Roger Baxter - Chamber of Mines of South Africa - The South African mining sector – Challenges and opportunities
Upcoming SlideShare
Loading in...5
×
 

Roger Baxter - Chamber of Mines of South Africa - The South African mining sector – Challenges and opportunities

on

  • 293 views

Roger Baxter delivered the presentation at 2014 Africa Iron Ore conference. ...

Roger Baxter delivered the presentation at 2014 Africa Iron Ore conference.

The Africa Iron Ore conference is the annual gathering for iron ore and stainless steel executives engaged in the African Region.

For more information about the event, please visit: http://www.informa.com.au/africaironoreconference14

Statistics

Views

Total Views
293
Views on SlideShare
293
Embed Views
0

Actions

Likes
0
Downloads
5
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Roger Baxter - Chamber of Mines of South Africa - The South African mining sector – Challenges and opportunities Roger Baxter - Chamber of Mines of South Africa - The South African mining sector – Challenges and opportunities Presentation Transcript

    • “The South African mining sector – challenges and opportunities” Roger Baxter Chief Operating Officer Presentation to African Iron Ore Conference, 4 June 2014
    • Presentation outline How does South Africa score? Conclusion Global and local drivers Key drivers of mining competitiveness Why Mining is Crucial to South Africa Unpacking the constraints for mining
    • The prospects of Commodities at a global level are mostly driven by economic growth Since 2008, the global commodities markets have been hit by the multiple effects of: • The “W” shaped recession-slow recovery in the EuroZone • The slowdown in economic growth in China. • The “V” shaped recession- slow recovery in the US economy. • The reduction in quantitative easing by the Federal Reserve. But prospects are stabilising: • Despite ongoing structural issues the Eurozone is expected to post a modest positive growth rate in 2014. • China’s economy has stabilised and is expected to grow at >7% in 2014. • The US economy is recovering, with consumer confidence rising. • The impact of tapering on commodity markets should ease.
    • PWC Annual Mining Report Titles • 2005 “Enter the Dragon” • 2007 “Riding the wave” • 2008 “as good as it gets” • 2009 “When the going gets tough” • 2010 “Back to the Boom” • 2011 “The game has changed” • 2012 “The Growing Disconnect” • 2013 “A Confidence Crisis”
    • The World economy is gradually recovering Source: IMF WEO October 2013 -5 -3 -1 1 3 5 7 9 11 13 15 Economic growth rate, selected countries and regions China South Africa United States European Union Sub-Saharan Africa
    • Risks at the Global level remain……. Source: IMF WEO October 2013 0 50 100 150 200 250 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 %ofGDP Gross public debt to GDP ratios, selected countries Germany Japan South Africa United Kingdom United States
    • Despite the volatility in the short-term, the long-term fundamentals are positive for growth in commodity demand • Long term drivers of demand remain intact: » Trends in urbanization and industrialization appear to be entrenched for the next few decades in China, India and other EMs. » By 2050 another 3 billion people at the global level will urbanize. Most of this urbanization will take place in emerging market economies (UN population division). » The infrastructure expenditure to accommodate global urbanization is significant. » The quantity of minerals required to support this urbanization will remain large.
    • World urban population growth (Billion people) Rising urbanisation, 3 billion people to urbanise by 2050 (most of the growth in Africa) Source: UN, McKinsey 0.4 0.5 0.5 0.8 0.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 2010 Urban Pop. China India Other Asia Africa RoW 2050 Urban Pop. The world is set to urbanise close to another 3 billion people by the middle of the century
    • Perceptions about Mining by RSA’s people in general •Little link made between role of minerals and the functioning of a modern society. •Little credit given to the mining industry for playing a key role in South Africa’s economic development over past 130 years, which has transformed South Africa into the most industrialised country in Africa
    • Metals and minerals in a Smart Phone • Copper (16 grams) ¹ • Silver (0.35 grams) ¹ • Gold (0.034 grams) ¹ • Palladium (0.015 grams) ¹ • Platinum (0.00034 grams) ¹ • Ceramic magnetic switches containing rare earths ² • Indium² • Titanium dioxide ² • Indium tin oxide ² • ¹ source – USGS http://pubs.usgs.gov/fs/2006/3097/ • ² source – NRC critical minerals report
