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The South African Mining Industry

The South African Mining Industry. ANGLOVAAL MINING LIMITED CEO’s evening : 2 November 2000. MINING IN SOUTH AFRICA. Exceptional geological deposits Political transition after 1990 Modernise the industry Result: leaner, more focused, more competitive and

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The South African Mining Industry

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  1. The South African Mining Industry ANGLOVAAL MINING LIMITEDCEO’s evening : 2 November 2000

  2. MINING IN SOUTH AFRICA • Exceptional geological deposits • Political transition after 1990 • Modernise the industry • Result: leaner, more focused, more competitive and • internationally active industry • Major transformation challenge remains • Continues to be a highly successful cluster in South African economy • Most major minerals have experienced long-term growth • Mining is a significant contributor to employment creation, rural economies and regional (SADC) development

  3. MINING IN SOUTH AFRICA Large, expanding industries • Hidden inside SA’s aggregate mining statistics are large, • expanding industries • Production: coal, PGMs and chrome sectors have doubled • in size since 1980 • During the same period, mining other than gold, grew faster • than the rest of the economy • World-class support industries (electricity, chemical, • engineering)

  4. MINING IN SOUTH AFRICA South African reserves and production in key minerals 1998 (% of world) (1) Manganese (1) Chrome ore (1) PGMs (1) Vanadium (1) Gold (1) Alumino-silicates (1) Titanium minerals (2) Vermicullte (2) Zirconium minerals (3) Fluorspar (4) Uranium (4) Antimony (5) Coal (5) Nickel (8) Iron ore Reserves (6) Zinc Production (9) Phosphate rock 0 10% 20% 30% 40% 50% 60% 70% 80% Source: Chamber of Mines

  5. MINING IN SOUTH AFRICA 60% of South Africa’s exports • Mining and related beneficiation accounts for over half of SA’s exports • Mining remains the most important earner of foreign • exchange • Growth in manufacturing exports is based • on mining activities

  6. MINING IN SOUTH AFRICA Extent of beneficiation % of production % of exports Beneficiation process beneficiated beneficiated Antimony concentrate to antimony troxide 65 80 Chrome ore to chromium alloys 57 71 Copper concentrate to copper metal 92 89 Iron ore to iron and steel 30 15 Manganese ore to manganese metal and 49 43 alloys sulphate Nickel matte to nickel metal and 100 100 Phosphate concentrate to phosphoric acid 52 37 and phosphatic fertilisers Zinc concentrate to zinc metal 100 100 Diamond sorting/valuing to cutting/polishing 100 52

  7. MINING IN SOUTH AFRICA Composition by sector of South African export earnings

  8. MINING IN SOUTH AFRICA 1% Africa Export destinations for SA’s processed minerals South America 2.5% North and Central America Europe 28% 38% Pacific Rim Middle Countries East 25.8% 4.8% Source: Minerals Bureau

  9. MINING IN SOUTH AFRICA Percentage contribution to GDP by sector: 1975 - 1998 • Mining / manufacturing is inter-related

  10. MINING IN SOUTH AFRICA Contribution to mining GDP, 1998 • Gross fixed capital formation • continues to be significant • Large portion of capital • investment in SA over past • decade has been into the minerals • complex (Alusaf, Columbus, • RBM, Saldanha Steel, Sasol, etc) Coal PGMs 21% 27% Diamonds Gold 7% 45% Source: SA Reserve Bank

  11. MINING IN SOUTH AFRICA Principal ally against poverty • For five million South Africans, mining is the principal ally • against poverty • Latest census - one in seven men with a formal sector job • in 1996 employed in mining industry • Mining industry is the conduit for money and opportunity to • some of the poorest areas in Southern Africa

  12. MINING IN SOUTH AFRICA • 1996 population census - more than one sixth of the aggregate income of wage earners is derived from mining in 56 magisterial districts • These 56 districts are SA’s “mining nation” • These areas include poor rural districts from which mine • workers are recruited. • Total population of these areas is 5,7 million: on average, more than a quarter of all income earned by men is earned from mining Principal ally against poverty

  13. MINING IN SOUTH AFRICA P e r c e n t o f a l l i n c o m e L e s s t h a n 4 % 4 % t o 8 % 8 % t o 1 6 % 1 6 % t o 3 2 % M o r e t h a n 3 2 % 4 0 0 0 4 0 0 8 0 0 K i l o m e t e r s Principal ally against poverty R u s t e n b u r g K r i e l J o h a n n e s b u r g O b e r h o l z e r

  14. MINING IN SOUTH AFRICA Proportion of workers at various formal education levels New mine workers 30% 20% Less than primary 10% Matric 0% 85 90 95 98 Source: Chamber of Mines

  15. MINING IN SOUTH AFRICA Employees on Chamber of Mines gold mines 95,000 Unskilled wages 20,000 90,000 15,000 Unskilled wages Rands per annum Skilled wages Rands per annum 85,000 10,000 Skilled wages 80,000 5,000 75,000 0 1970 1980 1990 1998 Source: Chamber of Mines

  16. MINING IN SOUTH AFRICA Contribution of direct taxes to the government revenue (per cent of total revenue) Sector 1970s 1980s 1990s Average Average Average Coal 0,29 0,52 0,60* 10,02 12,51 1,13 Gold & uranium Diamonds 1,45 0,56 0,09 * 1990’s figure includes coal and other mining

  17. MINING IN SOUTHern AFRICA Key to economic development • Over last 20 years, two major economic shortcomings have forced African economies to depend on multilateral aid agencies: • 1. Owing to inability of governments to generate • tax revenues, African countries have saved at • less than half the rate of other developing countries. • cont….

  18. MINING IN SOUTHern AFRICA Key to economic development • 2. With limited exports, less foreign exchange to purchase machines and computers required for • export-led growth. • Root cause of this: political instability, weak institutions, poor policies • Mining can play a critical role in Africa’s economic • renaissance

  19. MINING IN SOUTHern AFRICA Tanzania Zambia Mozambique Zimbabwe Namibia Botswana Key to economic development in southern Africa South Africa

  20. MINING IN SOUTHern AFRICA Recent mining FDI* in selected SADC countries 1995 - 1999 (US$ millions) Source: Business Map/SACS - FDI database FDI : Foreign direct investment

  21. MINING IN SOUTHern AFRICA South Africa is well positioned • SA mining companies are leading the resurgence of • mining activity in the region • Extensive African exploration is underway • Johannesburg may reclaim position as global centre of • mining technology, specialist services and supplies • It is estimated that half of investment made in large-scale • projects in southern Africa is returned to SA through • purchase of services and supplies

  22. MINING IN SOUTH AFRICA South African firms are at the centre... • SA provides sophisticated inputs and services to the • global mining industry • SA firms have become globally prominent in three areas: • 1. Technology providers • 2. Providers of knowledge- • based mining services • 3. Specialist mining contractors

  23. MINING IN SOUTH AFRICA Conclusion / looking forward • The contribution of mining to the economy must be seen • as coming not only from mining operations, but also • from upstream and downstream activities and the • huge multiplier effects the industry has at economic, • social and political levels • Mining represents the most successful “cluster” in SA’s • economy

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