior companies, which make up half its membership, and these companies spend a lot of time navigating the legislative environment. 

Mthenjane said this process is “hugely frustrating” for junior companies and investors. “Unfortunately, this frustration has seen the withdrawal of some investors in some instances,” he said.

“For sustainable transformation to bring in new entrants, women and youth, the mining industry must grow through the development of new mines to tap into known and yet-to-be-discovered mineral deposits.”

In January this year, Daily Maverick revealed that the Department of Mineral Resources (DMRE) has a backlog of 2,500 mining licence applications.

In addition, the publication reported that the department had not finalised a single application in the 2023/24 financial year.

Mthenjane said his council has held talks with the department about this backlog of unprocessed mineral rights applications.

In addition, the two parties discussed a review of the Mineral and Petroleum Resources Development Act.

This review is aimed at developing and implementing a modern, transparent mining cadastre to efficiently manage mineral and prospecting rights

The department plans to release its review of the Act before the end of March this year and implement the cadastre by the middle of 2025.

“In a globally competitive exploration and mining environment, South Africa needs a regulatory and operating environment that is conducive to attracting local and foreign investment,” Mthenjane said.

This includes investments in exploration, mine development and spending on existing mines to increase production and, where possible, extend their lives.

This would create further employment and local development opportunities.

The Minerals Council recently released its Facts and Figures for the mining industry in 2024.

The report found that real gross fixed investment by mining was poor in 2023, increasing by a mere 0.1% year-on-year in real terms.

Based on Stats SA’s Quarterly Capital Expenditure survey, there was some improvement in 2024. 

Adjusted for inflation, the council estimates that mining sector capital expenditures on new assets increased by 7.1% year over year in the three quarters of 2024.

However, for South Africa to truly reap all the benefits its large mining sector can bring, this figure needs to be far higher.

“The bottom line is that while there may not be significant green field mining investment in the foreseeable future, mining companies will be investing to future-proof existing operations,” the council said.

“In addition, spending on mining exploration should improve once the DMRE implements a functioning mining cadastre system.” 

Supporting South Africa’s mining industry would not only benefit local mining companies but also help the country as a whole.

South Africa was once a global mining powerhouse and considered one of the best mining countries in the world.

In addition, South Africa can attribute a lot of its development to the mining industry.

The discovery of diamonds in Kimberley and gold on the Witwatersrand led to rapid industrialisation, urbanisation, and economic growth in South Africa in the 1800s. 

Mining has attracted large-scale foreign investment, fueled infrastructure development like railways and electricity, and created a financial hub in Johannesburg. 

Today, mining remains a pillar of the economy and a key part of the country’s history.

The mining industry contributed 6% to South Africa’s GDP in 2024, but this is a decline from the 6.3% it contributed in 2023.

In addition, the mining industry employed 474,876 people in 2024, and employee earnings in the sector rose to R195.3 billion last year.

Mining companies paid R43.6 billion in corporate income tax in 2024. However, the sector has the potential to contribute significantly more to government revenue, as it paid R85.5 billion in 2023.

Mthenjane said that, given where South Africa is as a country, “it is critical and urgent that we work towards economic growth”. 

“It won’t happen by stakeholders operating alone. The government can’t do it alone, and business cannot do it alone either,” he said. 

“Cooperation, trust, a shared vision of a prosperous future of inclusive economic growth, job creation and making the most of our natural endowments in a sensible, business-friendly way will realise that goal.”