    • Metals and Minerals in a car • 960kg iron &steel • 109kg Aluminum • 22.7kg Carbon • 19 kg Copper, 34kg for a hybrid • 19kg Silicon • 11 kg Lead • 10kg Zinc • 7.7kg manganese • 6.8kg Chromium • 4.1kg Nickel • 0.3 kg Platinum •+Antimony, barium, beryllium, cobalt, gallium, gold, magnesium, molybdenum, neodymium, indium, palladium, •Sulphur, rhodium, silver, strontium, tin, titanium, tungsten, vanadium, zirconium.
    • Even a Wind Turbine uses a significant amount of metals and minerals • 335 tons of steel (chrome included) • 4.7 tons of copper • 13 tons of fiberglass • 3 tons of aluminum • 1,200 tons of reinforced concrete
    • Some of the world’s famous buildings would not have been possible without Mining
    • Even the cosmetics and makeup are made from minerals • Talc • Mica • Kaolin • Calcite • Titanium dioxide • Zinc oxide
    • Perceptions and realities about RSA mining PERCEPTION REALITY Is a “Dirt Digger” Is uncaring about the lives of workers and does not pay well Does not care about the environment, communities –Poverty at the doorstep of prosperous mines Profits and benefits exported to a small bunch of Capitalists Resistant to Transformation Does not matter to SA- Ingi Saldago- Business Report-”Eskom was right to switch off the Mines”
    • Perceptions and realities about RSA mining PERCEPTION REALITY Is a “Dirt Digger” Another R300 billion and 200 000 jobs created in downstream industries Is uncaring about the lives of workers and does not pay well 67% reduction in fatality rate, average wages per employee up 12% p.a. Does not care about the environment, communities –Poverty at the doorstep of prosperous mines Spent R2 billion on communities, R4 billion on skills and R20 billion in corporate taxes in 2012. Profits and benefits exported to a small bunch of Capitalists Shareholders balanced 50% local, 50% offshore, R12 billion in dividends Resistant to Transformation >R150 billion in BEE deals concluded, good progress on all pillars of Charter Does not matter to SA- Ingi Saldago- Business Report-”Eskom was right to switch off the Mines” 18% of GDP, 50% of exports, 1.3 million jobs, 94% of electricity, 17.2% of corporate tax
    • The ANC Mangaung Elective Conference • ANC rejects wholesale nationalisation as a policy option. • ANC has adopted the National Development Plan as a key strategic area. • Over the next five years, the ANC will take decisive and resolute action to overcome the triple challenges of poverty, inequality and unemployment, which are at the heart of South Africa’s socio- economic challenges. • The most effective weapon in the campaign against poverty is the creation of decent work, and creating work requires faster and more inclusive economic growth. • Using South Africa’s natural resources in a manner that benefits the nation as a whole.
    • The ANC Mangaung Elective Conference mining specific resolutions • State intervention with a focus on beneficiation for industrialisation. • Equitably sharing the rents. • Strategic minerals will be investigated and declared. • Strengthening of the state mining company. • Mining should create safe and decent work, and mineral extraction should not compromise local communities or the environment. • There is a need to develop and enhance mineral knowledge linkages.
    • The Chamber of Mines supports the ANC Policy Resolutions • A greater degree of policy certainty is emerging. • In a number of areas the “how” is critically important. – Encouraging further beneficiation is an important issue and further work regarding the “how” is taking place. – Energy security can be guaranteed through private sector investment and cooperation between government and the private sector.
    • Presentation outline How does South Africa score? Conclusion Global and local drivers Key drivers of mining competitiveness Why Mining is Crucial to South Africa Unpacking the constraints for mining
    • •Progress has been made to get the economy back on to a higher growth path (3.2% 1994 to 2012). •However, SA’s unemployment rate is too high (>20%), its levels of income inequality are very high (Gini coefficient 0.59). •Government has now placed the creation of meaningful employment as a central pillar of economic policy. •All parties recognise that higher levels of sustainable, balanced and labour absorbing economic growth is key to reducing unemployment (NDP, NGP, IPAP5). South Africa requires faster, more balanced and inclusive economic growth
    • South Africa While South Africa’s growth rate has risen to 3.2% p.a. 1994-2013, it is just too slow to meaningfully tackle unemployment & poverty 35 24 18 15 12 10 9 8 7 - 5 10 15 20 25 30 35 40 2 3 4 5 6 7 8 9 10 YearstodoublerealGDP % annual growth rate Number of years to doubling real GDP at different growth rates
    • Too much of the economy’s recent growth has been driven by credit fuelled non-tradable demand side, & tradable export sectors have languished….. Source: StatsSA 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 R'millions South Africa: Contribution to GDP in real terms, non-tradable vs tradable sectors of economy (real terms) Non-tradable sectors (financial services, wholesale and retail trade, etc) Tradable sectors (mining, manufacturing, agric)
