As expected, 2024 has not been any easier for Africa’s Mining and Natural Resources Sector, with the familiar challenges from previous years, continuing into 2024. These continuing challenges include political uncertainty (in many instances brought about through the ballot box), regulatory uncertainty, infrastructure deterioration and constraints (electricity, water, roads, and rail), safety and security, armed incursions and cyclical demand. However, there are a number of elements that have gained prominence in 2024 such as the rapid expansion of illegal mining. There has also been an increased focus on aspects that may have a significant impact on Africa’s Mining and Natural Resources Sectors such as mechanisation, automation, and the use of artificial intelligence (AI).
Unfortunately, the challenges experienced in 2024 will flow through to 2025, and while there are some positive sentiments regarding Africa’s Mining and Natural Resources Sector, an honest and robust strategy will need to be adopted to provide Africa’s Mining and Natural Resources Sector with the capability to withstand these challenges, and develop operations in a sustainable manner, with a focus on growth of exploration, and the extension of existing mines and the development of new mines and beneficiation facilities that are “fit for future”.
In this article we explore both some of the more significant challenges that will continue in 2025, and some developments that may, if embraced, support viability of current (aging) mines and the development of new mines and beneficiation facilities.
Illegal Mining
To many, illegal mining is represented by the images that are published in the media of children in small pits and holes, extracting minerals in extremely dangerous circumstances, or hundreds, if not thousands of persons going underground at old and abandoned mines protected by firearm-wielding “security”. These graphics however only show a very small part of a much greater and complex web, or illegal mining “community”, that makes illegal mining possible.
Companies that carry out mining activities lawfully, require a highly complex network of stakeholders to efficiently extract, beneficiate, market and sell the minerals, supported by extensive supply chain networks, service providers and suppliers of goods and services including transportation, communication networks, security, human resources, etc., while complying with South Africa’s extensive legislative framework that applies to the mining and natural resources sector.
While the illegal mining “community” is not similarly constrained by compliance with the legislative framework, the illegal mining “community” does require a substantially similar network. The reality is that illegal mining community is a large, parallel, but unregulated economic activity which, unfortunately only benefits certain of the persons involved in the illegal mining network and value chain.
The persons who are most exposed are the miners who conduct illegal mining activities in extremely unsafe circumstances, with both potential short-term consequences (injuries and death), but also longer-term effects because of exposure to noise, dust, heat, and other similar elements. These consequences may only manifest themselves years after the exposure.
The illegal mining community requires support services such as food, accommodation, communication, transportation and other social services. These are often provided by the members of the community from which the miners come, and it is understandable, as was the recent situation at Stilfontein, that the community “protects” the illegal mining because some benefits do flow from the illegal mining. However, even these community members, are not the largest beneficiaries of illegal mining, with most of the value “going up the chain” to the senior facilitators (syndicates) and the end-user/buyer.
In addition to not being constrained by the legislative framework, such as the health, safety and environmental laws, illegal mining creates “leakage” for taxes and other revenues which would normally flow to the State, including mining royalties and taxes. There are, currently, no reliable indications of just how much the leakage is, but it is thought to be substantial.
Illegal mining is not isolated to old and abandoned mines. Often, while the illegal mining takes place at old and abandoned mining operations, these illegal mining activities also take place at existing, operating mines, alongside lawful operations. In many provinces, the illegal mining value chain includes diversion of transportation contracted by mining companies that conduct lawful mining, and other interference and disruption of mining operations that are carried out lawfully. While, in the very early days of illegal mining, it was often said that the illegal mining was driven by localised socio-economic factors (joblessness, no economic opportunities, etc.), illegal mining has transitioned to a full-scale enterprise which is impacting significantly on South Africa’s economy.
We have, for many years, advocated for a regularisation of illegal mining in order to mitigate the extensive adverse consequences of illegal mining so that the illegal mining community can operate within the framework of South Africa’s mining laws and become small-scale and artisanal miners rather than illegal miners. Where the illegal miners then elect to continue operating unlawfully, regularization could make it easier for the regulators to clamp down on illegal mining.
It is going to take a significant and unprecedented effort from all stakeholders in the Mining and Natural Resources Sector, including government, the South African Police Services, the mining companies, and employee representatives such as the trade unions, together with community leaders, to address illegal mining, which, if unchecked, is going to continue having an adverse effect on South Africa’s economy, including the ability of the State to collect royalties and taxes which are sorely needed for allocation to growth and development in South Africa.
