3 - Global Expo Botswana

Report
HOW CAN BOTSWANA CAPITALIZE ON THE
MINING SECTOR TO ENSURE ECONOMIC GROWTH
& DIVERSIFICATION?
Botswana Investment & Trade Conference
20-21 November 2013
Bridgette Radebe
EXECUTIVE CHAIRPERSON: MMAKAU MINING
PRESIDENT: SOUTH AFRICAN MINING DEVELOPMENT ASSOCIATION
(Junior Mining Chamber)
1
The African Socio-economic and Political
paradigm shift and resulting economic successes
In 2011, the real GDP of Africa recovered and grew by 5.2% after increasing by
5.3% in 2004 and collapsing through 2008-2010
From 2009 to 2011, Africa’s GDP grew at an average annual rate of about 3%
In 2011, the GDP increased by an average of 6.3% in African petroleumexporting countries
Africa’s economy is projected to grow by 4.8% in 2013 and accelerate further to
5.3% in 2014. (AFDB- Africa Economic Outlook)
To achieve the above we need structural transformation based on natural
resources to address the socio-economic and political challenges created by the
resource curse.
The resource producing countries in Africa need to function under a meaningful
and effective transformative legislation.
Many countries are in the process of developing such legislative frameworks,
eg:
The Mineral Petroleum Resources Development Act has been used in South
Africa to redress the historic socio-economic and political imbalances in the
mining sector.
2
Source: US Geological Survey Minerals Year book 2011
Historically, Investments in Mining had an
exploitation culture in Africa:
Eg: Case Study South Africa
No black
ownership
Ghost towns
Militant labour
force fighting
exploitative
labour
practices
Monopolistic
industry in
South Africa
pre 1994
Neocolonialism
3
No royalty
payments to
rural
communities
Economic exclusion of the Majority –
a recipe for instability
Barney Bernato
Monopolistic industry
Godfathers
of the old

No junior companies
order gold
and
History of legal, institutionalized
exclusion of blacks and women, eg
diamond

black advancement prohibited in the following fields:
rush in
(eg. certificated miners, apprentices)
South
in the mining sector impeded by law
(eg. Scheduled Persons Clause, Mines and Works Act) until
Africa
1987

4
dominated by large mining houses,
large-scale mining operations

After 1987 the historic exploitation of black workers, rural
communities and women in the mining industry prevailed

Unionisation and major labour uprising a daily practice

Civil unrest – the norm

Monopoly of the industry by four companies

The Junior Mining Sector stifled

Financial institutions adverse to junior mining investments

The state was not the custodian of the mineral rights hence
Foreign investments stifled
Cecil John Rhodes
Ernest Oppenheimer
Exclusion
of Women
Post 1994: Legislative Transformation
Major contributor towards paradigm shift
State intervention:
Need for legislative change recognized
through:
5

The Mineral and Petroleum Resources
Development Act

The State became the custodian of the
Mineral rights

The Mining industry liberated to the inclusion
of Historically disadvantaged South Africans

Foreign direct investment flowed.

The creation of the Mining Charter and the
new mining legislation became the backbone
of the paradigm shift

Fair Labour Laws

Rural Communities became beneficiaries of
their Mineral Wealth.
Former President Nelson Mandela Opens Parliament 1997
SA Mining Charter from 2004 – Creating an
enabling environment in the paradigm shift
26% equity participation in 10 years time
40% black managers within 5 years
10% women participation within 5 years
100% literacy within 5 years
BEE procurement
Beneficiation
Social plan and labour plan
6
Post 1994: The transformation
march towards the paradigm shift
State becomes
custodian of mineral
rights

In line with international norms
Historically
Disadvantaged South
Africans and foreign
investors get access
Growth in Junior mining
companies
Balancing the playing field
7
The Mining Industry to Graduate from the
following Historic Mining Investment Model:
Explore + Extract + Exploit + Export = Ghost Towns + Resource Curse
From Exploited Mining Environment To
Massacres and Ethnic Cleansing
Rape of Mineral Wealth fare - Weapon of war
Conflict
Diamonds
the Root
of all Evil
Conflict
Diamonds
the Root
of all Evil
8
Sustainable Mining Environment
This land, the whole land
Will be healed, must be healed
These brazen cities, the swollen mines
The mineral of our sweat
The teeming ghetto, the dormitory cells
In towns and squalid squatter camps
Where hope smothers in a tyre
These furnaces of human indifference must incinerate
With all the heat of a healing fire
Those were the dark ages of mining
And now the winds of change are blowing
A brighter new future our wayA future of Global Mining Transformation
A future of the paradigm shift
This land, the whole land
Will be healed, must be healed
- Don Matera
9
Mining industry post state custodianship of
mineral rights – the fruits of paradigm shift
Liberalisation of mining industry








