In their strive to remain relevant, SA’s top mining companies are looking towards innovative technology, alternative sources of capital, as well as standardised processes and systems to improve project delivery, in their efforts to mine and improve safety conditions in the industry, says PwC. Now is the time for SA’s mining industry to make its voice heard in the midst of the current economic uncertainty and slump in commodity prices, coupled with a lack of investor confidence.
Michal Kotzé, Energy, Utilities and Mining Industry Leader for PwC Africa, says: “SA’s mining industry is set to undergo significant transformation in the next decade. Technology will drive a lot of what we currently see in the mining industry going forward. Conventional mining does not have a long life. It is expensive and unsafe. Mining will not be available in the current form and format in the medium term in South Africa. It will be a different set up and way of mining. The mining industry will have to adjust and embrace new technology and innovation, as well as new ways of working.”
Kotzé was speaking at the launch of PwC’s SA Mine report in Johannesburg last week. Key findings of the report, amongst others, include an increase in market capitalisation by 45%, an increase in operating expenses and regulatory uncertainty for the industry.
Kotzé says there is definitely a future for SA’s mining industry – “we have a fantastic resource base”. SA’s industry also has good infrastructure, compared to other countries on the continent. The mining industry is cyclical in nature. As a result, the cycle is likely to undergo change, with the emergence of new role players. ‘We may see new infrastructure requirements come into play, which in itself may change the whole supply and demand process. These may significantly impact commodity prices, which may become attractive again.”
Globally, there has been a move out of investment in the mining industry because of the lack of investor confidence. To some extent, there has been an acknowledgement by mining executives that they should not have invested in some of the big projects. Some of the projects invested in were not as feasible if you took a long-term view of the commodity cycle and the standing dynamics of China. “The lesson that has been learnt is that the hurdle for investing in projects has been set higher,” adds Kotzé.
PwC’s SA Mine report also provides guidance on how companies can achieve the United Nations (UN) 17 sustainable development goals (SDGs). “The mining industry has the potential to become leading partners in achieving the SDGs,” says Kotzé. The SDGs were agreed in 2015 by 193 countries, to tackle 169 goals across 17 areas of economic, environmental and social impact, creating a new framework for how government and business work together. It has been estimated independently that over $11.5 trillion is needed to achieve the goals through investments, in large partly driven by the private sector, including the potential for upgrades to existing technology, processes, skills and wages.
In South Africa, the Government has developed the National Development Plan (NDP) which aims to eliminate poverty and reduce inequality by 2030. The objectives of the NDP appear to have similar interest to a number of the SDGs, which show how aligned the Government is with regard to the implementation of the SDGs.
Mining companies committed to the SDGs will benefit from better relationships with the Government, civil society, communities and other stakeholders. Those that fail to engage meaningfully with the SDGs stand to put their operations at risk in the long-term. Numerous opportunities exist for the mining industry to contribute to the SDGs.
In addition, SA’s mining companies are paying more attention to risks in the wake of the current environment forcing management to make some tough operational and financial decisions to ensure sustainability.
Dion Shango, CEO of PwC Southern Africa, says: “There are so many risks out there – CEOs really need to be at the top of their game particularly when it comes to stakeholder management. Business leaders need to understand the changing business landscape, existing and emerging business risks, as well as opportunities. They are also required to know how their particular sector and other stakeholders are responding.” Shango, will be chairing a session on the skills set required by CEOs at the 2016 Joburg Indaba on 5 October, 2016, at which PwC is the lead sponsor.
Engaging with stakeholders can be extremely difficult for organisations, even more so for certain organisations in certain industries, like minerals and resources, where the expectations of government, regulators and other stakeholders, is increasing. Increasingly, many advanced companies are recognising that engagement with stakeholders is improving business performance and sustainability.
“Organisations that take a systemic approach are likely to get better results in the long term, and will ultimately be able to monitor and manage stakeholder relationships and risks more effectively,” says Shango.