    • -8 -4 1 5 9 13 17 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 %ofGDP. %growth. Real annual GDP growth for tradable sectors versus non-tradable sectors, and the current account deficit as % of GDP Tradable Non-tradable Current account % of GDP Resulting in large external imbalances, that must be funded by capital flows….. Source: StatsSA
    • To ensure more balanced and higher levels of growth & job creation the country needs its tradable export sectors to grow at a much faster pace This is where mining fits in: •Mining has a very large employment, foreign exchange earning and GDP multipliers. •The National Development Plan (NDP) recognises the important role that mining can play.
    • Mining - The Essential Core Of SA Economy • Creates 1.35 million jobs (520 000 direct & 830 000 indirect). • Accounts for about 19% of GDP (9% direct, 10% indirect & induced). • Critical earner of foreign exchange >50%. • Accounts for 20% of private investment (12% of total investment). • Attracts significant foreign savings (R1.4 trillion/ 29% of value of JSE). • 2012, R20 billion & R5.6 billion in royalties. • R437 billion in expenditures, +/- R389 billion spent locally. • R93.6 billion spent in wages and salaries • 50% of volume of Transnet’s rail and ports • 94% of electricity generation via coal power plants • 15% of electricity demand • About 37% of country’s of liquid fuels via coal • R4 billion spent on skills development • R2 billion spent on community investment
    • Downstream beneficiation is far bigger than people think! • About 99% of RSA's cement is made locally from locally mined products • 80% of RSA's steel is made locally from locally mined iron ore, chrome, manganese, coking coal • 30% of RSA’s liquid fuels are produced from locally mined coal • 94% of RSA's electricity is produced from locally mined coal • Most of our domestic chemicals, fertilisers, waxes, polymers, plastics, etc., are fabricated using locally mined minerals & coal • 13% of the world's platinum catalytic converters are made in RSA, and so on Overall another R300 billion in sales value and >200 000 jobs are created in the downstream beneficiation industries. Extra value is being created where the commercial opportunities exist
    • Mining has significant potential • If growth constraints can be removed mining can: – Grow at 3% to 5% p.a., resulting in a much more balanced country growth rate (double size of mining by 2028). – If mining had grown at same pace as rest of economy between 1994 and 2012, it would have increased the country’s growth rate to 4% from 3.2%, a significant difference. – At a 5% growth rate, the mining industry can double in size in 15 years, significantly increase exports and reduce the savings-investment constraint. – Add another 50 000 to 100 000 direct jobs.
    • Potential of the bulk commodities… Mineral/com modity Opportunities Key Enablers Risks 1.Coal • Need 100MT extra coal <10 years (> R80bn- R100bn in investment) • Export market (India/China) • Domestic market – Eskom/synfuels • SA has significant coal reserves • Mature Witbank fields • Relatively undeveloped Waterberg coalfield • Investment (capital) • Profitable coal projects • Synergy of domestic sales & exports • Stable, predictable & competitive investment environment for mining. (Smart tape) • Cost effective, efficient , reliable & available logistics • Demand (global/local) • Uncertainty on policy • Uncertainty on domestic pricing /export restrictions • Infrastructure. • Cost inflation. • Poor execution • Lack of cooperation between key stakeholders 1.1 Coal potential: Grow production to >350 MT by 2020 (2012: 258 MT), exports to >100MT (2012: 78 MT), Local sales 250 MT, (2012: 185 MT), and grow employment to >100 000 (2012: 80 000) 2.Iron Ore • Global demand (China) • RSA produces niche product • Same as above, but logistics is key • Same as 1 above. 2.1 Iron ore potential: grow production to >100 MT by 2020 (2012: 67 MT) increase exports to 90MT (2012: 59 MT) and grow employment to 30 000 people (2012: 18 000) 3.Manganese • Global demand and supply • Same as above but logistics is key • Same as 1 above. 3.1 Manganese potential: grow production to > 21 MT by 2020 (2012: 8.8 MT) and grow employment to 10000 people (2012: 5800) These 3 bulks could add 37 000 jobs and R72 billion extra in sales
    • RSA iron ore production is up 137% 1990 to 2013… Source: StatsSA/CoM 0 50 100 150 200 250 300 1990=100 SA: physical volume of production for selected minerals, 1990 to 2013, base indexed to 1990 diamonds gold PGMs Coal Iron ore Chrome Manganese