Mining regulation in line with international practice
Development of junior mining sector
Mushrooming of exploration companies
Rural community equity participation and payment of
royalties to rural communities
Creation of Integrated Development Plans and
eradication of ghost towns
Robust procurement opportunities
10
Beneficiation - an engine for economic
growth
Robust growth opportunities in the
South African mining industry
Total contribution of mining in South Africa –
2011 data (estimates)
Total contribution of mining:
GDP: $49-billion or 19%
Jobs: 1 350 000 (16% of total employment)
11
How did South Africa capitalize on the mining
sector to ensure mining growth and
diversification?
Mining remains a key contributor to
the South African GDP
19% of GDP (directly and indirectly)
38% of merchandise exports (primary and beneficiated mineral
exports)
12% of fixed investment (directly and indirectly)
Attracts significant foreign savings (R1.9trillion or 43% of value
of JSE)
12
Mining remains a key contributor to
the South African GDP
Accounts for 13.2% of corporate tax receipts (R17billion in
2010 and R6billion in royalties.
16% of formal sector employment (directly and indirectly)
50% of volume of Transnet’s rail and ports
94% of electricity generation via coal power plants
40% of electricity demand.
About 37% of the country’s liquid fuels via coal
13
Mining remains a key contributor to
the South African GDP
Accounts for R441billion in expenditure and R407billion spent locally.
The total mining expenditure in 2010 was R441-billion, of which:
R228.4-billion was spent on purchases and operating costs (timber,
steel, explosives, electricity, transport, uniforms, etc.
R78.4-billion went on salaries and wages for mine employees.
R49-billion on Capex (the lifeblood of mining).
R17.1-billion in tax.
R16.2-billion in dividends (only 3.7% of total).
R38-billion on depreciation and impairments.
R13-billion on interest to the banks
14
Procurement since 1994 – the leading force behind
enterprise development in the paradigm shift
Develop BEE mining support industries
41 000
suppliers
(2500 Narrow Based
HDSAs
Total annual
procurement
budget – estimated
at
2
$6 billion
500 BBEE)
3
1
33 mining
houses;
Source:
SAMPPF - 2006
15
15 venues;
6 provincial
governments
4
Approximately
$600 million
to HDSA
500 Buyers
Procurement an Engine for Economic Growth
Develop BEE mining support industries
65 000
suppliers
(4500 Narrow Based
HDSAs
Total annual
procurement
budget – estimated
at
2
$8.5 billion
12000 BBEE)
3
1
66 mining
houses;
Source: DECTI
- 2008
16
15 venues;
6 provincial
governments
4
Approximately
$950 million
to HDSA
600 Buyers
Botswana, A leading example of the country
First strategy: A catalyst for economic growth
and diversification
The Diamond Trading Company Botswana (DTCB), is a successful
example of an economic paradigm shift.
The relocation of the Diamond Trading Company from London to
Botswana is the new beginning of an economic revolution to
develop from diamond sorting and valuing into beneficiation of
minerals in Africa.
The country first approach is implemented through the creation of
the DTCB
We salute President Khama and the people of Botswana for
creating the Okavango Diamond Company which will secure the
supply of diamonds to international diamond traders and investors.
This is a great step towards liberating the diamond industry into
beneficiation and diversification.
17
The Country First Strategy Prevails.
Country First Economic Policies in the
Paradigm Shift
The majority sentiment is that strategic minerals should not be foreign owned. E.g. let
us learn from the example in Canada.

The Canadian government blocked BHP Billiton's $39 billion bid for Potash Corp, the
world's biggest producer of a key crop nutrient, halting what had been the world's
biggest takeover.

