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New Kids On The Mining Block

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Mining Indaba 2018

If radical socio-economic transformation – the term favored by South African politicians these days – had a face, it would probably look like one of the many new mining operations being established by new players in the industry.

A recurring theme over the years at the Mining Indaba has been the uncertainty in the South African mining industry. This is driven by contested regulatory and legislative issues which have looked to aggressively introduce transformative initiatives across the industry.

That narrative has not changed but this year’s gathering in Cape Town had a tinge of optimism, with miners waiting for the contentious legislation to be changed.

In 2017, the then-Minister of Mineral Resources, Mosebenzi Zwane, announced a new Mining Charter that “shifted the requirements for black ownership and employment equity at mining companies, as well as the companies from which they procure any goods and services.”

Following this, industry stakeholders say they have lost confidence in the ministry. According to the Chamber of Mines, the Mining Charter made investors wary of committing any capital to the country. A report by the Chamber of Mines claims that investment into the sector, which contributes 8% to GDP, has been stagnant since 2008.

This year, there were calls for the minister to stay away from the event. The stakeholders wanted Cyril Ramaphosa, who at the time was Deputy President, to deliver the keynote address. Zwane ignored this and defiantly asked, “In terms of the population of South Africa, what percentage of the people do these critics represent?”

“Anyone who thinks they can better the charter, our door is open for discussion,” Zwane told FORBES AFRICA on the sidelines of the event.

But, if you look past the legislative woes and the political rhetoric, you’ll see an encouraging story of a young black man who struggled to break into the sector which has previously been dominated by a privileged few.

A recent report by Statistics South Africa noted that mining production had increased by 6.5% year-on-year, up from the annual growth of 5.2% reported in October 2017. This bodes well for Black Royalty Minerals, a subsidiary of the Makole Group, which launched its first colliery in Bronkhorstspruit, a small town 50kms east of Pretoria, at the end of January.

“For us, mining is a pillar and a cornerstone of the South African economy. It’s a foundation that you cannot ignore when you talk about economic development. So, in 2014, [Bronkhorstspruit] is where Chilwavhusiku started, we did our prospecting and applied for all our authorization and after this was done we realized that we could take this project into the mining phase and that’s exactly what we did. And now, as we stand here, we are very proud of this development,” says Ndavhe Mareda, the Chairman of Black Royalty Minerals, which is 100% black-owned.

“One of our mandates is growth. We are looking at both the domestic market as well as export markets. We are working with a lot of traders in the hopes that we’ll be able to expand our horizon. And, we want to do this the right way, in a way that will not exploit the land or its dwellers and of course that works well with the society.”

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Mareda was born in Venda, a former homeland of the apartheid regime in northern South Africa. He obtained his matric and moved to Johannesburg, the City of Gold, to further his studies. He obtained his Bachelor of Commerce at the University of South Africa and practiced as an accountant before venturing into entrepreneurship.

The company, which became operational in 2014, employs 350 people – 90% of whom are Bronkhorstspruit locals. It is hoped the colliery will create opportunities for the some 20,000 people that live around the mine.

“There is a huge level of unemployment in Bronkhorstspruit and our mine eases a lot of the pressure applied by the poverty. We give tender preference to the locals. These tenders may be for transportation or any other services that the mine needs to commission,” says Mareda.

This is what the disputed Mining Charter is looking to foster – assisting black-owned businesses like Black Royalty Minerals.

Disputed government policies are not isolated to South Africa.

The Democratic Republic of Congo (DRC) is no stranger to legislation battles between government and mining conglomerates. The government recently completed a new draft of what it calls the Mining Code. It awaits the signature of the president. In the meantime, mining companies are anxious about the future of their operations in the region.

Randgold Resources started developing Kibali, in north east DRC, eight years ago. After investing $2.5 billion in the operation, the giant gold mine may have to stop productivity.

Randgold chief executive Mark Bristow says the mine is on track to produce its target of more than 700,000 ounces of gold in 2018, making it one of the largest gold mines in the world. But, with the Mining Code, this prosperity may be short-lived.

“It is our express wish that the government grasps the serious consequences this ill-considered code will have on its ability as a country to attract international investment and re-investment to the DRC, and to refer the code back to the ministry of mines for further consultation with the industry,” says Bristow.

Officials, however, are confident the code will demonopolize the industry and allow the country to enjoy a percentage of the profits made from the exploration of its resources. Albert Yuma Mulimbi, Chairman of the state-owned mining company Gecamines, says it will be renegotiating its contracts with international mining partners operating in the DRC.

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Regulation is not the only issue facing mining in Africa. The former president of Nigeria, Olusegun Obasanjo, in his official address, highlighted that creating a sustainable environment for emerging miners is no simple task. He said the industry is marred by a lack of transparency as well as a legacy of mistrust of major miners. The mining industry has been accused of pursuing profits at the expense of its workforce.

Solutions to these issues need to be found.

Apart from the emergence of junior miners, the mining industry in South Africa is looking at technological advancement to resuscitate the sector.

“Technologies like robotic process automation and artificial intelligence will enable core mining activities to be performed from locations that can support a more diverse and inclusive workforce,” reads Deloitte’s Tracking The Trends report. “These new technologies will turn the mining value chain upside down, disrupting both existing business models and the traditional roles and relationships among mining companies and their customers, suppliers, and even competitors.”

This is the kind of disruption that excites another junior miner, Olebogeng Sentsho, who’s a disruptor herself as a young woman emerging in the mining industry. She is the founder of Yeabo Mining, a company that specializes in erecting and operating waste management plants at mines.

“In order to make headway in this industry we need greater support and space from various stakeholders. The increasing cost of mining, especially when discovering alternative minerals in decommissioned mines, is immense,” she says.

