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Investing in African Mining Indaba

Ramaphosa talks collaboration, innovation and a just energy transition

The local mining industry is thriving, but infrastructure needs to be improved and changes need to be made for the sector to reach its true potential. This was the message from President Cyril Ramaphosa, who addressed attendees on the second morning of the Investing in African Mining Indaba 2022, taking place at the Cape Town International Convention Centre (CTICC) this week. 

Ramaphosa highlighted that the event is taking place at an important time in the globe’s recovery from the impact of Covid-19. “Across the world, most industries have had to adapt to new circumstances, confront new challenges and also prepare to seize new opportunities,” he said. 

The mining sector in Africa is no exception. Couple this with the benefits and potential risks of rapid technological change, shifts in demand, stresses caused by climate change, as well as massive geopolitical uncertainty, and the industry has a fair amount of work to do to develop and grow. 

Unpacking how the industry is doing right now, he explained that the mining industry experienced growth of 11% in 2021, recovering to pre-pandemic levels and marking the most significant growth of all industries across the economy. Despite this positive shift, he reiterated that the industry faces several real challenges. “South Africa needs to move with greater purpose to remove the various barriers, impediments, hurdles and constraints that are preventing the growth and development of the industry.”

According to Ramaphosa, this entails eliminating different regulatory and administrative problems, clearing the backlog of mining and prospecting rights and putting more modern and efficient exploration strategies in place. In addition, he acknowledged the need to improve the functioning of South Africa’s rail network and ports, neither of which are performing at the levels they need to enable the industry and drive economic prosperity. 

Confronting the energy insecurity realities that face the mining industry and the economy, Ramaphosa further discussed the critical importance of regulatory and policy reform. This reform must facilitate new electricity generation opportunities, which will enable the mining sector and others to better do the work they do. A prime example of this is the lifting of the threshold for energy generation, which allows companies to produce their own electricity up to 100MW without needing to apply for a licence. Government is also working to further cut red tape to speed up the process of registering electricity generation projects and securing environmental approval for these efforts. 

Diversifying the country’s energy mix demands that the government puts legislation in place to support renewables, minimise the effects of climate change and boost investment in sustainable energy supplies such as wind and solar, he said. In this forward march towards a low carbon future, the president stressed that the country’s efforts have to be both realistic, sustainable and don’t leave anyone behind. “As our reliance on coal reduces over time, it is critical that we create pathways towards new economic activity for affected workers, communities and industries.” 

South Africa’s energy landscape is being transformed to encourage greater competition and to introduce more diverse energy sources into the future, he outlined, noting that the unbundling of Eskom into separate entities is on track to be completed later this year. He said that government is committed to providing the resources and incentives the industry needs to promote a new wave of exploration, particularly relating to the minerals required to enable the global energy transition. 

“South Africa plans to focus on future strategic metals like copper, nickel and cobalt. And, as a global leader in platinum group metals, South Africa is perfectly positioned to take advantage of the massive growth in demand for these resources.” The country can also play a key role in the hydrogen economy, and there are plans for it to be an important hub for the production and export of green hydrogen. 

But this doesn’t mean that the mining industry should simply say goodbye to many of the minerals that have been the sector’s bread and butter for decades, he cautioned, stressing that the continent should rather protect and preserve its valuable natural resources. “As a continent with such a rich abundance of mineral resources, Africa needs to beneficiate its mineral endowments for the benefit of current and future generations.” 

We have a shared responsibility as government, as mining companies, as labour and as mining communities to do everything we can to realise the opportunities that lie before us, he said.  “I like to describe mining as a continuous sunrise sector in our economy. And, going forward, we only expect mining’s contribution to our economy to grow.” 

He concluded: “I firmly believe that the future of mining on the African continent holds great promise. Promise for investment, for industrial development and for profit, for our people and our economies.” — Joanne Carew


Re-establishing mining as a sunrise industry

The Investing in African Mining Indaba called on the industry to challenge existing ways of thinking about the sector’s impact on the economy, on the environment, on society and on South Africa’s already strained energy supply. Back after two years, the 2022 event has been described as a reunion like no other in which industry insiders, shareholders, investors, businesspeople and political figures can come together to promote innovation across the industry and facilitate greater investment in the sector.

