explain problems facing mining industry in africa(in essay form)
Answers
Answer:
The various challenges being faced by the South African Exploration and Mining Industry are generally summarised into 8 key challenges, namely:
the global financial crisis, and the impact that this has had on global demand,
regulatory and legislative uncertainty,
infrastructure, ports, rails, water, roads and electricity,
labour uncertainty,
health and safety,
environmental compliance requirements,
illegal mining operations, and
community activism.
The cumulative impact of these challenges, cannot be under estimated. Unfortunately, it is extremely difficult to quantify the cumulative impact. Mining companies do however accept that there is certain risk involved in the South Africa Exploration and Mining Industry and accommodate this risk, in the business decisions. However, one of the key challenges that has the most significant impact, is regulatory and legislative uncertainty. Without a stable framework within which exploration and mining companies can obtain prospecting and mining rights and the related environmental authorisations, and exercise those rights within an environment (which at the very least gives a sense of security that the significant investments required will be protected and will, for the duration of the right be certain) investors are extremely cautious when making investment decisions.
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Answer:
The current turbulence in the mining industry in South Africa has its roots in several different factors. First, the fall in global demand for platinum and other minerals due to recession; second, the consequences of the Marikana disaster in destabilising labour relations; and third, the structural character of our mining industry. A great deal has been written about the first two factors, so this article will examine the last factor, especially as the special features of mining cuts across the whole of mining and not just platinum.
Mining in South Africa has always been an enclave industry, albeit with substantial impact on the rest of the economy. In the main, minerals have been extracted from deep levels, subjected to some basic processing and then exported as ores without a great deal of beneficiation or fabrication. For instance we do not have substantial gold or diamond manufactured products capabilities despite having huge natural resources.
The gap between mining and manufacturing
The result of this restricted role of mining is a large gap between mining and manufacturing to the detriment of both sectors and to the national economy. Manufacturing has been subjected to extraordinarily high prices for raw material inputs such as steel, making our manufacturers uncompetitive internationally and even in the home market. The value chain and linkages so necessary for efficient and competitive production of finished goods have been seriously undermined. So has the flexibility of production needed to cope with shifts in global supply and demand, due to rigidities arising from the separation of the production of minerals and manufacturing.
This separation is strongly supported by the Chamber of Mines of South Africa, which argues that mining is driven by inherited comparative advantages, such as mineral deposits or natural beauty, while manufacturing depends on competitive advantages. They emphasise that a mineral resource endowment does not necessarily translate into manufacturing beneficiation. Furthermore, the mining industry should not be required to subsidise manufacturing beneficiation or to provide minerals below internationally determined prices.
The isolation of mining from the total industrial value chain also has consequences for labour policy. Amplats is now proposing to displace 14,000 workers from mining into other activities. But what broad training have they been given to enable them to switch to other jobs, especially in manufacturing ? These workers have been confined to mines, so what skills could a rock driller bring to a production line in a factory?
In December 2012, the Cabinet approved a draft amendment to the Mineral and Petroleum Resources Development Act (MPRDA) that gave effect to its constitutional obligation (in Section 24) to ensure that “the nation’s minerals are developed in an orderly manner while promoting justifiable social and economic development”. It provides for “the implementation of the approved beneficiation strategy through which minerals can be processed locally for a higher value”, and for mineral “rights to fall within the insolvent estate in the event that a company is liquidated”. It will also “strengthen the provisions relating to cession, transfer and encumbrance of rights in order to permit the partitioning of rights”, and “regulate the exploitation of associated minerals”.
The case for an increased role for manufacturing in the beneficiation of minerals is therefore compelling. This role would seem to be primarily suited to domestically based firms located within the mining value chain. Such firms are more sensitive to national interests and more likely to co-operate with government requirements in terms of producing for the domestic market, keeping economic rents under control, complying with tax rules, employing local rather than foreign managers and technical staff (where available) and taking account of the social impact of their activities.
The benefits of beneficiation are: job creation, contribution to skills enhancement, diversifying the economy and moving away from a primary producer status towards manufacturing-based industrialisation, increasing foreign direct investment, turning the comparative advantages of being resource-rich into a competitive advantage, small and medium enterprise creation.
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