Mining to South Africa

(Last updated: 31 Jul 2007)

Trends and opportunities

The market

The mineral industry in South Africa is a well-established sector of the economy. Mining is South Africa’s largest industry sector, and in 2006, some 59 different minerals were produced from 993 mines and quarries, of which 49 produced gold, 28 produced platinum-group minerals (PGMs), 64 produced coal and 145 produced diamonds.

In 2006, the value of domestic mineral sales was A$7.7 billion. Improvements in local sales income were recorded for all the minerals that make a meaningful contribution to the total, and in particular, non-ferrous, ferrous and industrial minerals recorded significant growth for the period 2003 to 2004. PGMs surpassed gold to become 2004’s major foreign revenue earner, accounting for 33 per cent of mineral export sales, while gold followed closely with 32.5 per cent and coal accounted for 16 per cent.

Gold production decreased by 8.8 per cent to 340.5 tonnes in 2006, compared to the previous year, largely as a result of shaft closures caused by lower grades and the effects of the strengthening rand. Total sales revenue decreased by 11.3 per cent to A$6.2 billion, due to smaller sales volumes and a lower average rand price, despite a higher average dollar price for the year. Despite a large decline in production, South Africa remains the world’s largest gold mining country. 

PGM production increased by 7.4 per cent, to 286.2 tonnes, in 2006, and production of platinum and palladium increased to 159.9 tonnes and 78 tonnes, respectively. By 2000, platinum had outstripped gold as South Africa’s number one earner of foreign exchange. In 2004, South Africa was the source of 5.03 million ounces of platinum, and overall sales value amounted to A$7.1 billion. Expansions in the South African PGM industry resulted in local supplies of palladium improving to record production level of 78.5 tonnes, and accounted for 33 per cent of global output.

In 2006, diamond production achieved a new record level of 14.3 million carats, an increase of 11.7 per cent compared to the previous year. The increase in production, the continued weakening of the US dollar relative to the rand and the increase in rough prices by an average of 14 per cent in 2004 resulted in an increase in the value of production to an estimated A$1.6 billion. South Africa is the world’s fourth largest producer of diamonds in terms of value and fifth largest in terms of production.

South Africa produced 242.8 million tonnes of saleable coal in 2006, making the country the fifth largest coal producer in the world, after China, USA, India and Australia. In 2004, 178.3 million tonnes of production was sold locally at a value of about A$2.8 billion, while 67.9 million tonnes was exported, at a value of about A$3.07 billion. While the local coal market remains the backbone of the industry in terms of demand, the majority of local coal producers’ revenue is generated from high export prices, which subsidise coal produced for domestic use.

South Africa also has relatively large reserves of most of the major nonferrous metals and minerals, with the exception of aluminium. In 2004, total sales of processed nonferrous metals and minerals were worth A$2.3 billion. The country is the world’s largest producer of chromium and vanadium ores and a leading supplier of their alloys. It is also a major producer of iron and manganese ores and an important supplier of ferromanganese, ferrosilicon and silicon metal.

South Africa holds the world’s largest reserves of ores of:

• platinum-group metals (87.7%)
• manganese (80%)
• chromium (72.4%
• gold (40.1%)
• alumino-silicates (37.4%)

It is also prominent in terms of:

• titanium (29.8%)
• vanadium (27.0%)
• zirconium (19.4%)
• vermiculite (40.0%)
• fluorspar (16.7%)

Privatisation and restructuring

In order to redress historical imbalances in the mining sector, South Africa’s mining legislation has been overhauled, with special emphasis placed on black economic empowerment (BEE). The Mineral and Petroleum Resources Development Act (No 28 of 2002), which came into force in May 2004, provides the new regulatory framework for South Africa’s mining and minerals industry, and aims to correct past imbalances without threatening the attractiveness of the industry to domestic and international investors.

The Act follows international norms in minerals regulation, especially those seen in Canada, Australia and North America, and centres around the provision that all mineral rights will revert to the State, representing a move away from the previous system where ownership of mineral resources lay in the hands of private companies.