Gwede Mantashe, Minister of Mineral Resources and Energy, stressed that South Africa must beneficiate its raw materials to create jobs.

Welcoming delegates to the Mother City and to the event taking place at the Cape Town International Convention Centre this week, Geordin Hill-Lewis, Executive Mayor of the City of Cape Town, noted that while we have had a particularly difficult two years due to the pandemic, we have also experienced a major boom in mining and commodities. “Around the world, people are talking about the commodity boom, which has pumped up the prices of all of the things that the people in this room sell. This holds incredible promise for African economies.”

Given this growth, Hill-Lewis highlighted that South Africa should be optimistic, but cautiously so. His call for hesitation is due to what he termed “state failure”, which is causing various structural constraints to economic growth and prevents the local economy from making the most of our rich mineral resources today and into the future. 

That being said, he highlighted that some real progress is being made. Transnet seeking private partners to better enable the country’s freight and rail infrastructure, the raising of the licensing threshold for energy generation and the acknowledgement of the private sector as a key player in driving growth and jobs were all outlined by Hill-Lewis as steps in the right direction. 

Sharing this sentiment, many of the speakers on day one noted that there are many challenges, but stressed that progress has been made and must continue being made if the industry is to grow, evolve and have a positive impact on society going forward. “The mining industry has come a long way since diamonds were first discovered here 155 years ago,” Frans Baleni, Chair of the Advisory Board for Investing in African Mining Indaba noted. “And the sector’s evolution has shaped, and continues to shape, our political and economic landscape.” 

Geordin Hill-Lewis, Executive Mayor of the City of Cape Town, says we should be ‘cautiously optimistic’ about the mineral sector’s growth

Also speaking on the opening morning of the event, Gwede Mantashe, Minister of Mineral Resources and Energy for the Republic of South Africa, noted that this year’s conference is taking place during an interesting time for the global economy. Given the commodities boom, the Russia-Ukraine conflict and the lingering impact of the pandemic, it is imperative that Africa keeps her mineral resources here. “If we export our raw commodities, we are exporting jobs,” he said. “And we are losing tax money.”

Last year, the mining industry paid around R92-billion rand in taxes and royalties out of a total of about R130-billion that was collected by the fiscus in South Africa, said Nolitha Fakude, Chair of the Board at Anglo American South Africa and President of the Minerals Council South Africa. But beyond the numbers, she believes that this kind of event provides the perfect platform for the sector to ask how they show up as mining leaders, how they can engage with society and stakeholders and how they can tell the industry’s story; acknowledging that this story is both a negative and a positive one. 

Regarding the future impact of mining businesses, Fakude highlighted that it is imperative that the industry looks to ensure that mining is meaningful for all stakeholders today, tomorrow and for years to come. “We need to ask what are some of the big things we as an industry should be thinking about as we rebuild, reboot, recover and reclaim the position of mining in society.”  — Joanne Carew


The role of mining in enabling a new and inclusive economy

In Africa, every job created in the mining industry creates at least six other jobs. This is one of the highest ratios in the world, and the impact of this is most felt in the developing world.

But the mining industry can only have a positive impact when all stakeholders and communities are brought along for the ride. This was the overarching sentiment across a range of presentations, which unpacked how the industry can play a role in enabling a more inclusive economy. 

Panel discussion, featuring from left to right: Rohitesh Dhawan, CEO of the
International Council on Mining and Metals; Nolitha Fakude, Chair of the Board at Anglo American SA; and Chris Griffith, CEO at Gold Fields

When developed in a considered way, with the right policies and partnerships in place, mining holds incredible potential, noted Mark Bristow, Chief Executive Officer of Barrick Gold Corporation. The industry builds a strong knowledge base that serves local communities and economies, it promotes infrastructure development and it contributes to local and national economic growth, he said. 

