Beneficiation (or adding of value to raw mineral materials before export) has been identified by the government as a strategic

area to be encouraged. The country's jewellery fabrication industry, for instance, only accounts for about 1% of the world's total production. There are lucrative opportunities for downstream processing and adding value locally to iron, carbon steel, stainless steel, aluminium, platinum group metals and gold.

SA Market Summaries

Mining
SAMS # 007 December 2009

It is estimated that there are over 3 000 artisanal to smallscale mining ventures and that this activity provides a living for 20 000 workers. The lack of appropriate skills is a major stumbling block for the development of these mining operations. Also, thousands of micro and artisanal miners operate illegally. Most small enterprises dont operate economically and many small operators dont abide by environmental and safety regulations. While the mining industry remains largely in the hands of whites, emphasis is being placed on stimulating black economic empowerment (BEE) in the industry and the last few years has seen the emergence of several BEE companies (see Mvelaphande Diamonds and Eyesizwe Coal, for instance). Other key concerns are environmental sustainability and the countrys electricity crisis, which is leading to a loss of production time for mines. Health and safety also plague the industry. The Leon Commission of Inquiry of 1994 found that over 69 000 mineworkers had died in the period between 1900 and 1994, and more than a million were seriously injured. Today, fatality rates are still a concern for mine owners and trade unions alike. On top of this tuberculosis and HIV infection rates remain high.

Contents
Introduction Market developments and business opportunities Future trends and issues Government initiatives Standards and legislation Transformation Further information

Introduction
The South African economy was built on mining and though the sector has declined in the percentage of gross domestic product (GDP) it contributes to the country, South Africa still has a significant proportion of the worlds mineral resources. The country has nearly 90% of the worlds platinum deposits, 80% of the manganese, 73% of the chrome, 45% of the vanadium and 41% of the gold. South Africa is the second highest producer of gold and also a leading producer of platinum, as well as base metals, diamonds and coal. In 2005, about 55 different minerals were produced from 1 113 mines and quarries of which 45 produced gold, 26 produced platinum-group minerals, 64 produced coal and 202 produced diamonds. This was an increase of 120 mines from 2004. For more statistics on mineral production: http://www.dme.gov.za/pdfs/minerals/B1%20Stat%20Table s%202007.xls South African mines export mineral commodities to over 100 countries. Mining now contributes 5,4% of the country's GDP. Precious metals contribute 65% to the country's mineral export earnings and 21% of total exports of goods in 2006. The total value of mineral sales has almost trebled in recent years, from R10 billion in 2003 to R28 billion in 2008. The country has a high technical and production expertise as well as comprehensive research and development activities, although there is concern is emerging that the number of researchers here is decreasing. SA also has world-scale processing facilities for stainless steel, aluminium, gold and platinum.

Market sectors and business opportunities

Sand quarrying, beneficiation of diamonds, small-scale gold mining and coal mining remain viable opportunities for new and small entrants to the sector.

Aggregates and sand mining

With governments massive spending on infrastructure projects, sand and stone quarries have been busy in recent years. The slowdown in the world economy is likely to affect local sales, although government is set to continue with construction work ahead of the 2010 Soccer World Cup. The clay brick and the aggregate and sand sectors provide the country with materials that are vital for all infrastructural development. South Africa uses around 110 million tons of aggregate a year, of which 90% is consumed by the construction industry. The production of sand and aggregate (crushed stone) has more than doubled in recent years from 27 million tons in 2001 to 58 million tons in 2006. Sales more than tripled from R833 million in 2001 to R2.8 billion in 2006. Lime and limestone production and sales have also grown steadily. However the aggregates sector is faced with a low skills base. Many skilled employees are dying from HIV/Aids. Artisanal and subsistence miners are often ruining the environment and are operating under dangerous conditions. In contrast to this, the production and sales of special clays has remained stagnant in recent years, while granite sales have been going down.

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Coal
Coal production is set to expand rapidly with growing demand from Eskom, which badly needs to top up its depleted stocks, and export markets like China. Coal production has grown from 223 million tons in 2001 to 245 million tons in 2006. In the same time period sales grew from R26,6 billion to R38 billion. In 2006 some 57% of sales were generated from export sales. Black-owned enterprises are likely to extract about half of all local coal mined by 2010. This is set to be a dramatic leap from 2002 black-owned firms mined just 10% of the country's coal production.

Eskom, agreement was reached on increasing the electricity supply by 260 megawatts to the mines most affected by the electricity supply curtailment. But the threat of future power outages remains.

