As beneficiation debate rages, experts insist focus must be on niche sectors, upstream manufacturing – by Jade Davenport ( – April 2, 2015)

JOHANNESBURG ( – The contentious debate surrounding South Africa’s beneficiation strategy and how best it should be undertaken has been placed under the glare of the spotlight again and has served to intensify tensions between government and the mining industry over continuing mineral policy uncertainty.

The debate flared up again in February follow- ing Mineral Resources Minister Ngoako Ramathlhodi’s announcement at the Mining Indaba that government intended to investigate the possibility of imposing developmental pricing on key strategic minerals and compelling producers of precious metals to sell at reduced prices.

Developmental pricing would be lower than the already-agreed-to “mine gate price”, essentially an export parity price less transport, which was a hard-won concession on the part of mining companies during discussions on the drafting of the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill in 2013.

Government intends to use developmental pricing to enforce the beneficiation of the country’s still extensive mineral resource endowment, a mechanism it believes will stimulate the South African economy by diversifying sectors, enhancing the quantity and quality of exports, and creating decent employment.

However, industry considers developmental pricing to be a substantive issue as it implies that mining companies will be forced to subsidise downstream manufacturing companies.

In this regard, Anglo American CEO Mark Cutifani told Mining Weekly earlier this year that the fact that the mining industry would be expected to provide effective subsidies to underpin mineral beneficiation, which was essentially inefficient and uncompetitive, beggared belief.

“In mining, we know very little about the resources we mine and we have to make large capital decisions on limited knowledge. If we then have to be the supporter of downstream inefficiency, we are setting ourselves up for failure.

“Let me be clear: it is not that the mining industry does not support beneficiation, but the laws of economics are simple and all-powerful,” he commented.

While the issue of subsidised downstream beneficiation may be extremely sensitive, especially given the fact that South Africa’s mining sector is generally struggling under a myriad of challenges, and is invoking heated responses from stakeholders, the consensus amongst mining analysts is that South Africa lacks the competitive advantage for broad beneficiation, with or without subsidies, to be an ultimately successful strategy.

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