Honourable Buyelwa Sonjica – South Africa Minister of Minerals & Energy – 10th China Mining Conference, Beijing, China

Honourable Buyelwa Sonjica – South African Minister of Minerals & Energy10 November 2008

Programme director,
Minister of Land and Resources of the People’s Republic of China, Minister Xu Shaoshi,
Captains of the mining industry from South Africa, People’s Republic of China and elsewhere in the world,
Distinguished guests,
Ladies and gentlemen,

It is a great honour for me to extend a warm welcome to you this morning to the South African Mining Seminar here in China. As South Africa celebrates the 10th successive year of diplomatic relations with the People’s Republic of China, depicting the political will of the respective countries to co-operate on various areas on common interest, we deemed it appropriate to assemble a multi-stakeholder platform, with particular emphasis on reciprocal investment prospects between the two countries.

The seminar is intended to focus on existing opportunities for Chinese and other foreign companies here present to partner with South African companies and communities in the mining industry. Notwithstanding the current financial challenge, which we project will have a limited shelf life, I believe that the relationships envisaged between our respective companies are intended for long-term periods.

One of the oldest Chinese proverbs has never been more applicable than today, namely: “A journey of a thousand miles begins with one step”. We all should remember that when former President Mandela announced South Africa’s intention to recognise the People’s Republic of China ten years ago, that was indeed a small step. In this context I believe South Africa’s journey with the People’s Republic of China has progressed remarkably towards its intended objective of increasing bi-national trade.

I am confident that a number of excellent interventions between our respective governments will go a long way in addressing the challenge of a trade balance skewed in China’s favour. I also wish to acknowledge the governmental administration workshop for the Kimberley Process Certification Scheme currently being held here in China. I am happy that it is attended by different governments, including South Africa. I know also that it is organised and funded by the People’s Republic of China.

In respect of South Africa, I wish to start by placing in context the recent changes in the mining policy framework in South Africa. As directed by the desires of the people who gave South Africa the Freedom Charter which formed the cornerstone of our brilliant Constitution, it is true that “South Africa belongs to all who live in it, black and white” and that no government can claim legitimacy unless it is based on the will of the people.

It is on that basis that our collective duty is to bring to fruition the aspirations of the masses of our people who gathered in Kliptown and further declared that “the wealth of this country will be shared by all.”

It is through the prism of this gracious and perennial document, the Freedom Charter, that the Mining Charter was launched, following rigorous consultations with all mining stakeholders. The Mining Charter sought to redress artificial imbalances created by the apartheid regime in South Africa, consistent with the progressive political landscape changes that started in 1994.

Since the promulgation of the Minerals and Petroleum Resources Development Act of 2002, in 2004, good progress has been made towards attainment of the objectives of the Charter. To date, the custodianship of all prospecting and exploration rights has been successfully transferred to the State. The next milestone is the mining rights conversion by 30 April 2009.

The promulgation of the Mineral and Petroleum Resources Development Act (MPRDA) has unlocked the mineral development potential of South Africa. The Department of Minerals and Energy (DME) has received an unparalleled number of applications for prospecting, exploration and mining from May 2004, peaking above 18 000 and resulting in development of new projects.

This figure represents an unprecedented interest in the history of mining in South Africa. We have since created adequate resources within the department to respond to this challenge. To this extent, the entire backlog in processing of applications has since been removed and we have committed to processing all prospecting/exploration applications within six months of receipt, while mining rights’ applications are being processed within twelve months of receipt of an application. This demonstrates the department’s commitment to a sustainable development of the industry and further corroborates that the rush for minerals in South Africa has not ended but also we need to do so as dictated by the Act.

During the first quarter of the year South Africa experienced unprecedented levels of electricity demand resultant from faster than expected economic growth. This was further exacerbated by the expansion of services to those previously excluded.

I concede that this situation impacted negatively on the planned output of the country’s mining operations, but I assure you that the permanent solutions to this challenge are being sought, in consultation with all stakeholders, including the mining industry as one of the largest consumers of the country’s electricity supply.

To this extent, a national emergency response plan has been released and implemented, which deals with the mandatory provisions, incentives and the support programmes aimed at increasing energy efficiency.

The plan is an interim measure, which is intended to make provisions for economic growth to continue on the basis of improved efficiencies in energy consumption in the short and medium term whilst we increase our reserve margin by bringing on stream new capacity in the medium to long term.

Because of the long lead times in building new power stations, demand side management is critical in helping meet electricity needs in the short to medium term. Key solutions that are being investigated include the implementation of demand side management initiatives to reduce overall demand by 10 percent. The Power Conservation Programme (PCP), Demand Side Management (DSM) and co-generation form the pillars of the national demand management strategy. The next few years are crucial in the successful execution of the build programme, as well as the restructuring of the distribution sector.

While co-generation guidelines are still in the pipeline, energy-intensive industries like smelters and other value addition processes are urged to establish co-generation power plants from their vast heat and gas producing processes.

It is in this context that I invite further investment in South Africa’s minerals and mining industry, across the various mineral commodity value chains, with particular emphasis on the downstream value addition.

The global economic developments have been tougher than expected this year, essentially underpinned by significant economic slow-down in the developed economies, fuelled by the propensity of most executives to accumulate wealth for themselves in a loosely regulated environment.