Mine rehabilitation
Environmental sustainability has become the responsibility of all mining companies under the Minerals and Petroleum Resources Development Act of 2002. Rehabilitation is expensive to carry out but is obligatory; this means that new entrants will have to seek out the most economic way to conduct mining while still adhering to the necessary environmental regulations.

Diamond beneficiation
The State Diamond Trader (SDT) was set up by government and the diamond mining giant De Beers; it aims to create jobs by supporting local value-adding initiatives in the diamond industry, and to make diamonds available to smaller cutting and polishing outfits, in particular. The production of diamonds has been growing, reaching 15,1 million carats in 2006. However, only about 5% of the country's mine output is cut and polished locally. The SDT aims to buy up to 10% of South Africa's diamond production to sell to local cutters and polishers. Many of those who will benefit are small businesses. See more here: http://www.sadb.co.za/NewsArchiveLatesttrue305.aspx

Government initiatives
The Department of Minerals and Energy has a Small Scale Mining Board to help build up the small-scale mining sector. The board specialises in planning and developing viable mining projects through the pre-feasibility stage.

Standards and legislation

Ownership and access to the country's mineral resources are regulated by the Minerals and Petroleum Resources Development Act of 2002, which recognises the state's custodianship over the country's mineral resources.

The Mineral Regulation Branch

The Mineral Regulation Branch was created when the Mineral Development Branch was restructured following the promulgation of the Mineral and Petroleum Resources Development Act 2002. The White Paper on Minerals and Mining Policy for South Africa (www.miningsa.info/all_html/DME%20Minerals%20Bill%20 WhitepaperComplete.htm) approved by Cabinet in 1998 provided for separate interdepartmental mechanisms to handle mineral resources management and promotion of the industry on the one hand, and mineral resources administration and regulation on the other. While the Mineral Policy and Promotion Branch is at the departmental head office in Pretoria, the Mineral Regulation Branch works out of both the head office and the regional offices. Three chief directorates have been created under the Mineral Regulation Branch: Eastern Regions; Central Regions; and Western Regions.

New gold panning methods

The majority of informal and small gold operations worldwide use mercury to extract gold from concentrates. These concentrates are produced, in the case of subsistence and artisanal miners, with hand-held gold pans. Each time the gold and mercury amalgam is heated in an open dish to recover the gold, 10% or more of the mercury is lost to the environment. Miners breathe in the mercury vapour which is dangerous to their health. Added to this, the hand panning by informal miners results in poor yields gold. Mineral processing research organisation Mintek has set up a project that trains small-scale miners in the application of these new techniques, as well as stressing the importance of banding together to form more economic units, and the need for the rehabilitation of the sites which have been mined. For more information on Minteks project, you can download a booklet from this website: www.mintek.co.za/downloads/publications/SSMB/iGOLIBO OKLET.pdf You can also find out more about Minteks research into small scale mining efforts at: www.mintek.co.za/downloads/publications/SSMB/RESEA RCHFORSMALLSCALEMINING.pdf

Each is responsible for overseeing the activities performed by the Directorate Licensing and Legal Compliance in the three regional offices or directorates. The Mineral Regulation branch administer the Minerals and Petroleum Resources Development Act 2002, No 28 of 2002 and other legislation around the granting of prospecting and mining rights in terms of the Act and promotes rural development and BEE. The branches also liaise with national, provincial and local government structures and address derelict and ownerless mines and enforce legislation regarding mine rehabilitation.

Future trends and issues

The electricity problem and environmental rehabilitation remain significant headaches for the industry.

Electricity shortages
Country-wide power cuts in 2008 have forced the mining sector to shut for days at a time, which reduced their output and cost millions of rands in lost revenue. Following engagement with the mining chamber, government and

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Mine economists
There are regional managers of Mineral Development in the nine mining regions, who deal with the issuing of mining rights applications, specifically ensuring that the applications for mining rights contain: a social plan; an environmental management plan; and an economic feasibility plan.

Transformation
The mining industry adopted a black economic empowerment (BEE) charter the first for any industry in 2002. The Mining Charter and Scorecard are contained in the Mineral and Petroleum Resources Development Act 28 of 2002. The charter has targets that the industry should reach so that previously disadvantaged South Africans can benefit. These include targets for: 40% of managerial positions to be held by blacks, women and disabled people. 26% of mining assets to be transferred to blackowned companies. 51% of future mining projects are controlled by black-owned firms.