    • Presentation outline How does South Africa score? Conclusion Global and local drivers Key drivers of mining competitiveness Why Mining is Crucial to South Africa Unpacking the constraints for mining
    • Competitiveness in mining is driven by multiple factors, and leads to measurable performance and sustainability outcomes Competitiveness drivers Performance outcomes  Value add  Production volumes  Investment • Labour cost • Other costs Produc- tion Costs Sustainability outcomes ▪ Occupational health and safety ▪ Environmental impact Trans- formation Safety, health, & environ- ment ▪ Transformation level ▪ Societal contributions SOURCE: McKinsey & Company Market context Regulatory environment Inherent potential Product demandEnabling factors Factor market efficiency Industry structure Natural resource endowment Human capital/ skills Geographical factors Accessibility of markets Domestic demand International demand Regulatory and legal requirements Institutional capacity Infrastructure Ease of doing business ▪ Social licence ▪ Security of tenure ▪ Rule of law ▪ Macroeconomic stability
    • Mining Asset Lifecycle Explore Evaluate Develop Mine Closure Cash flow over life cycle + - Price cycle Given long life cycle, mining requires predictable, stable and competitive policy and regulatory environment
    • Presentation outline How does South Africa score? Conclusion Global and local drivers Key drivers of mining competitiveness Why Mining is Crucial to South Africa Unpacking the constraints for mining
    • At a general level South Africa ranked 53rd /148 most competitive economy in WEF 2013-2014 report •RSA is the second highest ranked BRICs economy (behind China). •RSA does well on: • Auditing standards/efficacy of boards/protecting minority shareholders (rank 1) • Soundness of banks (rank 3) and security exchange regulation (rank 1) • intellectual property protection (rank 18th), • Protection of investors (10th) • Protecting property rights (rank 20th) and • the effectiveness of resolving legal disputes (13th). •RSA has high accountability in private institutions (rank 2), that support the institutional framework. •RSA has a mixed scorecard in other areas: • Its labour market efficiency is below average (rank 116) • Health and primary education score poorly (rank 135)
    • At a general level South Africa ranked 53rd /148 most competitive economy in WEF 2013-2014 report 0 1 2 3 4 5 6 Institutions Infrastructure Macroeconomic environment Health and primary education Higher education and training Goods market efficiency Labour market efficiency Financial market development Technological readiness Market size Business sophistication Innovation WEF global competitiveness scores, South Africa vs other Efficiency Driven Economies, 2013-2014 South Africa Efficiency driven economies
    • South Africa is the top ranked African mining country on WEF Competitiveness Score & Strength of investor protection 10 41 84 69 69 41 69 84 107 57 123 41 123 123 142 53 74 77 90 93 114 118 125 131 132 135 137 140 141 147 0 50 100 South Africa Botswana Morocco Namibia Zambia Ghana Egypt Tanzania Zimbabwe Madagascar Mali Mozambique Burkina Faso Mauritania Guinea Global competitiveness rank and strength of investor protection 2012/13 (WEF) Strenght of investor protection rank (out of 148 countries) WEF GCI rank (148 countries)
    • South Africa is mid-table ranked (8th) in the Fraser Institute Survey of Policy potential for Africa 17 25 30 36 54 55 59 64 69 70 74 76 79 85 91 93 0 10 20 30 40 50 60 70 80 90 100 Botswana Morocco Namibia Mauritania Ghana Burkina Faso Zambia South Africa Egypt Niger Tanzania Guinea Mali Madagascar Zimbabwe DRC Fraser Institute Survey 2012/13, ranking of mining countries by policy potential score (rank out of 96 countries)
    • -100 -50 0 50 100 Botswana South Africa Namibia Ghana Morocco Zambia Mauritania Tanzania Burkina Faso Egypt Madagascar Niger Mali Zimbabwe Guinea DRC Frazer Institute Survey 2012/13 Quality of the geological database, factors encouraging investment in exploration versus deterrents to investment for African mining countries Encouragement score Deterrent Score Quality of the geological database, selected countries – factors contributing to investment and detracting from investment
    • -100 -50 0 50 100 Morocco Namibia Botswana South Africa Egypt Ghana Zambia Tanzania Burkina Faso Zimbabwe Madagascar Mali Mauritania Niger Guinea DRC Frazer Institute Survey 2012/13 Quality infrastructure, factors encouraging investment in mining versus deterrents to investment for African mining countries Encouragement score Deterrent Score Quality of infrastructure, selected countries – factors contributing to investment and detracting from investment
    • -100 -50 0 50 100 Botswana Morocco Burkina Faso Ghana Namibia Mauritania Zambia Mali Niger Madagascar Tanzania South Africa DRC Egypt Guinea Zimbabwe Frazer Institute Survey 2012/13 Tax system, factors encouraging investment in mining versus deterrents to investment for African mining countries Encouragement score Deterrent Score Tax systems, selected countries – factors contributing to investment and detracting from investment
