Mining is a sunset industry. No matter how deep we dig or far we go, minerals are finite, and their extraction becomes more challenging every year.
By Wessel Badenhorst*
The Minerals Council South Africa has stated that over the last decade, multi-factor productivity in South Africa has fallen by 7.6%. Mining output has declined by 10% and minerals sales has contracted by 11%.
However, although we know that at some point we will run out of mineable resources, for now it is projected that there are still approximately $2.5 trillion of mineral resources in the country. No picture of SA’s future is complete without taking into account what mining can contribute to the economy. And harnessing technology is the only way that we will be able to get the most out of our mining resources in ways that are efficient, effective and responsible.
Investing in R&D
To remain competitive, the SA mining industry will have to spend more on technological research and development like it used to under the ‘mining house’ system, where large mining groups had significant R&D budgets. Our current model is simply not sustainable. We will need new technologies to unlock the country’s remaining mineral wealth and this may include artificial intelligence and deep level remote mining employing highly skilled operators, rather than sending workers underground.
This is an emotional issue, as the argument is often made that technology will replace employment, and in a country where we are teetering on an unemployment rate of 30.8%, this is not an insignificant consideration. Although one has great empathy with such a concern, it is not a question of choosing or rejecting technological advancement. Without it, some mineral resources cannot be mined at all and for the rest, it is important that mines remain competitive. Technology is the only answer to delaying the inevitable death of the industry once our mineral wealth runs out.
The question of labour should be framed differently when it comes to mining and 4IR, as we need to look at it from the perspective that technology is about preserving the mining sector in a new guise. We are then moving from predominantly manual labour to a higher reliance on technology with skilled operators, which is an important step to take for an industry that only recently started developing a social and labour responsibility mindset.
Upskilling the workforce
While it is a social, legal and ethical imperative for mining companies to invest in their people, the kind of scale of upskilling that is involved with 4IR and this sector is simply not achievable for the smaller mining companies on their own. The complexity of such an education process is one that starts well before the employment at the mine commences.
In the past two decades there have been many new entrants into the mining industry, with the deconcentration of mining efforts through various spin-offs to smaller operators, as well as the opening up of new mining right applications post the deconcentrating of mineral rights. Although the bulk of mining is still in the hands of majors, there are now in excess of 58 mining companies who are members of the Minerals Council.
Because these smaller companies do not have the economies of scale to invest in the radical upskilling of most of its staff, it is critical that government starts thinking about what regulations will be helpful here to ease up the employment of highly skilled people in the development of the mining industry. But we need to act quickly. If we think about how speedy technological advancement has been over the past few years, we must not be slow on the uptake and lag behind in upskilling people when it is too late.
The government could take a lead role here in co-ordinating the efforts of industry and private companies to ensure there will be suitably skilled individuals who can take up employment in the mining sector in the digital age. This requires considerable co-operation between all parties, including trade unions and bodies such as the Minerals Council South Africa, and if we are too slow, then the mining industry’s sun will set in SA a lot quicker than it should.
Another factor that comes into play when we consider technology and mining is SA’s rubric of infrastructure challenges, primarily in terms of electricity. Demand is obviously a major issue for the mining sector because of our electricity crisis, which casts a dark shadow over any development of industry in SA and the sustainability thereof. Renewables are critical, and there does seem to be a revived focus on this arena, but change is just not coming fast enough.
At last year’s Mining Indaba, the minister announced that he would investigate how mines (and down-stream beneficiation plants) could generate their own electricity. While it is encouraging that Government is developing strategies to permit private electricity generation, the capital costs thereof puts this beyond the reach of small and medium mining operations.
A solution here is to allow private electricity suppliers to be off the balance sheet of the mines and be financed independently. These companies should be given a licence to generate power, so the mines themselves would not need to build up capital for this. Another benefit would be that the electricity generation project would not be dependent on the life of the mine and would then enhance our national grid once the mine stops taking the bulk of the power.
A plan is urgently needed to streamline the various regulatory barriers to the construction of private power plants (in the mining industry) so that they can be owned independently, financed accordingly and then continue to feed into the national grid once the operations they service come to an end.
Infrastructure also becomes an issue when we talk about beneficiation, a key element of the future of mining, which goes hand in hand with discussions on technology. Beneficiation means to take raw material and to transform it to a higher value product. For example, take chromium ore and transform it into ferrochrome, then take ferrochrome and use it in the production of stainless steel and then use the stainless steel to make end products. Such a division of labour at a macro-economic level creates wealth.
Almost a decade ago, in June 2011, the Department of Mineral Resources and Energy (DMRE) published a Beneficiation Strategy for the Minerals Industry. South Africa has been a resource economy for more than a century and is in need of a paradigm shift. We must focus on strategic investment in assets to maximise long-term growth beneficiation projects, enhance value exports and increase sources for consumption of local content.
Unsurprisingly, the Beneficiation Strategy identified the lack of infrastructure as one of the barriers to the development of downstream beneficiation. Shortages of critical infrastructure such as rail, water, ports and electricity supply would, according to the DMRE, pose a major threat to future growth.
To lay the ground for beneficiation, we need to improve the efficiency and reliability of the state-owned rail transport, address the electricity crisis, entice investment and focus on streamlining the regulatory approval process.
In conclusion, technology in mining is not just a matter of mechanisation – there are labour and infrastructure issues that need immediate attention. Government should take the wheel here and help ensure there are available funds for mining companies to address labour upskilling as well as electricity issues. This is a sunset industry that we all want to last as long as possible, and the sector needs to revolutionise in order to remain relevant and sustainable.
*Wessel Badenhorst is a Partner at Hogan Lovells Johannesburg