Programme Director

Leadership of the Mining Industry in General and Coal mining in particular

Users of coal as the primary source of fuel and energy

Investors in this important sector of our economy

Invited guests

Introduction

I am going to limit myself to the case of coal, although it will be impossible not to touch on mining in general. I must first acknowledge that South Africa has a long history of being a great mining economy. After more than 130 years of active mining, the latest data shows that the sector contributes about 7% to the Gross Domestic Product (GDP) and about 40% of foreign earnings for the country. It is my considered view that the sector has the potential of increasing this contribution to the GDP to about 10% within the next five years. There are few conditions that will make this possible increased contribution to the GDP a reality and let me mention a few:

The industry itself must take pride in itself andcontinue to strive to develop and articulate more positive narrative about itself, without exaggeratingthe positives.

The sector must actively challenge the negative narrative against mining by various players in the mining space. A repeated message that is not challenged becomes the truth in the eyes of society. Why do we give free space to those whosee nothing more from mining other thandestruction of the environment? Sustainable development is about harvesting the benefits today without destroying the benefits of future generations. This calls for mining companies to be conscious about mining responsibly, and the need to co-exist with other activities, economic and social.

We must invest resources in the future we are dreaming about and aspire for. This requires strong leadership at all levels – a leadership that is prepared not to ignore what Jocelyn Davis calls blind spots. She describes this as the most difficult to avoid, since not avoiding it usually means opening our eyes to things we don’t want to see.

Research and development must be at the heart of building the future. This will include defining our role in the fourth Industrial revolution, rather than running for cover every time the any mention of the term Fourth Industrial revolution is made. We must accept the advice of Nicholas Haralambous; that we must Do, Fail, Learn and Repeat.

Coal mining in South Africa

Let me turn now to coal mining. As part of ongoing engagements with the industry, I receive regular updates on the performance of each sector, and what role Government can play in creating a more enabling environment for investment. I am therefore au fait with the current state of this sector.

Coal mining has always been the driver of the various industrial revolutions. Depending on the role of coal in the revolution in question, coal had to be classified into various types that focus on various functions. It is coal that has kept the world’s manufacturing sector going, particularly steel manufacturing. Coal-generated power has kept the world lighted.

In our case as South Africa, coal contributes more than 95 percent of the country’s electricity generation, 30 percent of our liquid fuel requirements and 70 percent of the country’s primary energy needs. It will remain a critical part of the country’s energy mix for the foreseeable future, in line with the country’s IntegratedResource Plan.

In 2018, coal was the biggest generator of revenue,ahead of gold and PGMs, despite a marginal decline in exports on the back of one month of non-export activities caused by heavy rainfalls in Richards Bay, adversely affecting the coal terminal. The sector is also the fourth largest employer, accounting for 18% of total mining industry employment.

South Africa has an abundance of coal. These include anthracite, found in Aliwal North in the Easten Cape, as well as the Free State, and used mainly in energy-intensive plants; thermal coal, found in areas including eMalahleni in Mpumalanga and Waterberg in Limpopo, and used in electricity generation. Last year, we directed the Council for Geoscience (CGS) to study the Springbok flats. The area is historically considered to have only an abundance of uranium, have been shown to have vast coal fields, which are also free of uranium, as well as coal-bed methane. The CGS will be undertaking more detailed work in the area in the year ahead.

Although the majority of new mines in the past two yearsare located in Mpumalanga, the Waterberg region in Limpopo is where the future of the South African coal industry is. The Waterberg hosts more than 60 percent of the country’s remaining coal reserves. The New Largo project in the Witbank coalfield, will therefore most likely be the last large project to be developed in the Witbank coalfields.

As part of the President’s stimulus and recovery planannounced in September last year, Government islooking into the challenge posed by administered prices- including port, rail and electricity tariffs, which have been cited as a barrier to investment. Infrastructure is also receiving special focus as part of the stimulus package, to address bottlenecks which have been an impediment for investors.

But the coal sector is now under siege from various angles.

The move towards cleaner coal

Coal mining must take note of every attack directed at it and develop a strategy to survive it. Movement to clean energy is at breakneck speed. Coal producers must not be in denial, but respond scientifically. To this end, it would be important for coal producers to fund research initiatives to find alternative markets for coal. On the just transition, coal producers cannot be at the mercy of competitors. They must put content and time frames to the mythical just transition. It is that content that will give us space to develop alternative markets and alternative uses for the product.