This situation was compounded by the speculated “cooling” of China’s economic growth prospects. Many developed and developing countries are experiencing unprecedented inflationary pressures, indicative of challenging economic environments within which we operate.

This cancerous global credit dearth led to diminishing capital expenditure plans, threatening investment short to medium investment and growth prospects in the sector. This situation is reminiscent of the great depression of the 1920s, threatening to have a profoundly negative impact on economic growth and employment security.

While we are gravely concerned about the global economic developments, we are also convinced that the fundamentals remain strong for a prolonged demand growth for the bulk of the mineral commodities. It is in this context that all stakeholders must continue robust engagements that seek to protect our common interests.

In the past, the remedy prescribed by Bretton Woods Institutions amounted to the Structural Adjustment Programme (SAP), the pillars of which, also known as the Washington Consensus were fiscal austerity, privatisation and market liberalisation. Emerging governments were forced to reduce government expenditure, to remove government interference in financial and capital markets, to do away with all support to agriculture and to rely on the private sector for the provision of transport, fertilisers and other support to small farmers. I would however, take the opposite view and argue that State intervention is necessary for development to take place, because development requires not “less State” as the Bretton Institute would contend, but “better State” action, characteristic of a developmental state.

Experience in Asia and recently in China shows that the opening up to outside competition must be gradual and carefully sequenced. I further contend that this crisis requires smarter State participation and that it is not more regulation of the industries, but better regulation that will nurture sustainable and predictable global economic growth.

The misfortunes of the global economic situation are undesirable, but most emerging economies have been exposed such blizzard before. They have learnt to survive through such difficulties. Most of such economies have developed fundamentally sound and balanced systems, which have mitigated against the impact of the economic financial storm.

The recent figures released by the South African Reserve Bank indicate progressive growth in fixed capital formation from the mining sector from R17,9 billion in 2004 to R36,6 billion in 2007, coincident with the era of the MPRDA. This is appreciated. In addition, the protracted decline in employment in the mining sector started in 1986, with the prolonged decline in gold output. Interestingly, time-series analysis of the official employment data in the mining industry exhibits a positive growth trend from a base of just over 440 000 in 2004 to over half a million in the second quarter of this year.

It is important to place in context South Africa’s beneficiation intervention. This is premised on the recognition that “the country’s resources are limited, but creativity is unlimited.” This intervention seeks to nurture and prolong sustainable growth of the mining industry. The notion of processing South Africa’s mineral resources further down the respective mineral value chains is premised on a deliberate policy intervention that seeks to advance the minerals and mining industry from being largely resource based to becoming more knowledge based.

The requisite skills for advancing this value addition programme cannot be overstated. A policy framework enabling beneficiation has been initiated in the diamonds and precious minerals sector. The South African Diamonds and Precious Metals Regulator (SADPMR) and the State Diamond Trader (SDT) were officially launched in February 2008. These entities are created to expedite the conception of an enabled environment to seamlessly effect local beneficiation of both diamonds and precious metals.

The beneficiation strategy for all minerals has been finalised and approved by Cabinet. I am certain that as we embark on our beneficiation route, all stakeholders will leverage benefit from the country’s comparative and competitive advantages.

Beneficiation in South Africa is bearing fruit. We are continuing to record a steady growth in processed mineral sector, reaching the highest of R54,8 billion in 2007, an increase of 26,3 percent from the preceding year. The figures presented exclude value addition of industrial and energy commodities and exceed revenues from any individual primary mineral sectors, indicative of the critical role of beneficiation in creating new and sustainable sectors in our economy. We are intending to increase the “value-addition” per capita in South Africa.

It has thus become abundantly clear that the downstream manufacturing is becoming an increasingly important contributor to South Africa’s rapidly growing economy. This is good news indeed, for it presents further investment opportunities as well as more jobs to reduce the current high levels of unemployment in all sectors of the country’s economy.
While the beneficiation strategy is focused on value addition of mineral commodities, we are also mindful of the resultant nugget-effect, which will benefit other industries linked to the mineral and metal processing sector, such as manufacturing, engineering, information technology (IT), environmental services, construction, energy, logistics, financial services, equipment/machinery supply, security services, insurance, transport and others.

I therefore encourage you to plan your value-adding programmes for the respective commodities of your interest to leverage optimal benefit for all stakeholders.

In conclusion, I wish to reiterate the opportunities available for investment in the minerals and mining sector in South Africa, across the various mineral commodity value chains. The new legislative framework in South Africa has indeed brought about new investor confidence and opportunities. We believe that the current global economic challenge would not be protracted and therefore it is opportune invest now in project development, given the lead times in mining project evaluation.

As the country embarks on expanding its scope further down the commodities value chains, a unique opportunity is presented to prospective investors to move their operations proximal to a critical mass of raw material supply for processing. This proposition requires your utmost support and indeed your business acumen in leveraging optimal benefits for all stakeholders, including investors, host countries and the market.

South Africa is alive with possibilities, awaiting to embrace your enthusiastic interest to invest and benefit from its endless opportunities. The DME officials as well South African companies are keenly awaiting your detailed engagement in Pavilion Hall D15 to D26.

On behalf of the government and the people of South Africa, I would like to congratulate China Mining Conference organisers and indeed the People’s Republic of China for opening this platform for all stakeholders to interface and exchange knowledge towards advancing the mining industry in its entirety.

I thank you.
Issued by: Department of Minerals and Energy
10 November 2008