Industry Minister Tony Clement said "In Canada, our natural resources are an
important economic driver,. "...I have come to the conclusion that BHP Billiton does
not present a likely net benefit to Canada.” (2011).
‘Country First Strategy!’ Should result in a net benefit for its people and its economy.
18
Beneficiation a catalyst for economic growth
and diversification
In 2010, South Africa as a resource economy was
estimated to possess approximately $2.5 trillion in
non-energy in situ mineral wealth, making it one of
the wealthiest mining jurisdictions in the world. There
was a need for South Africa to transform its mining
industry culture from exporters of mineral ores or
semi-processed minerals to high value intermediate
and finished products (Beneficiation).
19
What has South Africa learned from Botswana’s and
Canada's Country First Mining Strategy?
•South Africa identified 11 Strategic minerals,
•SAMDA has included two additional minerals which are strategic and pivotal for the
country’s developmental needs
Rank
Commodity
Needs of the Country and the Value Chain
1 Coal
Energy supply risk
2 Gold
Job creation potential - jewellery beneficiation
3 Iron Ore
Infrastructure and job creation prerogative
4 Manganese
Infrastructure and job creation prerogative
5 Diamonds
job creation potential
6 PGM
SA’s international dominance; job creation– energy supply
7 Chrome
SA’s international dominance
8 Vanadium
SA’s international dominance
9 Titanium
High technology industries
10 Nickel
Niche steel products
11 Uranium
Clean Energy
SAMDA proposed the following minerals to be Additional Strategic Minerals
12 Phosphate
food security and fertilizer supply
13 Limestone
Required for cement manufacture and construction projects
*SAMDA - South African Mining Development Association
20
Beneficiation: A Government Led Value Chain
Strategy
The 11 commodities have been clustered according to their value chains. The
government has identified five value chains that will be the preliminary focus of the
new Beneficiation Strategy. There are instances where some of the commodities
share value chains, such as Gold and Platinum. The five value chains are:
•
Energy commodities(coal, uranium and thorium)
•
Iron and steel (iron-ore, chromium and manganese)
•
Pigment and titanium production (titanium and vanadium)
•
Autocatalytic converters and diesel particulate filters(platinum)
•
Jewellery fabrication (diamonds, gold and platinum)
Each value chain requires specific collaboration and interventions in order to
maximise the value extraction of the associated minerals. Each value chain has its
own unique beneficiation strategy, which can be further unpacked.
21
Iron and Steel Value Chain
Jewellery Fabrication
Infrastructure
PGM Value Chain (Energy- Fuel Cells)
Energy Value Chain
Beneficiation Incentives Created By Government
Through The Following:
Industrial Development Zones, eg: Airports or
Harbours (Mining companies have the opportunity to
establish beneficiation plants at an IDZ)
Special Economic Zones (SEZ) - A geographical
region that has economic and other laws that are
more free-market-oriented than a country's typical or
national laws. "Nationwide" laws may be suspended
inside a special economic zone – eg: Tax incentives
from 28% to 15% Corporate tax rate reduction.
23
Section 12 I Tax Allowance Incentive (12I
TAI) (SARS)
The Section 12 I Tax Incentive is designed to support Greenfield investments (i.e. new
industrial projects that utilise only new and unused manufacturing assets), as well as
Brownfield investments (i.e. expansions or upgrades of existing industrial projects).
The new incentive offers support for both capital investment and training.
The incentive offers:
24
•
R900 million in the case of any Greenfield project with a preferred status;
•
R550 million in the case of any other Greenfield project;
•
R550 million in the case of any Brownfield project with a preferred status;
•
R350 million in the case of any other Brownfield project;
•
An additional training allowance of R36 000 per employee may be deducted from taxable
income; and
•
A maximum total additional training allowance per project of R20 million, in the case of
a qualifying project, and R30 million in the case of a preferred project
INTERGRATED RESOURCES
DEVELOPMENT MODELS
A Integrated Mining Development Partnership with Local, Provincial and National
Government, as well as Producers, Labour, Rural Communities, Business and
various other stake holders.
Objective is to create a sustainable mining economy in the rural areas where mining
production takes place in a model that will develop the mining areas , rather than
creating Ghost Towns.
25
The Integrated Solution Model
26
26
Municipalities in Context
27
27
The Mining Industry in Context
28
SLP – Social Labour Plan
LED – Local Economic Development
28
Mining Companies involved in Rural Upliftment
Partnership Models through Producers Forums:
• Modikwa Platinum Mine Joint Venture
• Akanani Mining (Pty) Limited
•
•
•
•
•
•
•
•
•
•
•
•
•
29
•
•
•
•
•
•
MTC Minerals
Northam Platinum Limited
Pan Palladium South Africa (Pty) Limited
Plateau Resources (Pty) Limited
Platreef Resource (Pty) Limited
Rustenburg Platinum Mines (Pty) Limited
(Eastern Limb Development)
Barplats Mines Limited (Rhodium Reefs)
• Samancor Chrome Limited
Boynton Investments (Pty) Limited
• Sishen Iron Ore Company (Pty) Limited
Chromex Mining (Pty) Limited
• Two Rivers Platinum (Pty) Limited
Corridor Mining Resource (Pty) Limited
• Umnotho weSizwe Investment Holdings
Eastern Platinum Limited
Limited
• Veremo Holdings Limited
Impala Platinum Limited
• Westen Platinum Limited (On behalf of
Lebowa Platinum
Messina
Marula Platinum
Platinum Mines Limited)
• Xstrata South Africa (Pty) Limited
Anglo Operations Limited
Anglo Platinum
ARM Platinum (Pty) Limited
ASA Metals (Pyt) Limited
Assmang Limited (Dwarsrivier Mine)
SLP – Social Labour Plan
LED – Local Economic Development
Public Private Partnership Funds Invested in creating a
Sustainable Rural Economy in Sekhukhune District
Limpopo
30
30
RBCT COAL EXPORT ENTITLEMENT
THE NEW 91Mtpa RBCT
Current Shareholders
72 Mt
BECSA
Anglo Coal
XCSA
Optimum Coal Holdings
TCSA
SASOL
KANGRA
Main Street 432
EXXARO
ESIZWE
31
17.9
19.7
15.0
6.5
4.1
3.6
1.7
1.5
1.0
0.9
Small Miners (QUATTRO)
SDCT
Phase V
4Mt
Prevoius made avaliable
via the CITT for new entrants
6Mt
9Mt
Now avaliable for emerging
BEE miners with export
volumes of 250 ktpa or less
100% BEE
EXXARO
Eskom Enterprices
Anker Coal
2.0
3.0
1.0
ARM
EXXARO
Mmakau
Tumelo
Umcebo
SACMH
Mbokodo
WCC
3.2
2.5
0.35
0.6
1.0
0.5
0.5
0.35
Richards Bay Coal Terminal
32
Trans Kalahari Corridor
TKC
33
Paradigm Shift Success Stories: The Rural
Community Perspective
Royal Bafokeng Holdings is
an excellent role model for rural
community ownership
initiatives:

Market Capitalisation: R40 billion (This is
a combined figure of all its investments
on the JSE - 2011).

Dividends are invested in rural renewal
projects.

In past 10 years over R5 billion invested
in clinics, education, public utilities.

Great mentorship to other rural
communities and other socio-economic
development projects.
Source RBN financial report : 2006
34

Most its mines are situated in rural areas.

Mining is a catalyst for rural development.
Paradigm Shift Success Stories: Women in
Mining Perspective – MMAKAU MINING
MMAKAU MINING
ENERGY
STEEL AND
ALLOYS
PRECIOUS
METALS
26%
Eureka Gold Mine
6.5%
65%
Karoo Uranium
9%
Marula Platinum Mine
Hernic Ferrochrome
100%
15%
Mmakau
Energy
Madibeng Exploration
51%
Mmakau Coal SA
26%
Dorsfontein Coal Mine
51%
Tumelo Coal Mine
26%
Brakfontein Reserve
www.mmakaumining.co.za
26%
Forzando Coal Mine
100%
Schurvekop Reserve
Paradigm Shift Success Story: Patrice
Motsepe - African Rainbow Minerals
African Rainbow Minerals
(ARM), is a diversified mining
company with interests in
platinum, coal, gold, iron ore,
manganese and chrome.
Market Cap of R41,7 Billion
(2013).
ARM has spent R300 million in
3 years on Local Economic
Development and Social &
Labour Plans.
R85 million on Rural
Community, women, youth,
church and trade union
upliftment projects.
36
The Mining Industry Paradigm Shift
37
Many achievements in the Long Road to
Economic Freedom
I have walked that long road to freedom. I have tried
not to falter; I have made missteps along the way.
But I have discovered the secret that after climbing a
great hill one only finds that there are many more hills
to climb. I have taken a moment here to rest, to steal
a view of the glorious vista that surrounds me, to look
back on the distance I have come, but I can rest only
for a moment, for with freedom comes responsibility,
and I dare not linger, for my LONG WALK HAS NOT
YET ENDED.
(Nelson Mandela)
38
THANK YOU
39

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