The Promise of mining contributing to the National Development Plan (NDP) by Joel Netshitenzhe, Executive Director, Mapungubwe Institute for Strategic Reflection (MISTRA) at the 2013 Mining Lekgotla. 29 August 2013

1. Joel Netshitenzhe:
Executive Director: MISTRA
August 2013
THE PROMISE OF MINING
Contributing to national development

2. 2
MAIN THEMES
❶ Background: the national strategic
environment
❷ Industry significance: opportunities
for sunrise
❸ Policy discourse: the logic and the
challenges
❹ Towards a long-term vision for
mining

3. BACKGROUND
 National Development Plan – beyond ‘political miracle’,
opportunity to pursue a national vision and detailed
long-term plans (Vision 2030):
► requiring identification of objectives, contribution, benefits,
trade-offs and sacrifices – beyond lowest common denominator
► sector leaders & institutions should identify role in
implementation and take initiative in partnering with others
 Mining Lekgotla 2013 a unique opportunity:
► after adoption of the NDP the Mining Sector has a
responsibility to reflect on the role that mining will play in
realising the objectives of the plan – Mining Vision 2030
► on the occasion of the first anniversary of the Marikana
tragedy, the lekgotla provides a platform more comprehensively
to reflect on the trajectory of mining – beyond just obviating the
possibility of a recurrence
Opportunities and challenges
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4. 4
Understanding the NDP growth storyline
BACKGROUND
❶ Multiplier effect of infrastructure programmes:
► Over R800bn of rolling investment every three years, with many multiplier
effects: jobs, crowd in private sector, supplier industries, Sub-Saharan Africa
❷ Aggregate demand and shared growth:
► Growth (SA and SSA) generates virtuous cycle, with profound opportunities for
manufacturing, and measures such as SME facilitation and skills training
► Balance cost and opportunity: forward and backward linkages and job
opportunities depending on R&D, regulations, procurement and feed-in tariffs
❸ Opportunities in the Green Economy
► Super-cycle anchored in demand from global growth regions; opportunities
for new applications – thus possibilities for mature industrial cluster
❺ Mining as catalyst for new industrialisation drive:
❹ Agriculture and the rural economy (1m jobs by 2030):
► Expand irrigated agricultural land by one-third; expand commercial production;
pick sectors and regions with high potential; access to product value chains

5. NDP & ‘decent standard of living’
5
BACKGROUND
Critical argument of the NDP: interventions should address
totality of socio-economic needs & guarantee a decent standard
of living for all. Beyond a living wage and decent conditions of
employment, a decent standard of living should entail:
► Affordable cost of living: including appropriate management of cost
of basic necessities such as food, and administered prices such as
energy and municipal rates
► Efficient and affordable public services: as with NHI, guarantee
floor of basic services for education, housing, water, electricity,
sanitation, etc.
► Social security net: covering most vulnerable in the form of social
grants and free basic services with quantum increased as resources
permit
► Decent human settlements: spatial settlement patterns that promote
affordable travel, decent community life with requisite social amenities

6. The real contribution of mining
2005 (2012) data (estimates)
Mining’s direct contribution:
• GDP: R94-billion or 6.2% (9.2%,CC)
• Jobs: 450 000 (500 000,CC)
Backward
Linkages:
• GDP: R35-billion
or 2.3%
• Jobs: 150 000
Forward
linkages
• GDP: R25.8-
billion or 1.7%
• Jobs: 55 000
Total contribution of mining:
• GDP: R246-billion or 16% (18.7%,CC)
• Jobs: 1 260 000 & 25% of total employment
(1 340 000 jobs, CC)
The induced effect:
• GDP: R91-billion or 6%
• Jobs: 600 000
Sources: Chamber of Mines Vice-President, 2006 & CC: Mining Indaba, 2013, Chamsa & dmr
Although there have been ebbs and flows over the years, mining
remains the most critical sector in the South African economy…
6
A critical sector of the economy
INDUSTRY SIGNIFICANCE
 18%-20% of
total private
fixed
investments
 18.5% of
corporate
tax receipts
 15% of
national
electricity
demand
 47% of
exports

7. China may be reconfiguring its economy; however the
demand for critical minerals will endure, even if
somewhat moderated:
Global ‘sunrise’ dimension
INDUSTRY SIGNIFICANCE
Critical to differentiate between cyclical and long-term
structural factors
► Urbanisation in China (and globally, some 3-billion more people
by 2050) and ‘middle class’ growth to drive demand: $80-tr com/res
construction investment (2025); car fleet 2x to 1.7bn (2030)
► India, Vietnam, Bangladesh and Africa: steadily following China
in the industrialisation trajectory, incl. infrastructure and low-end
manufacturing…
► New energy streams (H2ECO): besides catalytic convertors, if the
Hydrogen Economy takes off, demand for PGM-based fuel cells
will increase for mobile and stationary applications
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8. Proportion of reserves, valued at $2.5-trillion,
underlines SA’s global positioning
● 40% of gold
● 80% of PGM (73% prod)
● 72% of chrome ore
● 80% of manganese (27% prod.)
MISTRA Research – the case for PEMFC (based on PGM):
PGM value chain in hydrogen economy (Linkov, 2011) 8
INDUSTRY SIGNIFICANCE
Endowment for positive change
Components Type of PGM used
Platinum to precursors platinum and palladium
Precursor to catalysts platinum, palladium,
ruthenium, iridium,
osmium and rhodium
Catalyst to Membrane
Electrode Assemblies
(MEAs)
platinum, palladium,
ruthenium, iridium and
osmium
High purity hydrogen
generation
iridium and ruthenium
Membranes for
hydrogen separation
palladium
Metal hydrides palladium
Super capacitors and
batteries
ruthenium and iridium