The role of the mine economists in the nine regions and at head office (as part of the Licensing and Legal Compliance Directorate) ensures that all mining business ventures are evaluated on the basis of technical and financial information. Support to small-scale miners by large mining companies have to be included in these plans. One of the focal points of the Minerals and Petroleum Resources Development Act of 2002 is that all mineral resources belong to all South Africans and that the state is the custodian of these resources. Prospecting fees and royalties are payable to the state whenever a potential resource is to be prospected or a proven resource is to be mined, whether these rights were previously state-owned or privately-owned.

View the charter at: www.dme.gov.za/minerals/mining_charter.stm

Further information
Financial and technical support
National Empowerment Fund (NEF): The governments National Empowerment Fund offers bridging finance, asset finance or term loans to black-owned enterprises. Website: www.nefcorp.co.za Khula Enterprise Finance: Khula has three products which can assist business owners in the agro-processing sector: The agency has various retail finance intemediataries that lend out bridging finance and term loans. The RFIs are spread throughout the country. Visit the agencys website to get a list of the RFI near you. Khula also provides guarantees to those who lack the necessary collateral to access finance. The guarantees are available through the major banks.

Social Plan Programme

The Social Plan Programme sub-directorate falls under Mineral Regulation. It is responsible for the assessment and monitoring of compliance with the social and labour plans submitted with the applications for mining rights. One of the objectives of the Mineral and Petroleum Resources Development Act 2002, Act No 28 of 2002 (www.info.gov.za/gazette/acts/2002/a28-02.pdf) is to transform the mining industrys ownership and spread the social and economic benefits of mining activity. To ensure effective transformation, applicants must submit a social and labour plan before mining rights will be granted.

The Mine Health and Safety Act

The Mine Health and Safety Act came into effect in 1997, replacing the Minerals Act 50 of 1991 as the legal basis for regulating occupational health and safety in the South African mines. Download the act here: www.info.gov.za/gazette/acts/1997/a72-97.pdf The Act is now set to be amended. A maximum fine of R1 million and a maximum term in prison of five years for contravention of the Act are being proposed in new legislation guarding mine health and safety. See: www.busrep.co.za/index.php?fSectionId=561&fArticleId=4 468516

Website: www.khula.org.za Anglo Zimele: Anglo Americans enterprise development fund that assists businesses in the mining sector with funding and business support. It has various finance options, including a start-up fund and the Ango-Khula which provides see capital to junior mining companies to carry out feasibility studies. Website: www.zimele.co.za New Africa Mining Fund: A private Equity Fund which invests in junior mining opportunities in South Africa and the broader Africa continent. The Fund is managed by Decorum Capital Partners (the appointed Fund manager), under a Management Agreement. Website: www.newafricaminingfund.co.za Mintek: The statutory research organisation Mintek administer the CASM Grant for Artisanal and Small Scale Mining Communities, an initiative for small-scale mining enterprises housed in the World Bank. See this webpage for more information: Website: www.artisanalmining.org/index.cfm?page=page_disp&pid= 3305 The Industrial Development Corporation: The mining is one of the key areas the IDC funds. Finance is usually over R1 million. Webpage: http://www.idc.co.za/Mining.asp

Precious Metals Act

Under the Precious Metals Act, businesses need authorisation before they export unwrought or semifabricated precious metal. There are various commercial activities, for instance, that involve semi-fabricated precious metal from the platinum group of metals. There is also other legislation which affects the diamond sector; go to the web page www.sadb.co.za/ReadContent501.aspx for more information on this.

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Free State: Free State Development Corporation (FDC) Website: www.fdc.co.za Eastern Cape: The Eastern Cape Development Corporation (ECDC) Website: www.ecdc.co.za Gauteng Enterprise Propeller (GEP) Website: www.gep.co.za Ithala Development Finance (KwaZulu-Natal) Website: www.ithala.co.za

a division on Mine Water and Sludge Management: Website: www.wisa.org.za/Divisions/minewater/default.htm SA Institute of Mining and Metallurgy The institute serves its members requirements for technology and scientific knowledge of the minerals and metals section of the South African economy. Website: www.saimm.co.za The South African Mining Development Association Samda aimed at representing junior and BEE mining companies. The association aims to develop markets for junior mining companies and export allocations for junior coal producers. Website: www.samda.co.za Aggregate and Sand Producers Association of Southern Africa The Aggregate and Sand Producers Association of South is a private sector producers association that represents those companies that are in the business of producing aggregate and sand. Website: www.aspasa.org.za Copper Development Association Africa CDA Africa has represented the local copper industry in southern Africa since 1962 and now promotes copper usage throughout Africa. Website: www.copper.co.za Southern Africa Stainless Steel Development Association Sassda represents some 600 members in the steel company and its support includes technical advice, as well as marketing and business support. Website: www.sassda.co.za Seifsa The Steel and Engineering Industries Federation of South Africa (SEIFSA) has been the national employer federation for the metal and engineering industry for 60 years. SEIFSA is the umbrella body for 38 independent employer associations representing the following sectors in our industry: Website: www.seifsa.co.za

