Minerals Beneficiation Strategy: Department of Mineral Resources (DMR) briefing

Meeting report

Minerals Beneficiation Strategy: Department of Mineral Resources (DMR) briefing
Mr Siyabonga Ndabezitha, Chief Director: Mineral Promotion, Department of Minerals and Resources (DMR, the Department), briefed the Committee on the Beneficiation Strategy for the Minerals Industry. He outlined the basis for mineral beneficiation quoting from the 1994 Reconstruction and Development Programme (RDP) white paper which sought to promote beneficiation to increase employment . The white paper on Minerals and Mining Policy of 1998 showed that employment in the mining sector had declined from three quarters of a million people to  half a million since 1994. This led to the Mineral and Petroleum Resources Development Act (MPRDA) 2002, where, under Section 26, the Minister might prescribe the levels of beneficiation in the industry in an attempt to stimulate its ability to create jobs. The current New Growth Path (NGP) was seeking to generate 140 000 jobs in the next ten years and the mining and beneficiation of products had been identified as jobs drivers, therefore the minerals beneficiation strategy was seeking to increase the ratio of minerals beneficiated.

Strategy development
The strategy had begun as an initial research study undertaken by Mintek. Pilot value chains were then selected and a draft beneficiation strategy was developed by a dedicated interdepartmental task team. External stake holders were consulted and the strategy approved by Cabinet in June 2011.

Global economic Perspective
It was anticipated that the developing countries would be in the forefront of a new growth phase therefore there would be an increased demand for iron ore for infrastructure with developing countries being the major markets.

South Africa, according to a Citibank report commissioned last year, had $2.5 trillion worth of minerals excluding coal, uranium and thorium. It had 90% of the Platinum Metal Group (PGM), 80% of the manganese and 70% of the chromium in the world, giving it a comparative advantage. The beneficiation strategy was seeking to convert that into a competitive advantage. It would do so using policy instruments such as the MPRDA, work with the Platinum Beneficiation Committee, use international trade agreements and bilateral agreements with countries to facilitate beneficiation.

Constraints
The Department had identified as constraints, the limited access to raw materials for local manufacturers because of existing agreements. The Department was currently amending the MPRDA so that new entrants could have access to raw materials, for example 10% of diamonds had to be made available to the state diamond trader to be made available to new entrants.

There was a shortage of critical infrastructure, namely electricity, water and railways. It was working with Transnet so that future industry plans could be factored into Transnet‘s infrastructure plans.

There was limited expertise to do research and development (R&D). More institutions should focus on R&D. The Department was working with the Department of Science and Technology (DST) on a ten year plan to work on research dedicated to promote beneficiation.

There were inadequate work skills. It was partnering with Sector Education and Training Authorities (SETAs) and the Department of Higher Education and Training (DoHET) to generate the quality and the quantity of skills needed.

To negotiate market access to international markets for beneficiated goods, it was using international agreements. 

10 Minerals and five value chains selected
The task team had identified 10 minerals and five pilot commodity value chains in which to promote beneficiation. They were:

1. Energy commodities – Coal, Uranium and Thorium
The Department was quantifying the country's uranium and thorium reserves and supporting R&D into alternative future energy sources

2. Iron and Steel Industry – Iron, Chromium, Manganese and Vanadium
The Department would invoke regulatory provisions to ensure developmentally priced input commodities and encourage investment to break anti-competitive behaviour

3. Pigments and Titanium metal industry – Titanium
The Department was investigating the viability of establishing a chlorine plant in conjunction with a pigment plant, and was seeking to develop a more cost effective primary titanium metal production

4. Automotive catalytic converters and diesel particulate industry – Platinum group metals
The Department would invoke legislation to ensure the security of PGM supply and was seeking to develop a metal access mechanism to unlock the intrinsic value in the PGM sector

5. Jewellery industry – Gold Diamonds and Platinum Group metals
The Department wanted to establish a metal advance scheme and promote incentives in the jewellery sector.

The Department wanted to implement these plans for the five sectors before moving on to develop and implement plans for other sectors.

Discussion
Mr B Mnguni (ANC, Free State) said he was concerned about the lack of skills, the lack of infrastructure especially water and energy. He wanted to know the views of the mining industry and whether the Council for Scientific and Industrial Research (CSIR) had had any input as the strategy needed the involvement of everyone to be successful. To him the strategy was still too nebulous. He asked what percentage of the ownership of mineral rights belonged to the state-owned mining company and what percentage was  privately owned.