    • 0 10 20 30 40 50 60 70 Uzbekistan Ivory Coast Mongolia Ghana Guinea Greenland Arizona-USA Mexico Poland Tanzania Peru Indonesia Kazakstan Philippines South Africa Bolivia Papua New Guinea China Argentina Zimbabwe Chile Western Australia Sweden % effective tax rate Copper mine model-comparative effective tax rates South Africa Yet on standardised tax model, South Africa is reasonable competitive on a taxation point of view Source: Prof Jim Otto
    • South Africa is ranked 24th in terms of the IFC’s Doing Business 2014, Ease of Paying taxes RSA Australia Canada Brazil Botswana USA OECD Rank Ease of paying taxes 24 44 8 159 47 64 Payments (no. p.a.) 7 11 8 9 34 11 12 Time (hours p.a.) 200 105 131 2,600 152 175 175 Profit tax (%) 21.9 26.2 6.6 24.9 21.7 27.9 16.1 Labour tax (%) 4.1 20.2 12.9 39.6 0.0 9.9 23.1 Other Taxes (%) 4.2 0.6 4.9 3.8 3.6 8.4 2.0 Total Tax take (%) 30.1 47.0 24.3 68.3 25.4 46.3 41.3
    • Presentation outline How does South Africa score? Conclusion Global and local drivers Key drivers of mining competitiveness Why Mining is Crucial to South Africa Unpacking the constraints for mining
    • RSA mining has not met its potential • RSA mining missed out on the last commodity boom with mining GDP declining by 1% p.a. between 2001 and 2008, versus 5% growth rate in top 20 mining economies mining sectors. • Gold mining production shrank 7.6% per annum in the last decade. • Large shares of the gold & platinum mines are loss-making at current prices. • The industry has recently been hit by labour market challenges and by the unfortunate Marikana tragedy. • The industry has faced bouts of policy uncertainty (the nationalisation discussion, the review of mining taxation, the possible introduction of a carbon tax, etc.) and some licensing challenges. • The industry has faced infrastructure constraints (shortages of electricity, rail and water). • Rapidly escalating costs have challenged the sector.
    • Competitiveness drivers The key threats to competitiveness of SA mining are: ▪ Infrastructure (electricity, rail) ▪ Policy uncertainty and some challenges in regulatory framework ▪ Social licence to operate1 ▪ Human capital/ skills ▪ Institutional capacity ▪ Rapidly rising costs ▪ Falling productivity Competitiveness drivers of mining SOURCE: McKinsey & Company Competitiveness threat Competitive advantage Mixed picture Market context Regulatory environment Product demandEnabling factors Infrastructure Ease of doing business ▪ Social licence ▪ Security of tenure ▪ Rule of law ▪ Macroeconomic stability Factor market efficiency Industry structure Inherent potential Natural resource endowment Human capital/ skills Geographical factors Accessibility of markets Domestic demand International demand Regulatory and legal requirements Institutional capacity 1 Dealt primarily in sustainability and transformation workstreams
    • The unprotected strikes and Marikana tragedy exacerbated the situation • In 2012, the PGM mining sector was hard hit by the unprotected strikes and the Marikana Tragedy. • 50 lives were lost and the reputation of the PGM sector and RSA as a key mining investment destination was tarnished. • The strike induced decline in production exacerbated the cost squeeze faced by the industry. • Approximately R15 billion in revenue was lost and many related industries were negatively affected by the strikes. • The strike action in 2014 is further undermine the PGM mining sector and damaging the country’s reputation.
    • The Deputy President’s Mining Dialogue Process and the Minister’s Peace Accord • All stakeholders signed a “Peace Accord” in February 2013, focused on calming the situation and restoring law and order in affected areas. • In August 2013, the stakeholders developed a “Framework Agreement for a Sustainable Mining Industry” under the leadership of the country’s Deputy-President. The focus of the DP’s Mining dialogue process is to: – Stabilise the industrial relations environment. – Promote law and order. – Get the mining industry back on track from an investment and growth perspective.
    • Industrial relations 2013 • 2013 was been vastly different to 2012: – There has been a significant reduction in unprotected strike activity. – There has been better enforcement of law and order . – Mining companies are enforcing internal workplace rules and organised labour are generally operating within the labour laws, in terms of negotiations and going on legal strikes. – Despite high wage demands, single digit wage settlements accompanied by limited legal strike action has taken place in the gold and coal sectors. – Work is being done to improve the financial literacy of workers and to reduce the impact of employee indebtedness and exposure to micro- credit.
