ASHLEY NYIKO MABASA: Why SA can’t capitalise on its critical minerals

The global race towards a low-carbon future has thrust rare earth minerals into the spotlight. These critical elements — the building blocks of electric vehicles (EVs), wind turbines and advanced battery technologies — are the unsung heroes of the clean energy transition.

SA, blessed with significant deposits of these invaluable resources, should be poised to reap substantial economic rewards. However, a stark reality looms: unless the nation urgently revitalises its ailing manufacturing sector it risks frittering away yet another pivotal opportunity, condemning itself to a future of resource extraction rather than value creation. 

Consider the fundamental shift in material demands. While a conventional combustion engine requires a mere 30kg of critical minerals, an EV demands a staggering 200kg. This exponential surge in demand underscores the immense potential for nations holding these resources. Yet simply unearthing these treasures is insufficient. The true economic value lies further along the intricate chain of processing, refining and advanced manufacturing — precisely the rungs where SA remains conspicuously absent. 

The narrative of SA’s manufacturing sector since the 1980s is one of structural decline, a slow erosion often simplistically attributed to the meteoric rise in the 1990s of China, which now accounts for about 35% of global trade manufacturing output. While China’s emergence undoubtedly presented a significant challenge, the deeper malady lies in SA’s failure to keep pace with the relentless march of technological advancement. In advanced economies, automation and innovation fuelled unprecedented growth; in SA they tragically translated into job losses and a contraction of the industrial base.

The stark statistics paint a grim picture. In 1994 manufacturing constituted a respectable 21% of SA’s GDP. By 2021 this figure had plummeted to a mere 12%. The sector shed a painful 12% of its jobs between 2009 and 2022, now employing a precarious 1.5-million people, predominantly in semi-skilled or low-skilled roles. This is not merely industrial decline; it is a palpable economic regression.

Policy missteps have tragically worsened this predicament. SA failed to capitalise fully on the global commodities boom, hampered by inadequate infrastructure, incoherent industrial policies and a misguided localisation strategy that sought to shield uncompetitive businesses rather than integrate them into dynamic global supply chains. The consequence is a sector that looks inward, ill-prepared for the competitive demands of a burgeoning green global economy.

This short-sightedness is nowhere more glaring than in the nation’s counterproductive tariff regime. Imposing tariffs on goods not produced domestically — such as crucial solar panels — serves no strategic advantage. Instead, it artificially inflates costs, stifles the deployment of clean energy technologies, and penalises both consumers and industry. Protectionism without a corresponding surge in domestic production is a policy dead-end, a road to nowhere. 

This is particularly pertinent when considering the strategic importance of rare earths. There are 17 chemically complex elements of rare earth minerals — including neodymium, praseodymium, dysprosium and terbium — that are the lifeblood of permanent magnets, which are core components driving EV motors and wind turbines. 

China dominates this critical market, accounting for about 70% of global production and, more critically, a staggering 85% of global refining capacity. The refining process is technologically demanding and requires significant capital investment — barriers SA has yet to overcome. While nations like Germany and Japan possess some processing capabilities, they remain heavily reliant on Chinese supply. The US and SA lag even further behind in this crucial stage of the value chain. 

For too long SA has operated under a simplistic “pit to port” industrial paradigm: extract the raw resource, ship it abroad and import the higher-value finished product. In the realm of rare earths this self-defeating model is tragically repeating itself. The Steenkampskraal mine in the Western Cape boasts some of the world’s highest-grade deposits, including about 86,900 tonnes of total rare earth oxides. Yet without robust downstream beneficiation capabilities this mineral wealth will primarily enrich China, not SA. 

The stakes extend beyond mere economics; they are deeply geopolitical. Nations such as the UK, Japan and US are actively scrambling to secure critical mineral supply chains and reduce their dangerous dependence on China. SA possesses the potential to be a pivotal strategic player in this evolving landscape — but only if it urgently develops the capacity to process and manufacture these vital materials domestically. 

This necessitates a co-ordinated and concerted effort involving substantial investment in industrial infrastructure, targeted support for burgeoning clean-tech manufacturing initiatives, and the forging of strategic partnerships with global technology leaders. SA must fundamentally realign its mineral policy with a forward-thinking industrial vision that transcends mere extraction. Continuing to export raw ore while importing high-value manufactured goods is an unsustainable industrial dead end. 

The opportunity cost of inaction is immense. While exporting raw iron ore might yield modest 10% profit margins, processing that same ore into finished steel can more than double the return. The same fundamental principle applies to lithium and rare earths. Remaining tethered to the bottom of the value chain means perpetually forfeiting the lion’s share of potential economic value. It is no longer enough for SA to simply mine; it must actively make. 

A compelling PwC report underscores the transformative potential of industrial reform, projecting a potential annual manufacturing growth rate of 5.7% over the next decade, raising its GDP contribution to a more respectable 13% by 2030. Achieving this ambitious yet necessary goal requires a dedicated focus on workforce upskilling, improved policy coherence across government departments, and deeper integration into global value chains. SA has regrettably missed previous industrial revolutions; it simply cannot afford to miss the pivotal green one. 

Finally, the government must strategically leverage its substantial procurement power, aligning it with the objectives of broad-based BEE to actively drive domestic manufacturing. In the 2022/23 financial year alone government spending reached a staggering R2.04-trillion. Concurrently, a significant increase in investment in research & development is crucial to enhance the global competitiveness of the manufacturing sector. 

SA stands at a critical juncture. Its rich endowment of rare earth minerals presents a golden opportunity to not only participate in the burgeoning green economy but also to reignite its dormant industrial engine. However, this potential will remain unrealised, a tantalising mirage, unless bold and decisive action is taken to foster a robust domestic manufacturing base.

The time for strategic industrial policy, targeted investment and a shift from a “pit to port” mentality to a “mine to manufacture” vision is not merely opportune — it is absolutely imperative for SA’s future prosperity. 

• Mabasa is an executive manager in the office of the deputy minister of mineral & petroleum resources.