Electricity Supply
Loadshedding, particularly between 2022 and 2023, was one of the primary reasons, together with rising costs, for mining companies to initiate construction of renewable energy generation and storage facilities, to ensure that the mines have a steady supply of electricity, at costs which are known and controllable
Perhaps some decisions to construct electricity generation and storage facilities that were made in this period, may not be made today, with the significantly improved electricity supply through Eskom, but significant concerns remain regarding the sustainability of supply from Eskom, despite Eskom’s promises that there will be no load shedding for the next three to five years, and the significant costs associated with stiff tariff increases that Eskom is, once again, attempting to secure.
Mining companies that have either taken the decision to construct their own generation and storage facilities, or enter into joint venture agreements with alternative renewable energy generators and suppliers, are in a good position, going forward, because of reduced (or no) reliance on Eskom and its concerning generation, transmission and distribution infrastructure and rising costs of supply. In addition, in most instances where mining companies have constructed or are in the process of constructing their own generation and storage facilities, these are situated on the mine or in very close proximity, which reduces concerns around transmission and distribution infrastructure. The added benefit is that many of these generation and storage facilities can wheel electricity into the Eskom grid, assisting Eskom in meeting its supply mandates.
A “catch-22” scenario is however created by the increasing number of renewable energy generation facilities because these facilities reduce reliance on Eskom, and the income stream for Eskom diminishes, with consequences potentially including reduced spend on maintenance at Eskom’s generation facilities and less expenditure on new infrastructure including transmission and distribution networks. This will inevitably lead to greater tariff increases in coming years, leaving those who rely on Eskom’s supply, in an even worse position.
The fact remains, regardless of the many views around this, that the majority of Eskom’s generation facilities (coal-fired power stations), rely on coal and coal will remain a primary energy source, for South Africa, for many years to come. South Africa’s coal mining industry is focused on “green coal” and with an acknowledgment of South Africa’s reliance on coal, the focus should be on facilitating this “green coal” while at the same time making sure that renewable energy generation facilities can come onstream in the future, to support the energy transition.
For 2025, the challenges around electricity supply, particularly because of Eskom’s constraints around its generation and transmission infrastructure, are likely to remain, except where mining companies have already secured alternative renewable energy generation and storage facilities.
Many consumers are likely to take comfort from the report published by the National Transmission Company of South Africa that indicates that South Africa’s electricity supply is “adequate” and could remain so through to 2029, provided that Eskom sustains its current strong plant performance. Prudent mining and natural resources companies will however look to the future, and make sure that electricity supply, which is vital for mining operations, is not only available, but sustainable and cost – effective.
The draft Integrated Resource Plan 2024 will be published shortly, and it is going to be interesting to see what the changes are, from the Integrated Resource Plan 2023 which was both contentious and concerning because it did not appear to adequately address electricity supply concerns raised by multiple stakeholders.
Regulatory Uncertainty
While there have been regular amendments to South Africa’s environmental laws (Environmental Laws), including those that apply to the Mining and Natural Resources Sector, there has been relative stability around the key legislation, the Mineral and Petroleum Resources Development Act (MPRDA) with the primary concerns and legal processes focusing on the sometimes erratic interpretation and application of the MPRDA, particularly around the granting of prospecting and mining rights and the related processes.
This does not mean that the Minister of Mineral Resources (Minister) has not been making various attempts to amend the MPRDA. The Department of Mineral Resources (DMR) initiated processes to amend the MPRDA which led to the Mineral and Petroleum Resources Development Bill, 2013 (MPRDA Bill 2013). The MPRDA Bill 2013 went through parliamentary processes and was adopted, but it was referred back to the speaker of the National Assembly by the President for reconsideration in January 2015. The speaker of the National Assembly referred the MPRDA Bill 2013 to the Portfolio Committee and the Bill has been languishing in the parliamentary processes. However, in August 2024, the DMR made presentations aimed at communicating the rationale for proposed amendments and the MPRDA is likely to be amended in the near future. This creates potential uncertainty, and the significant challenge of interpretation and application of amended provisions (which may require the South African courts to get involved again).
The primary occupational health and safety law that applies to the Mining and Natural Resources Sector, the Mine Health and Safety Act, No. 20 of 1996 (MHSA) has, since it came into force and effect in 1997, been amended at regular intervals but these amendments have, largely, not been substantial.
On 14 October 2024, the Minister published a notice in the Government Gazette, that the Minister intends to introduce the Mine Health and Safety Amendment Bill 2024 (MHS Bill) in the National Assembly shortly. The amendments to the MHSA that will be introduced by the MHS Bill are significant, and will have far-reaching consequences for the Mining and Natural Resources Sector. The amendments include enhanced powers and functions for the Mine Health and Safety Inspectorate, increased responsibilities on the “employer” (the entity which holds the right to prospect or mine) regarding training that must be provided to employees, and fundamentally changes the landscape of liability for the “employer”, the chief executive officer, and other senior appointees. Increased consequences include fines based on the annual turnover of a particular mine, or the value of its exports (whichever is greater).