The intention of this development is to ensure increased access to mining activity for historically disadvantaged people, and to enable the State to put an end to the hoarding of mineral rights, with a 'use-it-or-lose-it' principle ensuring that, if a company fails to use its mineral rights, it will lose those rights after a certain period. This will affect mining companies holding un-utilised reserves or mothballed operations. In addition, the principle allows the State discretion to force the holder of mineral rights to abandon development projects if it is of the opinion that the project is not producing at the most efficient levels or is a threat to environmental sustainability or community health.

The Act also answers the need for broader access to geological, geochemical and geophysical information, which, in the past, was held by the entity that conducted the exploration and was protected by restrictions on disclosure. Through this, and improved access to mineral rights, the Act is designed to bring an end to the situation in which a few large companies dominate South Africa’s mining industry, and is intended to stimulate the development of South Africa’s junior mining sector, which is currently small and compares poorly with junior mining sectors in other parts of the world.

Opportunities

The value of South Africa’s exports of primary minerals is forecast to increase by 6.8 per cent per annum over the five year period, reaching A$26,200 million in 2009. The sectors with the highest expected growth rates are coal (11.4 per cent), gold (8.8 per cent) and ferrous metals (7.4 per cent).

The development of the technical capacity to mine deep-level gold ore bodies has seen South African gold mining becoming increasingly capital intensive. This is because of the massive capital required for ventilation, cooling, hoisting, underground and surface processing plants. The depth of gold mining operations has increased to levels of four kilometres below the surface in some cases.

Mine expansion projects and new mine development projects planned or underway by the major mining companies in South Africa are worth about A$13.2 billion. Of these, approximately A$3.9 billion are projects in the gold mining sector, A$1.8 billion are in the diamond mining sector, A$4 billion are in the PGM sector, A$2.2 billion in coal mining and A$1.1 billion in ferrous metals.

The key mining houses who are investing in expansion and new mine development are:

• Gold: Harmony, AngloGold Ashanti and Goldfields
• Diamonds: De Beers
• Platinum Group Metals: Anglo Platinum, Impala Platinum, Lonmin, Aquarius Platinum
• Coal: Ingwe, Kumba, Eyesizwe, Anglo Coal, Xstrata, Sasol, Total
• Ferrous: Asmang, Kumba

Although the existence of large reserves of a variety of minerals has been proven in South Africa, the country cannot be considered over-explored. Experts generally agree that there remains considerable potential for the discovery of other world-class deposits in areas that have not yet been exhaustively explored.

Exploration success in South Africa has made substantial investments in exploration for gold, platinum, diamonds, heavy minerals and base metals. Exploration activities in South Africa are mainly centred on PGMs and diamonds.

Minerals beneficiation in South Africa includes large-scale, capital-intensive activities, such as smelting, and sophisticated refining plants as well as labour intensive processes, such as craft jewellery and metal fabrication. Since the mid-90's the South African mining sector has undergone a major transformation away from gold into higher value added mineral processing and manufacturing, becoming a world exporter of processed minerals. South Africa still has the potential to further raise the level of beneficiated mineral output.

Competitive environment

Some of the key players in the South African mining industry are listed below:

Gold	AngloGold Ashanti Ltd, Gold Fields, Harmony Gold, DRDGold, Western Areas,  Thistle Mining, African Pioneer Mining (Pty) Ltd, Petrex (Pty) Ltd, Simmer and Jack
Diamonds	De Beers Consolidated Mines (DBCM), Trans Hex, Alexkor, Firestone Diamonds, SouthernEra Resources
Platinum Group Metals (PGMs)	Anglo American Platinum Corporation (Anglo Platinum), Aquarius Platinum, Impala Platinum, Lonmin Plc., Northam Platinum, Barplats Investments Limited (Barplats)
Coal	Ingwe Collieries Limited, Anglo Coal, Sasol Mining, Eyesizwe Coal, Kumba Coal, Xstrata Coal, Kangra Coal, Total Exploration, Wakefield Investments (Metorex), Anker Coal and Mineral Holdings
Ferrous and non-ferrous metals	ASA Metals Pty Ltd, Assore Limited, Anglo American Operations, Foskor Limited, Kumba Resources Limited, Metorex Ltd, Palabora Mining Company Limited (Palamin), Samancor Limited, Lonmin Plc, Xstrata Alloys, Anglovaal Mining Limited (Avmin Ltd), Bayer (Pty) Ltd, Hernic Ferrochrome (Pty) Ltd, Highveld Steel & Vanadium Corporation Ltd, National Manganese Mines (Pty) Ltd, Richards Bay Minerals (RBM), SA Chrome & Alloys Ltd
BEE Mining Companies	BEE Mining Companies African Rainbow Minerals (ARM) (ferrous metals, nickel and platinum operations), Mvelaphanda Resources (gold, platinum and diamonds), Incwala Resources (PGM’s), Eyesizwe Coal (Coal), Royal Bafokeng Resources (PGM’s), Mmakau Mining (platinum, coal and gold), Ponahalo (Diamonds), Matodzi Resources (Diamonds), Khumo Bathong Holdings (KBH) (Gold), Afriminerals (base metals, gold and diamonds), Endulwini Resources (coal), Imbani Coal (Coal), Kolong Investment Holdings (diamonds). Kuyasa Mining (coal), Leeuw Mining & Exploration (coal), Leswikeng Minerals and Energy (metals), Lidonga Minerals (gold, coal), Marothodi Resources (diamonds and platinum-group metals), Metallon Resources (Gold), Seven Falls (diamond exploration), Shanduka Resources (gold, coal, diamonds)

Tariffs, regulations and customs

South Africa is a free-market based economy with an active private sector. Law pertaining to trade and investment and competitive practices conforms to international norms, and there is a comprehensive and advanced range of legislation relating to business activity, copyrights, patents, trade marks, disputes and labour relations. There are very few limitations on inward investment.

There is no regulation on foreign ownership of companies and foreign companies are allowed to fully repatriate profits. What is of importance to foreign investors are the governments black economic empowerment policies and regulations, which make partnering with a black owned company adviseable, as procurement by government and many of the large local companies favour black owned concerns.

South Africa uses the Harmonised System of Classification. South Africa is an adherent to the Customs Valuation Agreement negotiated under GATT/WTO. The dutiable value of goods imported into South Africa is calculated on the FOB price in the country of export. South Africa has significantly reduced its number of tariff lines to eight levels ranging from  per cent to 30 per cent with a few exceptions (notably in clothing and textiles and motor industry manufacturers). Most tariff lines are contained to WTO binding levels.

Imports are grouped into three main categories, namely a list of about 700 items for which no import permit is needed; goods licensed on the basis of reasonable requirements which include most industrial raw materials and plant and capital equipment; and items requiring a special permit, which include finished machinery, spare parts not produced in South Africa, gold, petrochemical products and other synthetics, food items and clothing.

Value Added Tax

Value-added tax of 14 per cent is payable on all imports.

Corporate income tax

The corporate tax rate is generally 30 per cent and for non-resident companies operating in South Africa through a branch it is 35 per cent. Gold mining companies are treated separately and the taxation rate is reached through a specific formula. The Australia-South Africa Double Taxation Agreement entered into force in December 1999.

Mineral and Petroleum Resources Development Act of 2002

The Department of Minerals and Energy (DME) is responsible for the administration of the Minerals and Petroleum Resources Development Act, 28 of 2002, which came into effect in May 2004. This Act replaces the Minerals Act, 50 of 1991 and regulates the prospecting for, and optimal exploitation, processing and utilisation of minerals, provides for safety and health in the mining industry, and controls the rehabilitation of land disturbed by exploration and mining. Various specialised divisions of the DME and associated institutions are responsible for the administration of the mining laws and for promoting the development of the industry.

