The South African Mining Industry

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The South African Mining Industry
ANGLOVAAL MINING LIMITEDCEOs evening 2
November 2000
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MINING IN SOUTH AFRICA

• Exceptional geological deposits
• Political transition after 1990
• Modernise the industry
• Result leaner, more focused, more competitive
  and
• internationally active industry
• Major transformation challenge remains

• Continues to be a highly successful cluster in
  South African economy
• Most major minerals have experienced long-term
  growth
• Mining is a significant contributor to
  employment creation, rural economies and
  regional (SADC) development

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MINING IN SOUTH AFRICA
Large, expanding industries

• Hidden inside SAs aggregate mining statistics
  are large,
• expanding industries
• Production coal, PGMs and chrome sectors have
  doubled
• in size since 1980
• During the same period, mining other than gold,
  grew faster
• than the rest of the economy
• World-class support industries (electricity,
  chemical,
• engineering)

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MINING IN SOUTH AFRICA
South African reserves and production in key
minerals 1998 ( of world)
(1)
Manganese
(1)
Chrome ore
(1)
PGMs
(1)
Vanadium
(1)
Gold
(1)
Alumino-silicates
(1)
Titanium minerals
(2)
Vermicullte
(2)
Zirconium minerals
(3)
Fluorspar
(4)
Uranium
(4)
Antimony
(5)
Coal
(5)
Nickel
(8)
Iron ore
Reserves
(6)
Zinc
Production
(9)
Phosphate rock
0
10
20
30
40
50
60
70
80
Source Chamber of Mines
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MINING IN SOUTH AFRICA
60 of South Africas exports

• Mining and related beneficiation accounts for
  over half of SAs exports
• Mining remains the most important earner of
  foreign
• exchange
• Growth in manufacturing exports is based
• on mining activities

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MINING IN SOUTH AFRICA
Extent of beneficiation
of production
of exports
Beneficiation process
beneficiated
beneficiated
Antimony concentrate to antimony
troxide
65
80
Chrome ore to chromium alloys
57
71
Copper concentrate to copper metal
92
89
Iron ore to iron and steel
30
15
Manganese ore to manganese metal and
49
43
alloys
sulphate
Nickel matte to nickel metal and
100
100
Phosphate concentrate to phosphoric acid
52
37
and
phosphatic
fertilisers
Zinc concentrate to zinc metal
100
100
Diamond sorting/valuing to cutting/polishing
100
52
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MINING IN SOUTH AFRICA
Composition by sector of South African export
earnings
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MINING IN SOUTH AFRICA
Africa
1
Export destinations for SAs processed minerals
South America
2.5
North and Central
America
Europe
28
38
Pacific Rim
Middle
Countries
East
25.8
4.8
Source Minerals Bureau
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MINING IN SOUTH AFRICA
Percentage contribution to GDP by sector 1975 -
1998

• Mining / manufacturing is inter-related

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MINING IN SOUTH AFRICA
Contribution to mining GDP, 1998

• Gross fixed capital formation
• continues to be significant
• Large portion of capital
• investment in SA over past
• decade has been into the minerals
• complex (Alusaf, Columbus,
• RBM, Saldanha Steel, Sasol, etc)

Coal
PGMs
21
27
Gold
Diamonds
7
45
Source SA Reserve Bank
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MINING IN SOUTH AFRICA
Principal ally against poverty

• For five million South Africans, mining is the
  principal ally
• against poverty
• Latest census - one in seven men with a formal
  sector job
• in 1996 employed in mining industry
• Mining industry is the conduit for money and
  opportunity to
• some of the poorest areas in Southern Africa

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MINING IN SOUTH AFRICA

• 1996 population census - more than one sixth of
  the aggregate income of wage earners is
  derived from mining in 56 magisterial districts
• These 56 districts are SAs mining nation
• These areas include poor rural districts from
  which mine
• workers are recruited.
• Total population of these areas is 5,7 million
  on average, more than a quarter of all income
  earned by men is earned from mining

Principal ally against poverty
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MINING IN SOUTH AFRICA
Principal ally against poverty
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MINING IN SOUTH AFRICA
Proportion of workers at various formal
education levels
New mine workers
30
20
Less than primary
10
Matric
0
85
90
95
98
Source Chamber of Mines
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MINING IN SOUTH AFRICA
Employees on Chamber of Mines gold mines
95,000
20,000
Unskilled wages
90,000
15,000
Skilled wages Rands per annum
Unskilled wages Rands per annum
85,000
10,000
Skilled wages
80,000
5,000
75,000
0
1970
1980
1990
1998
Source Chamber of Mines
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MINING IN SOUTH AFRICA
Contribution of direct taxes to the government
revenue (per cent of total revenue)
Sector
1970s
1980s
1990s
Average
Average
Average
Coal
0,29
0,52
0,60
10,02
12,51
1,13
Gold uranium
Diamonds
1,45
0,56
0,09
1990s figure includes coal and other mining
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MINING IN SOUTHern AFRICA
Key to economic development

• Over last 20 years, two major economic
  shortcomings have forced African economies to
  depend on multilateral aid agencies
• 1. Owing to inability of governments to
  generate
• tax revenues, African countries have
  saved at
• less than half the rate of other
  developing countries.
• cont.

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MINING IN SOUTHern AFRICA
Key to economic development

• 2. With limited exports, less foreign exchange
  to purchase machines and computers
  required for
• export-led growth.
• Root cause of this political instability, weak
  institutions, poor policies
• Mining can play a critical role in Africas
  economic
• renaissance

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MINING IN SOUTHern AFRICA
Tanzania
Zambia
Mozambique
Zimbabwe
Namibia
Botswana
Key to economic development in southern Africa
South Africa
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MINING IN SOUTHern AFRICA
Recent mining FDI in selected SADC countries
1995 - 1999 (US millions)
Source Business Map/SACS - FDI database
FDI Foreign direct investment
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MINING IN SOUTHern AFRICA
South Africa is well positioned

• SA mining companies are leading the resurgence
  of
• mining activity in the region
• Extensive African exploration is underway
• Johannesburg may reclaim position as global
  centre of
• mining technology, specialist services and
  supplies
• It is estimated that half of investment made in
  large-scale
• projects in southern Africa is returned to SA
  through
• purchase of services and supplies

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MINING IN SOUTH AFRICA
South African firms are at the centre...

• SA provides sophisticated inputs and services
  to the
• global mining industry
• SA firms have become globally prominent in
  three areas
• 1. Technology providers
• 2. Providers of knowledge-
• based mining services
• 3. Specialist mining contractors

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MINING IN SOUTH AFRICA
Conclusion / looking forward

• The contribution of mining to the economy must
  be seen
• as coming not only from mining operations,
  but also
• from upstream and downstream activities and
  the
• huge multiplier effects the industry has at
  economic,
• social and political levels
• Mining represents the most successful
  cluster in SAs
• economy

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