I have in my mind this wild idea for clean coal technology. Because I am not a natural scientist, it is an idea that natural scientists can develop and execute. This is not only about saving businesses but developing a solid future. It should be about offering coal of the next generation. Is it possible to generate energy from coal without polluting the air we breathe? The development of dry cooling systems from the modern coal-generated power stations, with reduced consumption of water drastically, informs my view that science can find solutions to high levels of carbon emissions.

As a participant in the UN Framework Convention on Climate Change, the move towards cleaner coal technologies is an imperative for South Africa. The trend in some parts of the world has seen investors, including financial institutions and hedge funds, exit the coal business, under pressure from growing pressure from opposition to coal projects. We are urging the industry to work with Government in ensuring that coal mining is undertaken in a manner that embraces climate change imperatives while also supporting emerging economies such as ourselves, who have an abundance of coal, to grow and develop.

As part of plans to reduce carbon dioxide emissions, Government has directed State entities SANEDI and the CGS to explore prospects of applications of Carbon Capture Storage in South Africa. To this end, the CGS has identified five prospective basins for carbon storage. Carbon Capture Storage involves capturing carbon dioxide released from large industries and storing it underground. The advantage of such is that carbon dioxide released from large emitters such as electricity plants, coal-to-liquid plants and cement manufacturing plants can be captured and prevented from reaching the atmosphere.

Other plans in place to tackle emissions and help the country achieve its commitment include Carbon Tax, Carbon Budgeting system and compulsory Green House Gas reporting.

Relations with communities and labour; health and safety

During our engagements last year with communities across the country, it became apparent to us that there is a gap in engagements between mining companies and communities in which they operate. Mining companies must experiment with the best system of engaging communities so that there can be peaceful and healthy co-existence between mining and communities. We have a bigger responsibility in demonstrating that mining in general and coal mining in particular, is not destructive and not narrowly looking after the interests of the shareholders, at a huge cost to other stakeholders. Equally important is the need to treat workers with dignity and to recognise they are key in converting investments into wealth.

Linked to this, is the issue of health and safety. Despite the three mining disasters which occurred in the industry last year, mainly in the gold sector, we saw a decline in the number of fatalities and injuries in 2018. We will be releasing the detailed statistics in the coming days, but what we can confirm for now is that we are beginning to see a turnaround in the rate of fatalities and injuries, which gives us hope that 2019 will be a much better year for health and safety in the industry, if we all commit to the goal of zero harm and the quest for a fatality-free industry.

South Africa’s Policy and Regulatory Framework

We have worked hard to remove all policy and regulatory uncertainty to unblock all bottlenecks to investment. We have grown to appreciate that investment is a catalyst to economic growth, generation of earning and contribution to development of mining communities.

Government has withdrawn the Mineral and Petroleum Resources Development Amendment Bill from Parliament, and will retain the minerals aspect as is, while developing separate legislation to govern the oil and gas sectors. Work is already underway in this regard, and it is our intention to submit a draft Bill for consideration early in the sixth Parliament.

The Mining Charter and its regulations have also been finalised and gazetted for implementation. This was one of the key priorities I outlined when I joined the Department in February 2018. The finalisation of the Charter is one of the key components of the stimulus and recovery plan announced by the President in September last year, intended to bolster the sector and support its contribution to inclusive growth, transformation and competitiveness. This was further augmented by the pledges made by the sector during President Ramaphosa’s Investment Summit in October 2018, which saw in excess of R200 billion pledged by the investment community into the South African economy. This indicates that South Africa remains a preferred destination for investors, in mining and in the economy broadly.

We are keenly aware of challenges faced by investors in terms of processing of applications. We are thereforeworking on strengthening the online licensing system to address current deficiencies, because we understand that a fully functional licensing system is critical for investors, current and potential.

This was among the reasons we closed three of our offices � in Mpumalanga, Limpopo and North West for a thorough investigation. These regions were identified as the most problematic in terms of complaints received from our clients regarding backlogs, abuse of Section 54 of the Mine Health and Safety Act and double-granting of licenses. Once the investigations are completed we will be in a position to provide the outcomes and outline a way forward.

Conclusion

We are committed to creating an enabling environment for investment to thrive, and it is through continuous and proactive engagement with the industry that we can achieve this objective. It is our firm view that the mining industry has a bright future. We must therefore ensure we put in the necessary work now, in order to realise the future growth that this sector is so capable of.

I wish you a successful conference.

Thank you.

Source: Department of Mineral Resources