Government is committed to the promotion of beneficiation and the Mineral and Petroleum Resources Development Act of 2002 includes provisions that ensures the promotion of secondary and tertiary mineral-based industries, aimed at adding maximum value to mineral raw materials, where economically justifiable. The South African Mining Charter of 2004  stipulates that mining companies will be able to offset the value of the level of beneficiation achieved by the company against its BEE ownership commitments.

Draft Mineral and Petroleum Royalty Bill

The Government plans to impose a royalty for the extraction of a non-renewable resource. The proposed royalty would be calculated on the gross revenue of the mineral. The Chamber of Mines of South Africa, which represents 90 per cent of mining companies in the country, has proposed a profit-based royalty system, and negotiations are currently underway between the parties. The proposed new royalty regime will be brought into operation in 2009.

The proposed royalties would be as follows: 

Commodity	%
Anthracite and bituminous coal (low ash and steam)	2
Antimony, copper, iron, manganese, lead, zinc, cobalt, nickel, silicon, tin, and vermiculite	2
Gold, silver, vanadium, chromite, and titanium dioxide (Ilmenite, rutile)	3
Platinum group metals: platinum, paladium, rhodium, iridium,  ruthenium, osmium	4
Gem stones	5
Unpolished natural diamonds	8

Industry standards

The South African Bureau of Standards is a state-owned organisation that promotes quality and standardisation of products in South Africa.  SABS administers an SABS Mark Scheme, which applies to products for which national mark specifications exist, with SABS certification marks serving as testimonials that the product complies with the specification, and that the supplier maintains an efficient and appropriate quality system.

The SABS mark is generally accepted in the rest of sub-Saharan Africa as well. In addition, European and US standards are accepted in most African countries, including South Africa. The large multinational mining companies such as Rio Tinto, BHP-Billiton, Anglo Gold, Anglo Platinum, Lonmin, Teck Cominco and others all have group-wide safety, health and environmental (SHE) policies. Thus, regardless of the legislation that a country might have, they will implement their standards – based on the premise that their standards comply with best practice regulations.

Marketing your products and services

Market entry

It is advisable for the Australian suppliers to have some presence in South Africa. When dealing with overseas suppliers, South African companies would prefer a local contact or distributor with local warehousing capacity to guarantee the chain of supply. On-site (in-country) availability of service staff would be considered when awarding a contract.

Black Economic Empowerment (BEE) compliance by suppliers is not essential, but is recommended. Mining companies prefer to work with BEE compliant companies, as they have BEE targets to meet. Australian suppliers are therefore urged to set up partnerships or relationships with a local BEE company.

Mining houses require that all suppliers are registered vendors. Potential suppliers of products and services are required to submit a comprehensive application form (these forms are available on the company websites or from the company head offices) and these applications are audited by independent companies. Large orders, generally in excess of R5000 (A$1061), are usually put out to tender. Tenders are normally posted on the company websites, or approved and registered vendors are emailed directly. A closed tendering process is generally used, and only registered and approved vendors are invited to tender.

There is a trend amongst mining houses to base procurement decisions on the total cost of doing the business. This takes into account the cost of an item or service, plus all the other associated costs such as cost of installation and maintenance before making a final decision.

The main mining trade events in South Africa are:

Mining Indaba 2007
Dates: 6-8 February 2007
Venue: Exhibition Centre, Cape Town
Organisers: Iiconf

Austrade will be establishing an Australian Pavilion at Mining Indaba 2007. Australian companies are invited to promote their company at the Australian Pavilion. Contact Jay Meek for more details.

