Government wants to woo mining exploration, investment, but role players not convinced

Government is planning to expand exploration and attract investments, despite the mining sector’s low ranking investment appeal and continued disputes with communities that are steadfast against mining activities on their land.

The Department of Mineral Resources and Energy (DMRE) this week released a 12-page document outlining its mining exploration strategy and ambitious plans to attract investment in the sector.

Noting ongoing obstacles such as power supply problems, ineffective policy implementation, community unrests and protests, the department says tapping into exploration for minerals such as chromium may usher in a new era “that is responsive to current and future market demands”.

“South Africa should take advantage of the opportunities presented by the growing demand for minerals needed by the internet era with a high reliance on battery storage, artificial intelligence, robotics, electric vehicles, and clean energy, with a growing market demand globally.

“The country contains known deposits of minerals that contribute to these markets, such as copper, nickel, lithium, rare earth metals, graphite, and cobalt amongst others, yet these remain largely underexplored,” states the document.

To achieve this, plans are in the pipeline to increase research such as geoscience mapping by the Council for Geoscience from 9% to 14% in the next five years, to improve access to geoscience data.

Attention will be given to new and small exploration companies that will be provided with technical and financial support until the feasibility stage.

The DMRE says it plans to attract at least 5% of the world expenditure on exploration in the next three years, despite the country’s mining industry ranked the 10th worst for investment attractiveness by the Fraser Institute annual survey of mining companies.

South Africa was ranked 75th for 2021, dropping from 60 in 2020.

‘Political uncertainty affects investment’

Mining and labour analyst Mamokgethi Molopyane says although there will always be a global interest for investment and exploration, compounded by the Covid-19 pandemic that set off concerns about the supply chain, South Africa’s political environment is always going have negative implications on investment decisions.

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Furthermore, the Russia-Ukraine war has altered investment decisions but the country could see some injection of funds despite power supply problems and low GDP, Molopyane said.

“The DMRE is trying to position itself as a business and at the same time demonstrate its seriousness about exploration policy.

“Three months ago South Africa was and to an extent is still unattractive for many. However, the war has made some investors look favourably to South Africa.”

Previous exploration agreement changed

Responding to the document, industry employers’ organisation Minerals Council of SA, seemingly not impressed with the new plan, said the DMRE strategy shows changes to the exploration agreement reached between itself, the department and the Council for Geoscience last year.

It said one of the urgent tasks for the DMRE is to fast track implementation of a transparent cadastre system – a registry for property ownership – that is efficient and free of corruption.

“With South Africa ranked for the for the first time in the 10 least desirable of 84 global mining jurisdictions in the Fraser Institute survey of 2021, the mining sector needs investor-friendly regulations and policies to ensure sustainable and inclusive growth to benefit all stakeholders,” the council said in a statement.

In a collaborative effort by the council, it says it offered the DMRE financial and technical support to urgently implement an internationally approved system to replace the Samrad (South African Mineral Resources Administration System) that it says hampers exploration.

According to DMRE, the mining industry contributed 8.2% to the GDP, attracted over R575 billion in export earnings and netted R608 billion in mineral sales in 2020.

The country earned R27.2 billion in corporate taxes from the sector.