Government departments and boards

Department of Minerals and Energy The Departments Directorate of Small-Scale Mining assists aspiring small-scale miners in the following ways: Establishment of a legal entity; Guidance towards the identification of mineral deposits; Environmental impact assessment (EIA); Legal and contractual arrangements, mineral rights etcetera; Reserve estimation of the selected deposits; Mining feasibility study; Market study; and Development of the mining equipment.

The departments website also has the following guides: Guide to starting a mine: www.dme.gov.za/minerals/how_to.stm Guide to where to get finance (2006): www.dme.gov.za/pdfs/minerals/R40_2006.pdf

Department of Water Affairs and Forestry Website: www.dwaf.gov.za Mine Health and Safety Council A statutory body that advises the Minister on all occupational health and safety issues in the mining industry relating to legislation, research and promotion. Website: www.mhsc.org.za The SA Diamond and Precious Metals Regulator The regulator controls the possession, purchase sale, processing and the export of diamonds. The regulator ensures compliance with the Kimberley Process Certification Scheme and administers and controls the purchase, sale, beneficiation, import and export of diamonds. Website: www.sadb.co.za

Research
Mintek A leading research instution which provides minerals processing and metallurgical engineering products and services to industries world-wide. Mintek is a statutory organisation which reports to the Minister of Minerals and Energy. Website: www.mintek.co.za The Council for Scientific and Industrial Research The CSIR is one of the leading scientific and technology research, development and implementation organisations in Africa. It undertakes directed research and development for socio-economic growth. CISRs mineral resources page: www.csir.co.za/nre/mineral_resources/index.html Centre for Sustainability in Mining and Industry A research and training centre based at the University of the Witswaterand. The centre concentrates on occupational safety and risk management, occupational health, the bio-physical environment, community investments and stakeholder engagement. Website: www.csmi.co.za Council for Geoscience: The CGS is a leading resource on African geology. The council has a collection of maps and numerous publications. Website: www.geoscience.org.za

Industry associations
Chamber of Mines The Chamber of Mines of South Africa is a prominent industry employers' organisation which exists to serve its members and promote their interests in the South African mining industry. Website: www.bullion.org.za National Association of Clear Air The National Association of Clean Air is a nongovernmental organisation dealing with air quality management in South Africa. Website: www.naca.org.za Water Institute of Southern Africa The Water Institute of Southern Africa provides a forum for exchange of information and views to improve water resource management in Southern Africa. The institute has

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Training
Mining Qualifications Authority The Mining Qualifications Authority (MQA) is a statutory body established in terms of the Mine Health and Safety Act No. 29 of 1996 and is a registered Sector Education and Training Authority for the Mining and Minerals Sector in terms of the Skills development Act No 97 of 1998. Website: www.mqa.co.za Mintek The statutory research organisation, Mintek has a Small Scale Mining and Beneficiation division which assists entrepreneurs to apply for mining licences, conducts test work towards feasibility studies and provides access to appropriate technologies. The divisions training school conducts introductory courses in Mineral exploitation, processing, and Business skills at Mintek and at satellite sites around the country. For more information about the division see this link: www.mintek.co.za/landing.php?bus_cat=007ad439a08632 d2ee68ea525b4885a0&level=2

Opportunities
Trade and Investment SA The TradeInvestSA website and newsletter highlights specific trade and investment opportunities in South Africa that are relevant to international and local business communities. Website: www.tradeinvestsa.co.za

Gauteng Enterprise Propeller: Branches

Ekurhuleni
Ground Floor, Victoria Street, Germiston Tel: 011 821-2870

Johannesburg
29 Rissik Street, Marshaltown, Johannesburg Tel: 011 833-2542

Sedibeng
1st Floor, GEP House, 22 Hertz Boulevard, Vanderbijlpark Tel: 016 910-1200

Tshwane
4th Floor, 221 City Towers Building, 227 van der Walt Street, Pretoria Central Tel: 012 323 4203

West Rand
23 Eloff Street, Krugersdorp Tel: 011 950-9870

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