So falls Caesar: What are our economic growth prospects with the mining industry in disarray?

Since the Witwatersrand Gold Rush of 1886 and the Barberton Gold Rush of 1874, mining has been a significant role player in the economic development of South Africa. In fact, it has been a cornerstone of our economy for well over a century.

At the heart of the valuation of any mining company lies the life of the resources at the disposal of the mine. Once this declines, a lot of financial pain follows. Mining rights and exploration drive the value of the Company and its financial capacity to raise capital. Shrinking rights leads to shrinking balance sheets. This, in turn, affects the size and impact of new projects, and so the cycle of economic contraction continues. This contraction may eventually lead to financial distress.

Do the leaders of this country understand the contractionary nature of these utterly avoidable disasters?

In this edition of Conversations that Matter, we need to take a closer look at some of the decision-making within the DMRE and question whether these are the right decisions to facilitate economic growth.

A plethora of applications…none were awarded

The Daily Maverick article points out that, on 8 December 2023, when South Africa was on the verge of its annual Christmas shutdown, Mineral Resources and Energy Minister Gwede Mantashe responded to questions from Christian Themba Msimang, an IFP member of Parliament.

The article adds that, according to Mantashe’s response, the DMRE received 2,525 mining licence applications since the beginning of the 2023/24 financial year. However, none of these applications have been finalised.

Three-quarters of the way through the financial year, the department was unable to finalise any mining applications.

This shows the utter paralysis in the department and underscores the urgency of getting a functional mining cadastre up and running, a process that has also seemingly gone over a cliff.

Deliberate obfuscation?

Msimang had asked for a breakdown for each province, but the minister could not provide it. Perhaps this was because the department could not be bothered or because it is in such a muddled state that it doesn’t actually know.

The collapse of the administration of our mining regulatory regime seems to be happening behind a wall of deliberate obfuscation and denial. The Daily Maverick emailed a query to the department on 4 January 2024 asking for an explanation but has yet to receive an answer.

The mounting dysfunction at the department was thrown into sharp relief in February 2021, when it revealed that the backlog for mining permits, mining rights and permit rights had reached an eye-watering 5,326. It has since reported progress.

The article adds that if, as of December 2023, none of the 2,525 applications received in the financial year had been finalised, the logjam is clearly growing again.

Shifting the blame

The article points out that critics – and the minister himself – have long decried the department’s useless Samrad system for processing mining rights applications. Now Samrad – and the department by extension – seem to have completely melted down. This has happened largely under the radar, given the department’s aversion to transparency.

A mining cadastre is an online map portal that displays a country’s mineral wealth in a way that is easily accessible to the public. It also shows the state of play of mining and exploration rights, as well as active mining operations in a country, and provides a platform for companies to apply for exploration, prospecting, mining and related rights. The article adds that a functioning mining cadastre would shine the light of transparency on this shambolic state of affairs, but after years of promises and delays, the process is stuck in a rut of opacity.

Neighbouring Botswana and Namibia are among several African countries that have a mining cadastre.

What do we need to address?

If companies within a particular sector struggle while the industry and specific competitors are thriving, it is clear that the majority of these challenges lie within the DMRE. What must we address to ensure that all companies within the mining sector are given an equal opportunity to thrive?  In the DMRE presentation in February, hopefully, their key goals and objectives for the year will set out a clear plan for the department’s recovery.

Additionally, the Energy and Logistics Crises are the chief challenges to address. Mining is an energy-intensive process, and South Africa just came off the back of its worst year of loadshedding to date. However, even if loadshedding didn’t exist, mining companies would be less profitable as they currently cannot get their products to port.

If we then factor in the administrative delays at the DMRE, one cannot help but wonder if a change in the departmental and political leadership of the mining sector needs to take place.