SA failing to capitalise on its minerals wealth

The value added by the South African mining sector increased by only 0.5% a year between 2001 and 2008, according to a report released yesterday by the Industrial Development Corporation.

By contrast, China's mining value grew by 19% a year, followed by Chile (12%), Russia (10%), Indonesia (8%), Australia (7%) and even Venezuela (4%), the Chamber of Mines states.

A report compiled by Citibank says South Africa has the largest in situ mineral resources in the world. Estimated at $2.5-trillion, the country's mineral deposits are dominated by platinum-group metals, which account for 88% of global reserves; manganese (80%); chrome (72%); vanadium (32%) and gold (only 30% of global confirmed reserves).

Based on this under-par performance, the question of why South Africa is failing to capitalise on its rich minerals endowment is often raised. The issues facing the local mining industry are both complex and politically delicate.

But the IDC says it is possible to identify a number of common factors, which, taken together, might explain the sector's relative under-performance. These include the introduction of a new minerals regime, infrastructure constraints, safety issues, falling productivity, rising costs, skills shortages and a volatile exchange rate.

Both the mining industry and the government have recognised the seriousness of the problems lying ahead. As a result, a team was established late in 2008 to develop a strategy for growth and transformation.

The global commodities boom highlighted the urgent need for the upgrading and expanding of South Africa's transport and energy infrastructure.

Owing to these capacity constraints, the transportation of other bulk commodities, such as agricultural products, has, over time, increasingly moved from rail to road transportation.

Transport utility Transnet is to invest R110-billion over the next five years to unplug rail and port bottlenecks.

Eskom is building two new coal-fired power stations, Medupi and Kusile, which are expected to bring an additional 9600MW to the national grid by 2020.