“Africa has two enormous assets — its unparalleled mineral endowment and the relative youth of its population. To fully utilise and develop these assets requires a commitment between the private sector and government to foster sustainable partnerships that create a more sustainable industry,” said Bristow. This is key to ensuring that the industry contributes towards social and economic development. 

Rohitesh Dhawan, Chief Executive Officer of the International Council on Mining and Metals (ICMM), an international organisation dedicated to a safe, fair and sustainable mining and metals industry, chaired a panel discussion on the opening afternoon of the event. He noted that assessing the sector’s contribution to social and economic development means looking beyond what mining companies say they’ll do and looking at real, tangible outcomes. 

But how does one measure impact and outcomes? Chris Griffith, Chief Executive Officer at Gold Fields, believes that it comes down to creating common measures for impact and establishing standardised definitions around what amounts to impact, and ensuring that these are understood by all businesses across the sector. Likewise, any actions that mining companies undertake to contribute towards social development need to be made visible so that communities can see the results of the industry’s efforts and, additionally, hold firms accountable should they not live up to their promises. 

Speaking about the industry’s impact, Griffith noted that the mining industry creates a massive amount of employment, it contributes an enormous amount in taxes and, working in partnership with government, the industry makes a significant contribution to the development of critical services in the communities where our mines operate. “I truly believe that we do a lot. But we don’t do any of it alone,” he asserted. 

Having an impact means that in any changes we make and work we do, we need to take key stakeholders with us and include beneficiaries in our efforts, explained Nolitha Fakude, Chair of the Board at Anglo American South Africa. The mining industry can only be a multiplier industry if we are deliberate about promoting businesses in industries and sectors that support and contribute towards the work we do, she continued. This means enabling entrepreneurs, start-ups and small businesses that work along the industry’s value chain.

Duncan Wanblad, Chief Executive at Anglo American Group, shared this sentiment. According to Wanblad, creating an inclusive economy demands that the mining industry place people at the centre of everything it does. “When I look at this particular moment, never before has there been such an obvious and urgent demand for what we do. The metals and minerals that we mine are instrumental in spurring every aspect of modern human progress.” 

If there are any instances when the industry is unsure of its impact, the best thing we can do is ask, explained Griffith. To ensure that the mining sector has a positive impact on the communities they work in, Griffith highlighted the value of surveying stakeholders to get a better sense of where they feel the industry is succeeding and where it is failing. It is critical for the industry to report on the findings of these surveys and then use these insights to drive change. 

“By transforming ourselves, we are laying the foundations for a new economy,” concluded Wanblad. It will be an economy that is more inclusive, more sustainable and one that opens up a wealth of new opportunities to those who need it most.  
— Joanne Carew


Anglo American debuts world’s largest hydrogen-powered truck 

Last Friday, Anglo American made news headlines when they debuted their prototype hydrogen-powered mine haul truck, the largest of its kind in the world. Designed to operate in traditional mining environments, the vehicle was launched at the mining giant’s Mogalakwena mine in Limpopo. The truck took two years to design and build; is capable of carrying a 290-tonne load; is powered by hydrogen fuel cells and lithium batteries; emits zero carbon emissions and generates more power than the diesel-powered vehicles it is intended to eventually replace. 

Natascha Viljoen, CEO at Anglo American Platinum

This ground-breaking green vehicle was regularly referenced at the Investing in African Mining Indaba, taking place in Cape Town this week, as a prime example of how the industry can transform its operations and of the change that it needs to make to minimise the impact on the environment and solidify its sustainability commitments. The project forms part of the company’s FutureSmart Mining programme, which aims to leverage digital technologies to promote more sustainable outcomes.  

Speaking about this highly innovative truck at the Mining Indaba, Anglo American Platinum Chief Executive Officer, Natascha Viljoen, noted that the project marks a step in the right direction for the industry. “If you consider the costs around developing this truck, the numbers are eye-watering. But, if you consider the potential that it unlocks from an economic development and decarbonisation point of view, it makes total sense for us to make an investment like this.”