The enhanced consequences for mining companies, chief executive officers, and other senior appointees, are aligned with initiatives to enhance enforcement for contravention of South Africa’s environmental laws, and imprisonment of corporate executives.
These initiatives, potential amendments to the MPRDA, and amendments to the MHSA will require mining companies to refocus their efforts on compliance in 2025.
Advancements in Technology
The South African Mining and Natural Resources Sector has always been acknowledged as a world leader in the development and advancement of technology, particularly where the technology supports safer, more efficient mining, production and beneficiation.
This has created a perfect opportunity for original equipment manufacturers (OEM) and other suppliers to the Mining and Natural Resources Sector, to engage and partner with the mining sector. This partnership has led to significant advancements in technology in almost all aspects relating to mining and beneficiation.
In addition to technological advancements with equipment and machinery, the demands for safer, more efficient explosives, accessories and blasting systems, have contributed significantly to advances made in this field, and the move towards “green explosives”. This is of course a good development and supports the overall objective of the mining industry of sustainability and longevity.
A few years ago, the buzzword was “fourth industrial revolution” (4IR), but this terminology faded a bit because it did not properly encapsulate the full scope of the technical and related advances that have been made in the mining industry, including artificial intelligence (AI). 4IR is however making a mini-comeback, and the term is being used to promote and encourage broader participation by stakeholders in the mining sector, including small to medium OEMs and suppliers, as part of the broader growth, development and transformation objectives of the Mining Charter.
The development of AI and its likely, positive impact on supply chain, financial and supplier/service provider management is not the only advantage of AI. AI is powered by processors and energy sources, all of which rely on key minerals, commonly referred to as the “battery minerals” (lithium, platinum group metals and other similar metals). It is a good example of a mini “circular economy”. AI can benefit the mining sector but at the same time, it is a user of the minerals mined by many mining companies.
As with any new technology, there are of course concerns that the advancement of technology, including AI, will lead to job losses. This is an extremely important and sensitive topic in South Africa, and in Africa, more generally. If there are any concerns around potential job losses, key stakeholders such as the trade unions, may resist attempts to introduce new technology particularly if the introduction of new technology is not accompanied by re-skilling of employees and accommodation of legacy employees who may not be in a position to acquire new skills. There has also been a history of resistance to technology which is perceived to be too invasive, such as fatigue management technology through heads-up displays, and other real-time monitoring.
New technology is also challenging to introduce in some of South Africa’s older and aging mines, that were not designed to accommodate the new technology which is becoming available.
All of these challenges will need to be addressed in a practical, transparent manner with all stakeholders. There is no doubt that new technology can improve production and significantly increase safety, which remains a concern in South Africa’s mining industry.
Politics and Change
With the vast reserves of strategic minerals in the Democratic Republic of the Congo (DRC), there was some anxiety around the December 2023 elections. This led to an interesting situation where, at the same time, certain investors slowed down execution of projects (including beneficiation), while other investors accelerated the conclusion of agreements in an attempt to secure the status of the investment in the event that the elections did not go as anticipated (in the end, President Tshisekedi was re-elected amidst concerns around whether the elections were free and fair, which contributed to some anxiety by investors, for a period after the elections).
The elections in the DRC were followed by the elections in South, and the establishment of the Government of National Unity (GNU), has had a positive impact on investment decisions including foreign direct investment, despite continuing concerns around the regulatory framework that applies to the South African mining sector, deteriorating infrastructure (electricity, water, roads and ports) and increasing costs of employment.
The two most recent elections in Africa, in Mozambique and Botswana represented two extremes. In Mozambique, the government of the day won the elections, but this resulted in wide-spread displeasure which was expressed in protests, some of which turned violent, resulting in border closures by the South African government. Mozambique is endowed with good mineral resources, and it is extremely unfortunate that Mozambique is not in a position, currently, to take advantage of cyclical increased demand for certain minerals.
In contrast, Botswana has seen a peaceful transition after what can only be described as a seismic shift. The previous ruling party, the Botswana Democratic Party (BDP) was ousted after 58 years of rule, showing that nothing is permanent. The Umbrella for Democratic Change (UDC) has swept into power and the UDC has immediately outlined its agenda for change including a restructuring of Botswana’s economy aimed at not only addressing voter concerns (which led to the ousting of the BDP), but also creating an environment which attracts FDI. The UDC’s economic restructuring plan includes making it easier to do business by simplifying bureaucracy, and introducing systems in support of transparency and accountability.
The common denominator in the elections in the DRC, Botswana, South Africa and Mozambique is that nothing is permanent, and attempting to “play politics”, does not necessarily support longevity of investment decisions and the projects and mines that are established off the back of these investment decisions.