Sentsho says Yeabo Mining will need R50 million ($4.1 million) for infrastructure needed to mine in the current climate.

“It’s not an easy ride but it’s one worth hanging onto and I am confident about the future and the markets we’ll be serving as Africans,” says Mareda with a smile and genuine hope.

Economy

Cash-strapped South African Airways Expands Emirates Code Sharing

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South African Airways (SAA) said on Tuesday that it had signed a deal with Emirates to expand an existing codeshare agreement, in a rare bright spot for the cash-strapped airline.

The state-owned carrier, which has not made a profit since 2011 and survives on government handouts, said the agreement would see the two airlines leverage each other’s route networks, cargo services and flight schedules to boost passenger flows.

South African President Cyril Ramaphosa has been at pains to stabilize ailing firms like SAA, but the extent of their financial difficulties has meant slow progress.

SAA, which hopes to turn a profit by 2021 by cutting jobs and routes, expects to make another large loss this financial year, despite a recent government cash injection of 5 billion rand ($350 million).

“The expansion of our commercial relationship will further strengthen key focus areas of the implementation of our turnaround plan,” SAA Chief Executive Vuyani Jarana said. -Reuters

– Alexander Winning

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Economy

South Africa’s mining and manufacturing sectors show slight growth

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Report shows positive growth in the mining and manufacturing industry as both sectors  show slight figures of recovery in third quarter


South Africa’s mining and manufacturing industry shows slight growth in production and sales, but could decline in the near future.

The October 2018, StatsSA report shows both sectors have had figures of recovery from the start of the first quarter.

The mining production overturned a three-month decline with a 0,5% year-on-year growth in the third quarter, with gold being the lowest contributor.

Senior economist, Elize Kruger from NKC African economics, says despite  growth in the mining sector there is nothing to be excited about.

Protest action that started on gold mines in mid-November added to the pressure that the sector has been under over the past months.

A protected wage strike at Sibanye-Stillwater’s gold operations started when The Association of Mineworkers & Construction Union (AMCU) made a demand of  R1,000 annual increases in wages for mine workers.

The National Union of Mineworkers, Solidarity and United Association of SouthAfrica on  the other hand accepted R700 in the first two years and R825 in the third for most of their members.

The Johanessburg based mine urged striking workers to return to work by December 15, 2018. 

“Novemember and December could be impacted by the strike action that we see in the gold mining industry. The fourth quarter data is likely to remain depressed despite the October numbers,” she says.

Gold is the largest negative contributor at -15,1% thus contributing -2,3%percentage points to the overall figures.

Furthermore, increases in electricity prices that will take effect early 2019, will tighten the pressure on the industry adding to headwins faced on a global scale.

“Alluminum sector is impacted by the US import tarrifs increases and the threat of electricity price increases in the order of 15% ,” says Kruger.

The 15% increase is a strategy put in place by the electricity public utility, Eskom, to settle financial constraints.

The request made to the National Energy Regulator of South  Africa will be effective for three years if approved.

The manufacturing industry grew by 3,0% with eight out of 10 sectors showing positive growth rates over the last three months.

According to Kruger, the strong levels of the rand exchange rate put in a helping hand in the manufacturing production and sales sector.

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Current Affairs

In an African First, a Cannabis Expo…without Cannabis

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Andre Kruger’s stand at Africa’s first ever cannabis exposition displayed an indoor growing tent, complete with state-of-the-art lighting imported from the United States and fittings for a high-tech hydroponic irrigation system.

What it didn’t have, however, was a cannabis plant.

The four-day expo, which opened in South Africa’s capital Pretoria on Thursday, was a stark illustration of the legal grey area the nascent industry occupies in the continent’s most developed economy.

In September, the Constitutional Court decriminalized the use and cultivation of cannabis in private space. But the decision did not legalize its trade or distribution. Even displaying cannabis in public remains legally dubious.

So exhibitors at the expo got creative. Kruger, whose company Sombrero Hydroponics has seen a spike in customer inquiries since September, used two artificial poinsettias as stand-ins.


“People just feel more comfortable now, because they don’t have this added thought in the back of their mind thinking, ‘What if the cops stop at my house?” he said.

“They’re coming out of the closet, in this case the tent.”

Hundreds of expo-goers bought tickets and were already queuing before the event opened, but not everyone agreed with the ground rules.

Cannabis activist Steven Thapelo Khundu handed out cannabis buds from a plastic bag at the expo entrance, encouraging attendees to bring them inside.

“Free Ganga Free! Free Ganga Free!” he shouted as security forcibly removed him.

Under the court decision, lawmakers have two years to amend the country’s cannabis laws, but the industry isn’t waiting.

South Africa recently established a legal framework for licensing growers. The local unit of Canada’s Canopy Growth, which in August received a $4 billion investment pledge from Corona beer maker Constellation Brands, is among the early applicants.

“I don’t think most people realize just how big the cannabis industry is in Africa already, in South Africa already,” said the Cannabis Expo’s co-founder Silas Howarth.

International companies are, for now at least, seeking licenses to produce cannabis for export. But Gerhard Naude, the founder of healthcare company Go Life International, believes a fully legal domestic industry is now only a matter of time.

“I think there will be a few licenses awarded, and very closely regulated. I think in two years we’ll definitely have a license, for the use of medicinal cannabis in any case,” he said.

Itumeleng Tau, who said he’s been growing marijuana for around 20 years, is among a wave of underground cannabis entrepreneurs who are hoping the pending legal changes will allow them to bring their businesses out of the shadows.

The expo was an important first step, he said. But the absence of any actual cannabis was strange.

“It’s something very, very wrong … It’s like we came to a party but there’s no music.” – Reuters

  • Joe Bavier

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