Even President Cyril Ramaphosa, who attended the launch of the vehicle last week, was impressed by the innovation, highlighting it in his Mining Indaba address. “It is just amazing to see the innovation that the mining industry is capable of,” he said, joking that he was so inspired by the vehicle that he’d be happy to take up a role working with Anglo American on this incredible and innovative hydrogen-powered truck when he eventually gets fired from his current role.  — Joanne Carew


The future of work: Digital skills in a physical industry

As mines start to automate and increasingly digitise their processes, they desperately need skills to enable and facilitate this transition. 

When we think about the future of work in this industry, we must ask what work needs to be done, who will be doing this work, when and where it will be done and how it will be done, explained Dr Shaniel Davrajh, a Senior Engineer at the CSIR. In asking and answering these questions, we will have a better understanding of the skills we need and we’ll be able to create the right jobs to meet the industry’s needs. Many of these jobs will be jobs we’ve never even heard of, he asserted. We all know that the country has a massive unemployment problem, but it makes little sense for us to just create jobs if we don’t have people with the skills needed to fill these roles. 

Clive Govender, CEO and
Founder of CGC Consulting
& ADAPT Digital Solutions;
Dr Shaniel Davrajh, Senior
Engineer, CSIR-DMRE;
Yugen Pillay, National
Director for business
consulting and energy
and natural resources
industry leader at SNG
Grant Thornton; Dr Thabo
Mashongoane, CEO at
MQA; and Pedro Galiano,
GM at Endiama Mining, in a
panel discussion

Yugen Pillay, National Director for Business Consulting and Energy and Natural Resources Industry Leader at SNG Grant Thornton, agreed. “Automation and digitisation is actually about job creation,” said Pillay. “In changing up our processes, we are creating better business and new ways of working. This creates entirely new ecosystems, which entrepreneurs, small businesses and start-ups can tap into in order to become part of the mining supply chain.”

As a sector that employs a large portion of South Africa’s workforce, it is understandable that conversations around digital transformation and virtual work elicit fear among workers, but Davrajh is adamant that there are many ways that we can innovate and embrace technology while “keeping the human in the loop”. This demands that the industry is strategic about how to innovate. “Human-centred innovation means coming up with ways to enable low-skilled labour to do skilled work.” 

According to Davrajh, we know that most people can operate a smartphone, so when we automate and innovate, we must endeavour to create systems that resemble the solutions our workers are familiar with. This means creating interfaces that empower people with low literacy levels, for example, to use tools and technologies they are already familiar with to do more technical tasks. “I don’t see technology as a threat to employment. It is a tool that can add to, improve and supplement many of the actions we perform,” concluded Davrajh.  
— Joanne Carew


ESG and the energy transition – is Africa ready?

Acknowledging that the sector has been rather profit-driven in the past, the mining industry is looking to turn over a new leaf to secure its future. As such, ensuring that mines leverage more sustainable and environmentally-friendly energy sources and address key environmental, social and governance (ESG) concerns were major focus areas at the Investing in Mining Indaba, which took place at the Cape Town International Convention Centre this week. Many of the industry’s biggest players have set bold targets to decarbonise their operations in the coming decades, with some promising to be carbon neutral by as early as 2040. 

Dawie Scholtz, Principal, Boston Consulting Group; Werner Duvenhage, MD, Richards Bay Minerals at Rio Tinto; Kgabi Masia, MD Minerals, Exxaro Resources; Tshokolo Nchocho, CEO, Industrial Development Corporation of South Africa

But South Africa is still heavily dependent on coal. Kgabi Masia, Managing Director for minerals at Exxaro Resources, admitted that change needs to be made, but said that coal isn’t going anywhere; at least not yet. With 77% of South Africa’s energy  provided by coal, Masia said that the country’s energy security still depends on this fossil fuel. Until we have a viable alternative that can provide the same scale of capacity, it would be foolish to even consider walking away from coal. And others agree. 

