Mining offers SA an infrastructure solution - Polity

4 December 2018 - It is clear that with some clever thinking, and work with the mining industry, South Africa will have not only the funding, but also the resources necessary to meet the infrastructure challenges the country currently faces. It may be our only real hope.

Warren Robertson

South Africa is generally woefully prepared for the future.

Back in 2015, conservative estimates put SA at having “R1.5-trillion in infrastructure maintenance backlogs”, according to an article in the Mail & Guardian by Linda Doke. This is backed by a G20 Global Infrastructure Hub (GI Hub) report that South Africa needs to invest $464-billion (R6-trillion) in just the water and electricity sectors to plug its infrastructure investment gap and address economic and population growth between now and 2040.

In his paper, “Rail transport and the economic competitiveness of South Africa: Timeous delivery of goods and demurrage”, Masters of Business student D M S Mathabatha recommended an investment of R300-billion in rail, port and pipeline infrastructure to bring these sectors up to necessary levels. And so it goes.

And all this to be achieved in a climate not conducive to raising extra capital. According to an IMF report, trade tensions between the United States and other major economies, including China, could lead to a cumulative loss of GDP for Africa of up to 1.5 percent by 2021.

South Africa is likely to face additional long-term challenges due to rapid advances in artificial intelligence and increased automation, which are expected to shape future job markets, even as it contends with an official unemployment rate of 26,7%, according to StatsSA.

“Of the 10,3-million persons aged 15–24 years, 32,4% (approximately 3,3-million) were not in employment, education or training – implying that close to one in three young South Africans between the ages of 15 and 24 were disengaged with the labour market in the first quarter of 2018,” StatsSA reports.

It's a desperate situation, especially when one considers that the long Zuma years have led to a decline in construction and manufacturing, with many of the country’s largest companies in those sectors openly struggling.

There is however one real ray of glimmering hope – mining. Due to the nature of the industry and South Africa’s abundant wealth of resources, mining can be considered top of the pile when it comes to future readiness. The old model of mining focused on platinum, gold and coal mining is still turning over a profit in difficult times, but the world is entering a technological age, and the demands of the future will not be those of the past. Fortunately, due to its wealth of mineral resources, the mining industry in SA is in an excellent position to turn around operations, start delivering on that demand, and help the country seize control of its future.

With a decline in demand for fossil fuel and precious metal comes an increase in need for the minerals that make up infrastructure and the various technologies of the future. Minerals that were until very recently only secondary, or of negligible use, will likely find themselves becoming the key components in new and increasingly used battery technology.

While SA does not seem to have any great deposits of lithium, which is necessary for lithium ion batteries, one of the country’s largest mining companies, Glencore, is sitting on a wealth of cobalt, another key component in rechargeable batteries that use lithium. Should the lithium ion battery not become the dominant form of battery technology, then platinum (of which SA is the number one supplier) should be ready to pick up the slack. Recently in lower demand as use of catalytic converters dies down, platinum forms an integral component in hydrogen fuel cell technology – lithium ion’s largest battery-of-the-future competitor.

According to the Chamber of Mines’ “Facts and Figures Report of 2016”, in 2012 South Africa was ranked 7th in the world for nickel production. This mineral has seen its price plummet over recent years as two thirds of nickel goes into low-demand stainless steel. However, according to Russia’s largest producer of nickel, Norilsk Nickel, demand for nickel from the auto industry is set to rise as much as threefold in five years thanks to increased output of electric and hybrid cars, which generally use either lithium ion batteries containing a small amount of nickel (Tesla’s factory in Reno, for example, is designed to more than double the world’s supply of lithium ion batteries) or nickel-metal hydride batteries.

Nickel should expect an increase in sales from demand for steel, too. Battered over the recent past due to a low demand from the Chinese construction industry, steel is predicted to still be a major player over the next few decades as the world recovers and starts building again. This increased demand will see a greater need for iron, where, according to the Chamber of Mines’ report, SA is the world’s 12th largest producer. Additionally, copper, which the same report says SA is ranked 11th in the world in terms of production, can expect to see increased demand for use in all electrical developments.

In fact, the demand for all of the so-called “base minerals” – from chrome (of which SA is the world’s number one producer) to copper, iron ore, lead concentrate (6th in the world), manganese (1st in the world), nickel and zinc (8th in the world) – can expect to see a boost.

And the news gets better. Vanadium is poised to be the latest precious metal to benefit from the evolution of the growing energy storage industry as well as a strong demand for steel. According to a statement by Bushveld Minerals, vanadium was the best-performing battery metal for 2017, growing by 72%, and achieved "fivefold" growth since 2015. South Africa is the world’s third highest producer of the mineral.

It is clear that with some clever thinking, and work with the mining industry, South Africa will have not only the funding, but also the resources necessary to meet the infrastructure challenges the country currently faces. It may be our only real hope.

Written by Warren Robertson, a writer commissioned by the South African Institute of Race Relations (IRR), a liberal think tank promoting political and economic freedom