MZILA MTHENJANE: An opportunity to invest for mining growth through sensible legislation

The review of mining regulations in SA by the department of mineral resources & energy presents a rare opportunity to create a well-considered and shared vision of a thriving mining industry that will benefit SA for generations to come. 

The department’s review process, which started more than a year ago, provides the chance to press the reset button and unlock the true potential of our mineral wealth for the good of all South Africans. This can be achieved by encouraging investments in exploration and mine development, and operating mines with a view to achieving the goal of the government of national unity for inclusive economic growth and job creation. 

SA is one of the world’s richest sources of minerals such as platinum group metals, manganese, chrome, vanadium and gold. Many of these are increasingly needed for the transition to a low-carbon future and new technologies. But the environment to discover and extract them is not conducive for investors to lay out the large sums of capital needed for exploration, which is a high-risk, high-reward element at the start of the mining value chain.

According to Stats SA, measured in real, or inflation-adjusted, terms, expenditure on mineral exploration in SA declined by 8.1% per annum in 2015-23. Over the same period overall real fixed investment by the mining sector increased by a mere 0.7% per annum. Much of the investment that has taken place was to sustain operations as opposed to building new mines to increase capacity. 

The department’s review of the Mineral & Petroleum Resources Development Act is the opportunity to implement a pragmatic revision of the regulations and underlying policies that have stifled prospecting and new mine development because of uncertainty in the regulatory environment and concern about security of tenure.

Ian Cockerill, the former CEO of Gold Fields and a respected veteran of the mining industry, was quoted by Miningmx in November advising West African governments not to follow SA in implementing laws that discourage investment. Cockerill was speaking as CEO of Endeavour Mining, a London-listed gold miner that has operations in West Africa. 

“We’ve seen in SA, for instance ... they brought in their new mining code in 2004. Twenty years later we see what has happened. Effectively there has been an investment strike,” Cockerill is reported as saying. 

Damaging clauses

There is a concern in the local mining industry that the department may use the opportunity when splitting out petroleum resources from the ambit of the act to revisit mining regulations and introduce damaging clauses that have negative unintended consequences and, possibly, to address setbacks it suffered in earlier court judgments.

The latter includes the judgment that ruled the Mining Charter is a policy document, with various clauses set aside, and that there are enduring consequences from historic empowerment deals. This means past transactions do not have to be replaced or topped up. 

The industry believes it has dealt with the issue of once-empowered, always-empowered through the courts and that this must be clear in any new iteration of the act. The industry is operating under the third charter, with each iteration since it was first introduced in 2004 shifting the goalposts and creating more uncertainty in the industry about the operating environment.

It is more important than ever that ideological considerations and any intentions to settle old scores are set aside for the greater good of creating a conducive, flourishing and attractive mining sector for local and international investors. The focus should be to promote inclusive growth, job creation and increased tax generation and foreign exchange earnings for the country. 

A thriving mining industry that is growing has upstream and downstream benefits for other industrial sectors, including manufacturing and construction. A growing mining sector will lead to greater demand for machines, equipment and products, and boost the production of more metals and minerals that could supply local manufacturers to add value to our spectacular mineral wealth.

Any attempt by the government to force the mining sector to sell mineral and metals exclusively into the domestic market through the imposition of developmental pricing and export taxes or export quotas will make mining even less attractive to investors. 

As S&P Global recently noted, mining exploration expenditure around the world declined by 3% to $12.5bn in 2024, below the $20bn of 2012. There is intense competition for exploration budgets from Latin America, Morocco, Angola, the US and Saudi Arabia. Unfavourable mining jurisdictions will struggle to attract spending despite attractive geological potential. 

SA remains unable to attract the local and foreign investments needed to revitalise large-scale, modern prospecting. The country has been languishing below 1% of global exploration spending for the past four years and shows little sign of any growth towards the 5% of two decades ago.

Without a pipeline of new mineral deposits our mining industry has a finite future, one of diminishing importance to the economy and employment. That said, the requests for funding unleashed by the R400m joint Industrial Development Corporation/department of mineral resources & energy exploration fund highlights the robust appetite for exploration activity in SA. A favourable policy environment could go some way to ensure this demand translates into more exploration activity.

The promised introduction by the department of a modern, transparent mining cadastre in June 2025 to efficiently manage prospecting and mining rights and applications will be an important milestone. Overlapping rights and applications to mine minerals on existing mining tenements is of deep concern to companies, which have to resort to expensive, time-consuming legal channels to protect their operations and their security of tenure. 

The pressure on limited staffing capacity within the department to manage dozens of applications a week will be relieved by a cadastre that uses GPS co-ordinates to efficiently manage current and future mining and prospecting rights and applications, giving the industry security of tenure, a fundamental requirement for investments. 

The creation of a “one-stop shop” for prospecting and mining rights, with the alignment of government departments such as water & sanitation, forestry, fisheries & environment and co-operative governance & traditional affairs on how to facilitate the timely, consistent and efficient processing of rights applications, is equally essential to encourage investment. Where departments do not work together it takes anywhere from 18 months to two years to secure approvals for a prospecting right, and in some instances longer to have a mining right approved. 

Once a mining right is approved it must be known that it has been approved by every area of government relevant to making that mine develop, including local government. This is how we will achieve a thriving mining industry that ensures SA and all its citizens benefit from our minerals. 

• Mthenjane is CEO of the Minerals Council SA.