Speaking during a media briefing at the event on Tuesday morning, Niks Lesufi, Senior Executive for Health and Environment at the Minerals Council, acknowledged this reality, explaining that the Minerals Council has adopted a dual approach in order to secure energy security, while making simultaneously making the transition to more environmentally-friendly energy sources. This strategy entails maintaining the country’s dependence on coal, while driving renewable energy programmes that promote and encourage the move to these technologies. 

Talking about decarbonisation specifically, Werner Duvenhage, Managing Director of Richards Bay Minerals at Rio Tinto, asserted that it has to happen in phases. Globally, renewables account for about 38% of power supply, while in South Africa this number sits at around 13%. “This means that there is a huge gap for us to get to where other countries are from a renewable energy perspective. It also means that there is a huge opportunity.” 

But Duvenhage and others caution that grabbing this opportunity does come at a cost, which is why the different stakeholders — communities, government, investors and industry — need to work together. “All key stakeholders must be committed to making a change, and we need to be very careful that we don’t leave anybody behind,” said Masia.

When we talk about an energy transition, ensuring that it is just demands that everyone is prepared to make the shift. Masia believes that it all comes down to resilience; having the capacity to adjust quickly to difficulties and adapt to change. “Businesses will have to adapt or they are going to die,” noted Tshokolo Nchocho, Chief Executive Officer at the Industrial Development Corporation of South Africa (IDC), adding that society will determine if a business has done enough to minimise their impact and if society decides that it hasn’t lived up to its promises, that business won’t be around in five or 10 years time.

“What we are facing really is a global challenge. Moving this energy transition forward, minimising our impact and getting to net zero as soon as possible so that we can avoid the devastating effects of climate change is an enormous task,” said Demetrios Papathanasiou, Global Director for Energy and Extractives Global Practice at the World Bank. “It’s not about working against each other, but rather trying to work with each other.” 

Governments, the private sector and investors need to collaborate to overcome the obstacles that lie ahead, he concluded. “We are facing a common challenge so it makes sense for us to come up with solutions together. The kind of conversations and engagements we are having at an event like this are so important. We have to grab this common sense of purpose and figure out how we can collaborate more effectively and more quickly together.”  — Joanne Carew


DBSA helps to finance green projects

Since its establishment in 1983, the Development Bank of South Africa (DBSA) has rapidly advanced to become one of the crucial catalysts in the transition to a green economy. 

One of the greatest challenges faced by many governments is how to green the current economy so that it remains resilient and globally competitive. The UN’s Sustainable Development Plan has also put pressure on countries, including South Africa, to respond to global goals and targets by 2030, with South Africa targeting clean energy, low-carbon transport, smart water, the circular economy and smart agriculture. But to do so requires substantial finance, and depends largely on the ability of development finance institutions such as the Development Bank of Southern Africa (DBSA) to leverage available resources to attract private investment.

The greening of South Africa’s economy requires substantial financing, which depends heavily on the ability of development finance institutions such as the DBSA

The DBSA works across sub-Saharan Africa to promote economic and social development, by sourcing and providing mostly infrastructural financing. Climate change has become increasingly important, and as such one of its priority focus areas is climate finance. According to Olympus Manthata, Head of Climate and Environmental Finance, the ability to mobilise climate finance at scale requires innovative approaches such as the DBSA’s Climate Finance Facility (CFF).This is a climate-related lending facility, which is a first in Africa and is based on the “Green Bank” model.  

The CFF uses a blended finance approach, which essentially combines public finance with private finance to address market constraints and fill market gaps. These funds are for private projects that have potential but cannot currently attract market-rate capital at scale without credit enhancement. The DBSA bridges this gap and catalyses private funding by co-funding alongside developmental and private sector financial institutions, with the aim to achieve a 1:5 leverage.

The initial debt funding of R2-billion in use by the DBSA is a rand-denominated facility and directed purely at co-funding private sector projects in South Africa, eSwatini, Lesotho and Namibia — countries in the common monetary union. It brings credit enhancement products in the form of a first loss or subordinated funding and tenor extension of up to 15 years, combined with concessional funding provided by the UN’s Green Climate Fund (GCF).

