Dangerous group robbing South Africa of R60 billion a year by Shaun Jacobs

[Nat Quinn]

Dangerous group robbing South Africa of R60 billion a year by Shaun Jacobs

Illegal mining costs South Africa R60 billion annually in lost economic activity and mineral exports, threatening an industry that employs nearly half a million people.

This was revealed by Mineral and Petroleum Resources Minister Gwede Mantashe in a press conference, in which he described illegal mining as an attack on the South African economy.

Mantashe’s conference followed the final phase of an operation that began in October to force an unknown number of people out of the disused gold mine in Stilfontein.

“It’s a war on the economy. Until you show me something different about illegal mining, that they add value to the economy, I can’t change my approach,” he told bloomberg in a separate interview.

The illegal industry has been prevalent in the country for over a decade but has rapidly expanded in recent years as individuals come under greater financial pressure.

This has been coupled with increased government inefficiency and regulatory changes, making it more difficult for traditional mining companies to open new shafts and continue operating their mines in South Africa.

Operating a mine in South Africa presents massive challenges, including volatile labour relations, disputes with surrounding communities, and organised crime.

The industry is also hamstrung by regulatory uncertainty, unreasonable delays in processing applications and infrastructure bottlenecks.

This has led to a growing number of abandoned mines, many of which have been closed by companies because they are not profitable.

These mines attract people from outside the country to make money by illegally mining minerals in disused shafts, which is incredibly dangerous.

Of the 1,576 people who were arrested after they resurfaced from the Stilfontein mine before the start of the rescue operation, only 21 were South African nationals, according to the police.

South Africa currently has 6,152 abandoned mines that have become hotspots for crime.

South Africa’s mining industry has lost its shine in the past few decades, going from the top-ranked jurisdiction globally to among the worst.

The Fraser Institute, based in Canada, conducts an annual survey on the attractiveness of different countries as mining jurisdictions. These days, South Africa ranks among the ten least attractive mining destinations.

The financial ecosystem that supported junior miners in years gone by has also largely disappeared.

Local investors have limited appetite for supporting early-stage mining companies, and global investors have little appetite for investments in South Africa.

Mining analyst at Modern Corporate Solutions, Peter Major, recently outlined why this is the case in South Africa.

“The simplest explanation is that you had an established mining law and protocol system on how to develop and run mines and who owned them,” Major said.

“That had been built up over 150 years and was working pretty well. It made us the number one mining country on the planet.”

Once the backbone of the local economy, South Africa’s mining output has steadily declined since the 1990s by around 0.4% annually, with gold, in particular, falling off a cliff and declining by 85%.

South Africa’s status as the leading global mining jurisdiction changed dramatically after the ANC assumed power and began advocating for the nationalisation of mines.

These proposals were accompanied by increasingly stringent Black Economic Empowerment (BEE) requirements.

“When the new administration took over, they decided to completely overhaul mining laws in South Africa, emulating policies from other African countries,” Major explained.

“They declared, ‘We will nationalise these mines and reclaim them. They will no longer be private property but assets of the state.’”

“You can imagine the impact. Companies had invested billions in projects with century-long horizons, only to face the threat of state ownership.”

“New investments dried up. Exploration and expansion came to a halt. Why would anyone invest in something the state controls?”

“They kept changing the legislation, too. Initially, you needed a BEE partner owning 25%, but that requirement quickly rose to 30%. Then, they mandated that 70% of your spending had to go to BEE suppliers.”

“On top of nationalising property, these onerous conditions drove capital away,” Major noted.

As a result, South Africa now has 6,152 abandoned mines, which the state is theoretically responsible for but lacks the resources and expertise to manage.

“The ANC didn’t fully grasp the repercussions of their actions. These abandoned mines could have been generating billions for the local economy if they had been left alone,” Major said.

 

source:Dangerous group robbing South Africa of R60 billion a year – Daily Investor

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