Electra Mining (held every two years)
Dates: 2008
Venue: Expo Centre, Nasrec, Johannesburg
Organisers: Specialised Exhibitions (Pty) Ltd
Website: www.electramining.co.za

Links and industry contacts

Mining–related resources

Chamber of Mines of South Africa - www.bullion.org.za
PO Box 61809
Marshalltown, 2107, Johannesburg
Tel: +27 11 498 7100
Fax: +27 11 834 1884

The Institute of Mine Surveyors of South Africa - www.ims.org.za
PO Box 62339
Marshalltown, 2107, Johannesburg
Tel: +27 11 498 7682
Fax: +27 11 498 7681

The South African Institute of Mining and Metallurgy - www.saimm.co.za
PO Box 61127
Marshalltown, 2107, Johannesburg
Tel: +27 11 834 1273
Fax: +27 11 838 5923/ 833 8156

Copper Development Association (Pty) Ltd - www.copper.co.za
PO Box 14785
Wadeville, 1422, Germiston, Johannesburg
Tel: +27 11 824 3712
Fax: +27 11 824 3120

Federation of South African Gem & Mineralogical Societies - www.fosagams.co.za
PO Box 17273
Groenkloof, 0027, Pretoria
Tel: +27 12 460 7562

Council for Geoscience - www.geoscience.org.za
Private Bag X112
Silverton, Pretoria, 0001
Tel:  +27 12  841 1911
Fax: +27 12 841 1221

CSIR - Mining Technology (Miningtek) - www.csir.co.za
PO Box 91230
Auckland Park, 2006, Johannesburg
Tel: +27 11 358 0000
Fax: +27 11 726 5405

Mintek - www.mintek.co.za
Private Bag X3015
Randburg, 2125, Johannesburg
Tel: +27 11 709 4111
Fax: +27 11 793 2413

The South African Diamond Board
PO Box 16001
Doornfontein, 2028, Johannesburg
Tel: +27 11 334 8980/6
Fax: +27 11 334 8898

Government, business and trade resources for South Africa

Department of Minerals and Energy - www.dme.gov.za
Private Bag X59, 0001 Pretoria
Tel: +27 12 317 8000
Fax: +27 12 320 4327

Trade and Investment South Africa (TISA) - www.dti.gov.za
The dti Campus
77 Meintjies Street
Sunnyside, Pretoria
Tel: +27 861 843 384

Industrial Development Corporation (IDC) - www.idc.co.za
PO Box 784055
Sandton, 2000
Tel: +27 11 269 3000
Fax: +27 11 269 3116
Email: idc@idc.co.za

South African Chamber of Business (SACOB) - www.sacob.co.za
PO Box 213, Saxonwold, 2132
Tel: +27 11 446 3800
Fax: +27 11 446 3847/9

National African Federated Chamber of Commerce and Industry (NAFCOC) - www.nafcoc.org.za
39 Rivonia Road
Corner Melville Road, Sandown
Tel: +27 11 268 2800
Fax: +27 11 268 2940

Afrikaanse Handels Instituut (AHI) - www.ahi.co.za
PO Box 35100
Menlopark, Pretoria, 0010
Tel: +27 12 348 5440
Fax: +27 12 348 8771

South African Bureau of Standards (SABS) - www.sabs.co.za
Private Bag X191, Pretoria, 0001
Tel: +27 12 428 7911
Fax: +27 12 344 1568
Email: info@sabs.co.za

South Africa Info - www.southafrica.info/doing_business/investment
A portal providing useful data on investing in South Africa with links to service providers

South African Reserve Bank - www.reservebank.co.za
A rich source of economic data on South Africa. The website also contains a list of registered banks in South Africa and detail on exchange control regulations

South African Revenue Service - www.sars.gov.za
SARS is responsible for the Department of Customs and Excise and the web site provides general trade statistics, customs information and customs forms

Cargo Info Africa - www.cargoinfo.co.za
The Cargo Info site contains amongst other things, links to the South African customs tariff, ship sailing schedules and a Directory of Freight Service Providers

Statistics SA - www.statssa.gov.za
Statistics South Africa is the collector and publisher of statistical data for the government. A range of statistical data is available on the Statistics South Africa website.

JSE Securities Exchange - www.jse.co.za
The JSE site contains information on stock markets and trends and financial information on South Africa’s listed companies.

Department of Labour - www.labour.gov.za
The Department of Labour's website contains legal texts and regulations on South Africa’s labour legislation and requirements

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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