Development of climate facilities 

The DBSA with support from the GCF is currently developing various climate facilities such as the National Water Reuse programme, which it aims to finalise in the last quarter of this financial year. The DBSA will thereafter submit a funding proposal for $150-million to the GCF for the concessional part of the finance facility, and the bank aims to contribute significant co-financing for further credit enhancement. 

“The package we are designing is aimed at making water reuse projects bankable. Water tariffs often limit the way in which water is costed; our solution is to target new and existing wastewater treatment plants that either need to be upgraded or expanded, and increase municipalities’ awareness of how to treat effluent water for reuse,” said Manthata.

“We are also taking a comprehensive approach, because there is a tendency to look at such projects in isolation. However municipalities generally experience the same challenges, and there are many lessons and benefits for all that partake in the programme. And, with a single programme in use, transaction costs will lower.” 

This proved to be the case with the renewable energy programme, once financiers became more familiar and comfortable with the conditions of the contracts.

About 56% of South Africa’s wastewater plants are in poor or critical condition, said Manthata. The DBSA believes that it will take between 20 and 30 years to correct this, but again, it is going to require public and private sector buy-in. “If we can change the negative perceptions around water reuse, that it is not a wasted resource but has the ability to produce energy, and that its sludge has value, for example, the resulting revenue streams generated can potentially be used to finance other climate mitigating projects.”

DBSA’s role in key infrastructure development projects

Further credibility for the DBSA’s role in such projects comes from its playing a key role in developing the market for Independent Power Producers (IPPs), through the Renewable Energy Independent Power Producers Programme (REIPP). The bank has already invested R12.4-billion into 14 REIPP projects, of which R2.5-billion was funding support for nine BBBEE entities and 15 local community trusts.

The bank is also looking at investing in the country’s Embedded Generation Investment Programme (EGIP) to the tune of $84-million, directed at BBBEE organisations and local community SMMEs that are specifically focused on renewable energy. “EGIP is transformational in that it will add more than 450MW of new generating capacity, which in turn directly avoids more than 700 000 tonnes of carbon emissions per annum,” said Manthata.

Green Bonds

Yet another of DBSA’s tasks is to manage The Green Fund on behalf of the Department of Forestry, Fisheries and the Environment, which allows the bank to provide access to funds for low-carbon and climate-resilient development. The Fund had an initial allocation of R1.1-million for disbursement, for use as complementary funding for green projects and programmes. To further enhance the DBSA’s role and commitment to climate change efforts, it also issued its first Green Bond in February through a private placement with French development finance institution, the Agence Française de Développement (AFD), with whom the bank has concluded many successful infrastructure financing facilities.  Worth R3.59-billion, the bond will help finance domestic projects that will contribute to the green economy.

“The DBSA Green Bond issuance will be applied to projects that contribute specifically to climate mitigation and/or adaptation, aligned to the National Development Plan and sustainable development goals,” confirmed Manthata. “This inaugural issue is, however, intended primarily to refinance select renewable projects under the REIPP, but future issuances will also include wind, solar, small-scale hydro and certain biomass energy projects.” — Content supplied by DBSA – 

More information visit www.dbsa.org

The DBSA Green Bond

The DBSA Green Bond is recognised as the first bond issuance where a South African issuer has issued bonds in Euroclear France. The DBSA green bond is a type of infrastructure financing instrument exclusively applied to finance or refinance eligible green projects — essentially projects that contribute to environmental sustainability. 

 According to Mohan Vivekanandan, Group Executive: Client Coverage at the DBSA: “The Green Bond is used to finance projects that contribute to climate mitigation and/or adaptation; that are aligned to South Africa’s National Development Plan objective of an environmentally sustainable and equitable transition to a low-carbon economy; and that are aligned to the UN’s Sustainable Development Goals. 

 “It is an attractive infrastructure financing instrument for impact investors. It is intended primarily to refinance select renewable projects under South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPP)”, Vivekanandan concluded. For future issuances, other renewable energy projects, including wind, solar, small-scale hydro and certain biomass energy projects would qualify.

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