Mining’s second wind: Critical minerals have potential to galvanise growth

By Thabiso Sekano

Several challenges ranging from a drop in output compounded by an inconsistent energy supply, logistical challenges to export markets including dwindling employment figures, give the impression of a sector under siege.

I hasten to remind though that energy supply has improved significantly, and the country is now heading to close to a year without uninterrupted power supply.

For context, in 1994 mining contributed 5.2% in current terms to South Africa’s gross domestic product (GDP), while having accounted for 52.2% (45.5% in 2023) of our merchandise exports. Thirty years into the new democratic dispensation, the sector would contribute 7% to national GDP and 38.5 % (in 2023) to our merchandise exports. 

It’s indisputable that the industry has been vastly transformed compared to 30 years ago. From a high of 650 961 jobs in 1994, employment figures have drastically dropped and currently hover at about 521 162. 

In fairness, the challenges facing mining are not unique to SA but the industry worldwide. And it could get worse especially for mining companies and economies that are resisting the need to embrace change. The global push for the adoption of regulatory requirements, some of which are aimed at supercharging the just energy transition and the introduction of new mining technologies, will further decimate jobs in the sector. Yet, in the face of looming adversity are plenty silver linings – there are abundant opportunities for growth.

Critical minerals to the rescue

Against the backdrop of challenges, the notion that this sector is on the wane is far-fetched. At least, this argument is not consistent with the abundant opportunities at the industry’s disposal. Need I remind that mining is cyclical with a number of unintended factors influencing its performance. The challenge for mining companies is how to position for growth in the wake of a rapidly changing industry. With an exposure at cost in mining and metals estimated at over R34.3 billion, the Industrial Development Corporation (IDC) continues to play a significant role in the growth and transformation of this sector.

Our helicopter view of the sector gives us a vantage proximity to industry trends which over the years have largely informed our investment decisions. To us, the perceived challenges facing the sector present great growth opportunities. For example, the push to achieve global climate targets requires a rapid scaling of the mining industry’s output of critical minerals, to that end the IDC has an intentional strategy termed, The Critical Minerals Game Plan, aiming to assist to develop projects in this space. As such plans for the deployment of clean energy sources, alongside clean technologies including battery storage will drive demand for critical minerals in the next decade.

And SA has some of these critical minerals, for example, manganese and most recently, the mooted resumption of copper mining activity in the Northern Cape and other regions bodes well for the future of the local mining industry. As an experienced development funder, the IDC is uniquely placed to participate early in projects – which is one of the corporation’s value propositions.

It’s been among the catalysts for the kind of evolution and change the industry is experiencing. The corporation is also investing in minerals and metals used in new technologies – for example, in making batteries and energy storage.

AfCFTA can facilitate mining boom in Africa 

The African Continental Free Trade Area (AfCFTA) is a trade bloc that represents the emergence of a continent that is taking a proactive stance, seeking to move away from merely exporting raw materials and to start producing finished products.

In terms of figures, AfCFTA is the world’s largest free trade agreement offering investors access to an integrated single trade and investment market of more than 1.3bn people and with a combined GDP that is projected to exceed $3.4 trillion by the end of 2025.

Encouragingly, countries to the north are also endowed with a vast array of resources that are critical to driving growth and industrialisation. SA mining companies and other investors looking for growth and opportunities to mine critical minerals need to look to countries beyond our borders. The continent is widely regarded as one if not the world’s largest untapped mineral reserve, abundant in critical minerals that are fuelling the energy transition, including copper, cobalt, lithium, manganese, nickel and graphite.

As part of its commitment to the AfCFTA and its mandate to invest in the rest of Africa, the IDC has invested in several projects in the continent. One such project is a start-up tin mine – Alphamin Bisie – in the Democratic Republic of Congo.

The success of this entity, despite the DRC’s well-documented security challenges, underscores the IDC’s experience in investing in the continent. The Mahenge and Pula graphite projects in Tanzania, including the ongoing development of Giyani Metals in Botswana also demonstrate the IDC’s credentials in the continent. For eligible investors looking for funding opportunities either in the local, or markets to the north of South Africa, the IDC is well positioned to meet their needs. Back to my point, the opportunities are huge, it’s up to the sector to seize this moment.

* Sekano is the Head of Mining & Metals at the Industrial Development Corporation