9. INDUSTRY SIGNIFICANCE
Endowment for positive change: H2ECO
 Build knowledge-based
networks
 Ensure global security of
supply
 Trading arrangements that
minimise disruptive price
volatility
 Social compacting & stability
 Fuel cell demand within SA
 Balance self-reliance &
global networking
 Develop capabilities in
recycling of PGM
MISTRA Report identifies fundamental decisions required
to meet objective of 25% of global fuel cell supply by 2020:
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BACKWARD LINKAGES
* Specialized inputs
* Machinery and equipment
* Specialised services Abundant forestry reserves and plantations
SIDE LINKAGES
Related activities
FORWARD LINKAGES
* Roundwood
* Wood products
* Wood pulp
* Paper and cardboard
Source: Ramos 1998 p111
(CEPAL Review, #68, 12/1998);
a: Generates 25% of Finland’s exports;
b: Compared with 25-30m3 per capita in the rest of the world.
 Forward value-addition of ferrous minerals and metals, PGM, titanium &
pigments, polymers, and mining inputs
 Backward value addition in supply of technologies, services and inputs for
domestic use and export: equipment, turnkey in mine design & operation
 Mining-related capital goods for mining and mineral-processing sectors
 Ensure access to raw materials to help unlock downstream industrial projects
 Ways of exploiting producer power
POLICY DISCOURSE
Base logic: cluster development
Develop a mature industrial cluster using resource
endowments – dti IPAP iteration (objective vs. instruments)
e.g. Finland: The mature forestry industrial cluster 1997a

11. POLICY DISCOURSE
Despite hyperbole, tendency has been to gravitate
towards rationality and synthesis
ANC 2012 National Conference
ANC National Conference, December 2012
❶ Approach to state intervention informed by principle of
capable and effective state with qualifications:
11
◙ General: financial regulation & control plus state bank; taxation and
wage & income policies; competition, industrial & trade policies
◙ State ownership: in strategic sectors “where deemed appropriate on
the balance of evidence” (ref. Ready to Govern, 1992)
❷ Approach to the mining industry is to adopt broad
principles in SIMS and leave space for initiative:
◙ Custodianship as in the MPRDA
◙ SMC in strategic sectors & as partner to private sector
◙ Mining as a basis for new wave of industrialisation
◙ Ensure implementation of safety and social & labour plans

12. POLICY DISCOURSE
ANC 2012 National Conference
ANC National Conference, December 2012
❸ Approach to the mining industry is to adopt broad
principles in SIMS and leave space for initiative:
12
◙ Resource rent tax for skills, research, geological
information & fiscus: only partly a tax – essence is to ensure
reinvestment of mining rent for sector regeneration – and
issue is whether we can attain objectives without it
◙ Strategic and important minerals: about 20 listed and
need to identify the “strategic minerals that require special
public policy measures…” and, in so doing, ensure balance
between certainty and open-ended prerogative
◙ Vertical integration: creative ways of dealing with
challenge e.g. of Eskom coal supply security and costs –
shareholding and vertical integration as one of the
instruments

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Tragedies can be a catalyst for all-round self-
correction if lessons are appropriately internalised
Immediate lessons from Marikana
Managing labour disputes and state-societal relations
Management and labour regime: hierarchy of wage structure (RDO),
consultative platforms at workplace, changing demographics of workforce,
era of testing balance of forces and new cost curves
The social wage: implementation of social and labour plans and
partnership with municipalities & provincial governments
Union dynamics: perceptions of ‘sweetheart’ and patronage; exaggerated
expectations; inter-union rivalry & fight among powerless for power over
one another; closed shop agreements and workplace forums
Eliminate violence in protest action and assert role of the state as
legitimate bearer of weapons – with professionalism and humane conduct
Nip opportunism in the bud – by obviating opportunity, primarily by
enhancing legitimacy
TOWARDS VISION 2030

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Crafting a long-term mining strategy
❶ Mature industrial cluster as a basis for new industrialisation drive
with systemic forward and backward linkages, incl. global turnkey
status in mine design and operations
❷ Lessons from other jurisdictions on management of migratory
labour system and job grading e.g. RDO (WSJ, 16/11/2011)
❸ New technology, from rock drills with better damping system,
‘game-changing’ technology with no drill & blast, robotics for narrow
tabular reefs & ultra-deep areas to u/g coal gasification
❹ Implications for labour intensity addressed through mining
industrial cluster and sustainable development approach?
❺ Transformation of ownership should place greater emphasis than
currently on ESOPs so workers feel and become stakeholders
Beyond the immediate responses, a long-term vision
should seek systemically to reconfigure the industry
TOWARDS VISION 2030

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This requires decisiveness, with all mining partners geared
towards tilting the economy and society at large in a
positive direction:
“There is a tide in the affairs of men
Which, taken at the flood, leads on to fortune
Omitted, all the voyage of their life
Is bound in shallows and in miseries.”
Shakespeare (Julius Caesar)
Will the sun to rise
TOWARDS VISION 2030
Revitalise the process to develop a mining sector
strategy in line with NDP, through MIGDETT+ with
senior representation across the board

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END