Then of course there is the re-election of Doland Trump as the President-Elect of the United States. Donald Trump is still President-Elect until January 2025, but his re-election had an immediate effect on global markets including the strengthening of the United States Dollar (USD) which could have a significant impact on the Mining and Natural Resources Sector in the short to medium term, particularly because of the mining sector’s reliance on imported goods and services such as machinery and equipment. It is predicted that President-Elect Donald Trump, aligned with his “America first” approach, is likely to push for significant reduction in reliance on international supply chains for critical minerals including “battery minerals”. He is likely to do this by focusing on three key areas, namely instituting import tariffs aimed at making production and beneficiation of minerals more cost-effective in the United States, reforming the mine licencing processes including environmental authorisations to make the process more efficient and quicker, and decoupling from China. President-Elect Donald Trump is expected to prioritise and incentivise primary extraction and beneficiation of the available minerals in the United States, including increased extraction of uranium in support of a possible increase in nuclear facilities.
Africa has large deposits of critical minerals and, with the anticipated decoupling from China and increased tariffs on imported goods from China, Africa’s Mining and Natural Resources Sector may benefit from increased United States investment. There are also other factors that are likely to shift the focus of the United States to Africa’s Mining and Natural Resources Sector including an acknowledgment, by the United States, that China’s footprint in Africa has grown significantly, and if the United States does not take the opportunity to reduce China’s influence now, it may not be able to do so in future.
It is anticipated that the Trump Administration will be more supportive of fossil fuels in the United States, but it is not possible to totally exclude the transition to green energy, and the growth of the electric vehicle sector, with its reliance on “battery minerals” such as graphite which is a vital component of lithium-ion batteries.
The effects on Africa’s Mining and Natural Resources Sector may not be immediate, because of President-Elect Donald Trump’s focus on the United States, and confirming his administration, but there will certainly be longer term effects on the Mining and Natural Resources Sector in Africa.
Employment and Labour Costs
Despite the state of the South African economy, and the precarious state of certain mines and mining companies in South Africa, demands for significant increases are made, with mining companies attempting, where possible, to secure longer-term wage agreements with the recognised trade unions, to create certainty.
The demand for significant increases are aligned with similar demands for increases in the related sectors such as transport, and collectively these increases have a significant effect on the costs of operating South African mines.
The situation is made more complex by demands from communities in and around mines to participate and benefit from the mining operations through service agreements, supply agreements, and employment.
These elements are likely to continue in 2025, as South Africa’s socio-economic landscape is placed under more stress as a result of smaller and large-scale retrenchments in the mining sector and communities in and around mines also demand construction of infrastructure, provision of electricity, water and other services, as municipalities fail to provide these key deliverables.
What can the Mining and Natural Resources Sector do better in 2025?
It is not all doom and gloom. While the mining sector will continue to face significant challenges in 2025, the chaos created by the convergence of these challenges at the same time, creates opportunities.
As almost every financial advisor will tell you, if possible, everyone should have savings in the bank for the “rainy day”. This applies equally to the mining sector, and mining companies with financial reserves and a strong balance sheet can anticipate opportunities and take them when the time is right. Mergers and acquisitions by deal value increased significantly in 2024 and there are likely to be good opportunities for investment in 2025.
International trading companies who are in a good financial position are also able to lock up and secure supply of key minerals through pre-payment arrangements linked to guaranteed off-takes, placing the producer in a position to fund mine and beneficiation development through the pre-payment and through improved “credit-worthiness”.
Mining companies should, where practically possible, develop reserves and a good balance sheet in 2025 so that they can both navigate cyclical demand and take up opportunities as they arise.
Development of partnerships amongst key stakeholders, is vital. Whether this is to secure the supply chain from extraction through to beneficiation, or to develop technology which makes mining safer and more efficient, partnerships are critical to sustainability and longevity of the mining sector, particularly taking into account one of the interesting trends of 2024 of large mining companies spinning off non-core assets to re-focus on primary activities (whether this is extraction or beneficiation) and develop a strong balance sheet so that these mining companies are in a position to take up other opportunities.
Transparency and good stakeholder relationships are also vital. Good stakeholder relationships with the regulators, communities and employees typically leads to longer periods without disruption. Good stakeholder relationships are normally based on integrity and transparency, and where integrity gaps are created, it can take a long time to re-develop the credibility that is needed to support development, growth, and transformation of the mining industry, and avoid unnecessary disruption.
Embracing new technology would be a key objective as the mining industry looks for ways in which to become more cost-efficient, increase production, and significantly improve safety.
In 2025 the mining industry will need to embrace change (which is constant) and navigate the complex challenges by focusing on more nimble decision-making.