    • Industrial relations 2014 • 2014, the Platinum Strike: – AMCU demands entry level wage of R12,500 on basic wages. – Mining companies have offered increases of 9%-10% (average guaranteed pay would rise from R9,230pm in 2013/14 to about R12,500pm by 2015/16). – The companies have lost R20.9 billion in revenue, while workers have lost R9.3 billion in wages. – The impact on the Rustenburg area, the associated industries and the workforce is significant. – The impact on South Africa’s reputation as a mining investment destination and choice supplier of PGMs has been tarnished. – Further restructuring is likely.
    • South Africa has good policy potential assuming best practice • The country’s mineral laws are generally congruent with global practice (MPRDA, taxation system and Royalty Act), but some areas require further work (environmental licensing, beneficiation, etc.). • Recent policy uncertainty regarding the nationalisation debate has been negative (but is now resolved). • Some licensing challenges have undermined investment. • Bouts of policy uncertainty, some licensing challenges and the Marikana tragedy is reflected in the 2013 Fraser Institute Survey which ranks South Africa in position 64 out of 96 countries. • The MPRDA Amendment Act has been passed by Parliament. • A country taxation review is scheduled for 1h14.
    • Significant engagement has taken place on the MPRDA Amendment Bill and progress made on the mining related aspects of the Bill 1. Section 9, license application system. 2. Section 11, Ministerial approvals for change in controlling interest of a listed company. 3. Regulating residue stockpiles. 4. Penalties and sanctions. 5. Sharing credits in social and labour plans. 6. Refusing right applications due to concentration. 7. Streamlining environmental licensing. 8. Beneficiation. 9. Other technical issues.
    • Inflation in input costs has simply been too high 4.4 7.2 9.1 11.2 12 15.3 15.7 18.1 26 0 5 10 15 20 25 30 Mining machinary Total producer price inflation rate Cement Structural steel Labour costs Reinforcing steel Diesel Pgm mining cash costs per 4e ounce Electricity prices for mining Cost inflation affecting the mining sector, average annual increase in costs, 2007 to 2012 (Source: StatsSA, CoM EAU)
    • Presentation outline How does South Africa score? Conclusion Global and local drivers Key drivers of mining competitiveness Why Mining is Crucial to South Africa Unpacking the constraints for mining
    • RSA, reinforcing competitive strengths, tackling competitive weaknesses • RSA has a number of competitive strengths and advantages that must be built on. • Significant work is going into challenging areas: • The DMR Minister’s Peace Accord and the Deputy President’s Mining Dialogue process have helped stabilise the labour relations environment and promoted law and order in key mining areas. • The ANC has rejected wholesale nationalisation and adopted the NDP as the cornerstone of economic policy (mining is recognised as a key industry). • The MPRDA Amendment has been passed by Parliament and stakeholders have provided significant input. • The taxation review process is in a Committee looking at the impact of the tax system on realising inclusive growth
    • South African Mining Industry of the Future? Skilled workforce, transformed, productive, decent wages and non- discriminatory, safe & healthy workplaces Management not only focus on profits, but provide decent jobs, play positive role in mining communities and sensitive to environment Government and trade unions: proud of and fully supportive of the mining industry and acknowledge industry as important for the country  Key exporter  Key earner of foreign exchange  Key taxpayer  Creator of decent jobs  Developer of skills  Key contributor to economy Investors regard industry as a good investment destination Constructive Partnerships built on TRUST
    • Way Forward • Collaborative partnership that “Puts South Africa First” to achieve the NDP objectives is key. • We all understand what the growth constraints are, the key is proper implementation plans to resolve the constraints. • Work is underway to improve the regulatory framework and greater clarity and certainty are emerging. • All stakeholders have a role to play in moderating cost pressures and improving productivity. • We need to restore stability to our production cycle and reposition the industry for growth by focusing on competitiveness.
    • Vibrant, growing, transforming mining sector that helps contribute substantively to growing the economy, reducing unemployment and making South Africa a better place for all We have a Vision of a
    • Conclusion Mining and minerals matters for the growth, development and transformation of South Africa