South Africa

Details

  • Industry: Mining
  • Type: Business and industry issue
  • Date: 2014/02/05

Clearing the hurdles to a promising future 

This article first appeared in the Mail & Guardian supplement, 31 January 2013

 

Wayne Jansen, global head of mining at KPMG, says that although the mining sector has been in survival mode in recent years, the growth starting to emerge in the global economy gives reason to hope that the situation is set to improve.

“Overall, I am still cautiously optimistic, but more so than a few months ago,” he says. “The latest World Bank forecasts show the world economy is starting to move out of a low growth phase and Southern Africa is expected to follow this global trend.

 

“But our mining industry needs to get its act together to take advantage of the next mining super cycle. And once profits start flowing again, the ability of mining companies to deal with some of the major issues they currently face must surely improve.”

 

A critical hurdle to overcome is the labour issue

 

“We are in a very difficult space, given the labour issues and fragmentation of the unions. In addition, mining faces challenges presented by the coming elections, which will likely impact on decision making around power security and infrastructure blockages.”

 

The national infrastructure development plan is “a key component of addressing some of the challenges we face, but equally important is labour stability,” Jansen says.

 

“The plan addresses some operational issues, such as power, logistics and communication. While addressing the transport corridor issues will not necessarily make the unions happy, it will at least help to support an industry that needs to see real investment at this stage.”

 

Jansen believes that beneficiation has the potential to address labour concerns.

 

However, moving from being a mineral resource exporter to an industrialised economy requires certain building blocks: power (which he describes as a “critical component”), a transport infrastructure with sufficient capacity to support beneficiation plans, skills development and access to capital.

 

“The right level of investment will drive the growth of transport and power infrastructure and support beneficiation plans. But this investment will not be forthcoming unless there is a strong commercial case for it,” he says.

 

“Politics needs to be set aside and commercial sense must be applied to major infrastructure investments. If planned developments are not commercially viable, they won’t get off the ground and the hoped-for benefits for communities and labour will not be realised.”

 

The employment and economic growth envisaged as a result of beneficiation will likely not materialise for up to 10 years, he says.

 

“When it starts emerging, it will help to address the labour issues, but one of the big challenges is how to address labour concerns in the interim.”

 

Skills development is yet another challenge in the sector

 

“What we face in the mining sector amounts to a productivity issue. This is invariably linked to the pay dilemma. If mines saw greater productivity, they would be in a position to pay individuals more, but, correspondingly, you would almost certainly see a decrease in the size of the labour force.”

 

Globally the industry is also moving towards automation, which is “a very real alternative” that the local industry is considering.

 

“This means that re-skilling people into other areas and beneficiation become very important to address the expected, inevitable job losses. Both the government and the private sector have a very important role to play in uplifting education and skills development.”

 

Jansen believes prioritisation and commercial sense will be critical to the success of the national infrastructure development plan.

 

“While the plan aims to address some of the issues that have held the sector back in the past, detailed plans have not yet been developed for each sector. It is necessary for the government, mining houses and unions to work together in close collaboration to ensure that these detailed growth plans are prepared.

 

“Unfortunately, there is the potential for the process to become politicised, which could slow it down.”

 

He believes it is in the best longterm interests of the government, mining houses and unions to collaborate to ensure a sound and viable infrastructure development programme that encourages local and international investment.

 

“The Waterberg is an important development area, and the Saldanha-Northern Cape development corridor makes a lot of sense. My only question marks relate to the southeastern node and corridor development and the upgraded manganese line into Coega, which could be routed through Saldanha. Here, if private sector investment is sought, the question of viability may come to the fore.”

 

The decision to extend the railway line to export manganese via the port of Ngqura (Coega) instead of Saldanha Bay has drawn widespread criticism.

 

This corridor development aims to strengthen economic development in Port Elizabeth by creating rail capacity to carry manganese from the Northern Cape to Coega, extending the manganese sinter (which creates objects from metal powders) in the Northern Cape and extending the smelter capacity of the Eastern Cape. Other plans include a possible Mthombo refinery (in Coega), a trans-shipment hub at Ngqura, and port and rail upgrades to improve industrial capacity and performance of the automotive sector.

 

“Ultimately, any developments that depend on local and international investment will likely not come to fruition unless they are commercially viable, which is ultimately good news for the taxpayer.

 

“We are experiencing a watershed moment in the mining industry at the moment — the current situation has not been this bad in decades.

 

“However, with sensible regulation, appropriate infrastructure and skills development, and the labour impasse overcome, South Africa could be well placed to take advantage of the next positive cycle.”

 

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Contact

Contact
Wayne Jansen
Global Head of Mining
Tel: +27 (0)11 647 7201
wayne.jansen@kpmg.co.za