Mineral and petroleum resources minister Gwede Mantashe says the government is open to supporting South Africa’s mining sector, including an electricity tariff linked to commodity prices to provide relief to mining companies.
The minister was speaking to reporters at the Investing in African Mining Indaba in Cape Town on Monday afternoon. He said for local beneficiation to succeed, mining companies need guaranteed access to consistent, reliable and affordable electricity supply.
‘Survive the cycle’
“Commodity-linked tariffs talk to what you do to accommodate the electricity tariff . Samancor is one company that has total experience of that in South Africa, where we say that when the price of a commodity is high, you must accept paying higher electricity tariffs. When the price of a commodity is low, we must pay a low price for electricity.
“In the long-term, those prices cancel each other. But they allow a company to survive the cyclical behaviour of the tariffs on electricity. And that is going to be important as we move forward and it will be linked to other interventions.”
Mantashe’s remarks come after Eskom managed to supply electricity to South Africa for over 300 days without having to implement load-shedding.
It also comes after the National Energy Regulator of South Africa granted Eskom a 12.74% average tariff hike, which is well above inflation, but less than half of what Eskom asked for.
Earlier in the day, Mantashe told delegates at the Mining Indaba that the government was considering “sustaining commodity-linked tariffs and consolidating and applying incentives and other existing financial instruments to support and encourage beneficiation”.
“We, therefore, urge African leaders and investors across the continent to also promote the beneficiation of these minerals close to the point of production so that we can stop the export of jobs and profits.”
Cadastral system ‘progressing’
Mineral resources director-general Jacob Mbele said the long-awaited cadastral system was a crucial step closer to going live, as software has been developed with data already populated onto it.
This system seeks to enhance efficiency and transparency in the licensing process for the mining value chain.
“We are still on track, in terms of the commitment that we have made. Significant progress has been made with regard to the development of the software. We already have a prototype, a version that’s customised in line with our processes. The main feature is the underlying data ... that must be populated into the software,” Mbele said.
MPRDA review
Mbele said the department was also in the process of reviewing the Minerals and Petroleum Resources Development Act (MPRDA) and the department was aiming to have the review taken through cabinet in time for public consultation to begin after April.
“The review of the MPRDA is at a very advanced stage. We are currently consulting within the government processes. Our target is to hopefully still go through cabinet processes so that it can go for public consultation ... before the end of March,” he said.
Mantashe sought to allay industry concerns about potential empowerment partnership provisions that the MPRDA review could produce. The minister said the department was adapting the act to the demands of the sector.
“Any policy should be an evolving policy. It must respond to challenges that we come across on the application and try to correct them with the amendments and that is the intention of the MPRDA. [There are a] few aspects of the MPRDA that landed us in court. We are reviewing them to see if we can better them and improve the operation of the MPRDA.”
Exploration fund
Mantashe said his department was committed to exploration investment through the country’s exploration fund launched at last year’s Mining Indaba. He said of the eight beneficiaries from the first funding call, at least three were fully black-female-owned.
He said the department was of the view that an export tax was not an attractive option for revenue generation from the sector as it reduces the volume of exports from South Africa.
“If we are serious about beneficiation, there must be incentives for beneficiation and among these is export tax. My argument, as the minister responsible is that export tax is a blunt tool. Because export tax reduces the volume of exports and it actually reduces foreign earnings from a commodity.”
He said the industry’s debate around beneficiation needed to become more nuanced, adding that South Africa will not do away with the export of raw commodities altogether, as mines are businesses that draw value from this activity.
Mantashe encouraged African leaders to rally together and not allow themselves to be bullied by developed economies through the threat of withholding aid.
This was in response to US President Donald Trump threatening to withhold aid to South Africa pending an investigation into what he claimed was the “confiscation” of land by the South African state under the Expropriation Act that was signed into law by President Cyril Ramaphosa in January.
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