Mr Ndabezitha replied that the there was a need to work with all research institutions in the country. In the past research had been fragmented and in future needed to be properly co-ordinated. On the infrastructure he said he wanted to see the mining industry assist by exploring ways to use less water and the Department was encouraging co-generation where companies generated its own electricity. He said did not know what percentage of the mineral rights belonged to the state-owned mining company.

Mr K Sinclair (COPE, Northern Cape) said the beneficiation strategy formed part of a broader debate on how to spread the wealth of the country to its citizens. He was disappointed in the way the Government was moving and used the example of the state diamond trader which had been set up to assist local diamond traders yet had its office in Johannesburg and not Kimberley. He said the beneficiation strategy would only work when Government emphasised beneficiation at source

He added that the Government was heading on the wrong track to use carbon based energy, it needed a stronger green energy approach. He said further he did not notice diamonds being mentioned as holding a comparative advantage for South Africa

Mr Ndabezitha replied that the Department concurred on beneficiating at source. On the roll-out of the strategy he said that the Department had just finished the plan for the iron and steel industry and was now working on energy. The Government was doing research to ensure compliance on the use of coal, but that South Africa would still be relying on coal until new means of energy generation was established. Coal was also still a cheap option because of the amount available to South Africa.

The Chairperson said that the Department need not answer the question on the state diamond trader as it had been already answered by the Minister, on a previous occasion, in the presence of Mr Sinclair.

Ms M Dikgale (ANC, Limpopo) asked that the Department not forget rural areas when implementing the beneficiation strategy.

Mr Ndabezitha replied that the rural areas were sometimes left out, but that in future interventions had to be taken into consideration.

Mr D Gamede (ANC, KwaZulu-Natal) said that, while the Department complained of a shortage of infrastructure, the Government had set up an infrastructure fund.

Mr Ndabezitha replied that he did not mean that the lack of infrastructure was because of a lack of funds but rather it was because industry and the Government were not talking to each other, for example Transnet and the Department of Public Enterprises (DPE) were not discovering what the needs of the mining industry were with regards to developing the infrastructure it needed.

Ms E van Lingen (DA, Eastern Cape) asked how the strategy would ensure competitive pricing of the final product when there was a labour skills shortage.

Mr Ndabezitha replied that there were subsidies in the iron and steel industry which were not being passed to benefit the local manufacturers further down the beneficiation line. It was the Department’s view that investment in the sector had to be encouraged to promote competition in the sector.

The Chairperson asked what the situation regarding Kumba and ArcelorMittal and its implications to the steel value chain were. On the strategic development path of the beneficiation strategy, he asked whether the Economic Development Department (EDD) was part of the team and, if not, why not.  He asked what the working relationship between the DMR and the EDD was.

Mr Ndabezitha replied that as the matter was before court and, as he was involved in the court matter, he requested that he not answer the question on Kumba and ArcelorMittal.

On the EDD, he said the Department was only formed in 2009 but that the DMR did work very closely with the it and that it was part of the team. 

Mr Mnguni said that Mintek had in the past researched a formula for steel. This patent was later obtained by investors in the company. Had Government been able to get the patent back? He felt the strategy was still broad and wanted to see more concrete proposals.

Mr Ndabezitha replied that the he would have to find out from Mintek what had happened. He said that there had to be buy-in from industry and that industry had initial reservations on the strategy.

Mr Sinclair said that if the Government had invested the money in building coal-powered power stations like Medupi in green alternative energy it would have benefited. Coal was not the solution as South Africa in future would move to a mix of nuclear and green energy.

He said the Government had a narrow vision using the example of the Coega Development Corporation where billions had been spent on developing the harbour but not on the link between the manganese mines and the harbour resulting in a negative impact on the roads. Industry had spoken out about this but Government had not listened

Mr Ndabezitha replied that Government had different scenarios on energy supply but that currently it was relying on coal. On the infrastructure, he said that what the DMR was doing was to look at the infrastructure bottlenecks highlighted by industry and then speak with industry, the DPE and Transnet.

Mr Sinclair said that the Government should invest in alternative energy, which was not a new technology but a tested technology that just needed implementation.

Committee business
The Chairperson said that the oversight visit to the Northern Cape had not been approved as it was felt that extra role players had to be included in the trip. No date as yet had been set for a rescheduled trip.

The meeting was adjourned.