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4.800 1 “Role of the South African Mining Industry in South Africa’s Growth and Development Plans” Roger Baxter Senior Executive: Economics & Strategy Back ground presentation to a Harmony Sponsored Investor Forum, 25 March 2013 Presentation outline The Local Context Unpacking the growth constraints RSA Mining “Putting South Africa First” Why Mining is Crucial to South Africa Resolving the challenges Recognising the industry’s potential The Global Context

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Page 1: “Role of the South African Mining Industry in South Africa ... · RSA Mining “Putting South Africa First” Why Mining is Crucial to South Africa Resolving the challenges Recognising

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1

“Role of the South African Mining Industry in South

Africa’s Growth and Development Plans”

Roger Baxter

Senior Executive: Economics & Strategy

Back ground presentation to a Harmony Sponsored Investor

Forum,

25 March 2013

Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

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Commodity outlook, short-term stress, long-term growth in demand

SHORT-TERM WEAKNESS

• World economy is recovering from the 1st global recession in 61 years.

• Recovery is unevenly distributed, with advanced economies sluggish and developing countries growing at a faster pace.

• The recession in the Eurozone and the soft landing in the Chinese economy has negatively impacted South Africa.

LONG-TERM STRUCTURAL FUNDAMENTALS IN PLACE

• The materials intensive nature of growth in emerging economies will escalate in the next decade caused by continued urbanization and industrialization.

• Supply will struggle to meet the growth in demand.

• Companies now focused on value vs growth.

The prospects of Commodities at a global level are mostly driven by economic growth

SINCE 2008, THE GLOBAL COMMODITIES MARKETS HAVE BEEN

HIT BY THE MULTIPLE EFFECTS OF:

• The “W” shaped boom-recession-recovery-recession-slow recovery in the

EuroZone due to the sovereign debt crisis

• The slowdown in economic growth in China (towards a soft landing).

• The “V” shaped boom-recession-recovery and then continued below potential

growth performance of the US economy.

BUT PROSPECTS ARE LOOKING UP:

• Despite ongoing structural issues the Eurozone is expected to post a modest

positive growth rate in 2013.

• China’s economy has stabilised and is expected to grow at >8% in 2013.

• The US economy is showing positive signs of recovery, with consumer

confidence rising.

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The World economy is recovering

Source: IMF WEO October 2012

-5

-3

-1

1

3

5

7

9

11

13

15

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

% G

DP

gro

wth

rate

Economic growth rate in USA, EU and China

China

United States

European Union

Economic weakness in EU zone resulted in downward pressure on the spot price of Platinum

� GDP is a key driver to Pt demand

� Pt demand is mainly driven by carbon emission legislation hence Euro dependence

� Europe consumes 40% of Pt demand and 40% is used in autocats

� Platinum has not recovered because its demand most impacted by Euro crisis and increased recycling

� Automotive producers have reduced load rates and thrifted away from platinum towards palladium

Source: IMF, Johnson Matthey

6

4.800

5.000

6

4.400

6.800

4.600

6.400

5

5.200

5.400

5.600

5.800

6.000

4

3

2

1

0

-1

-2

-3

6.600

-5

201220112010200920082007

-4

200520042003200220012000

6.200

2006

Pt Demand (koz) - RH Axis

Euro Area GDP, % change

World GDP, % change

Historic GDP & Pt Demand

GD

P -

% c

hange

ko

z P

t

Financial Crisis

Year

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Risks at the Global level remain…….

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

% o

f G

DP

Gross public debt as a % of GDP

Germany

Japan

United Kingdom

United States

Source: IMF WEO Oct 2012

Despite the volatility in the short-term, the long-term fundamentals remain for in place for continued growth in commodity demand

• Long term drivers of the structurally driven commodities boom remain intact:

» Trends in urbanization and industrialization appear to be entrenched for the next few decades in China, India and other EMs.

» By 2050 another 3 billion people at the global level will urbanize. Most of this urbanization will take place in emerging market economies (UN population division).

» The infrastructure expenditure to accommodate global urbanization is significant.

» The quantity of minerals required to support this urbanization is significant.

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World urban population growth

(Billion people)

Rising urbanisation, 3 billion people to urbanise by 2050 (most of the growth in Africa)

Source: UN, McKinsey

0.4

0.5

0.5

0.8

0.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

2010 Urban Pop. China India Other Asia Africa RoW 2050 Urban Pop.

The world is set to urbanise close to another 3 billion people by the middleof the century

Fixed investment will mostly be into infrastructure in emerging economies…….

Source: IMF WEO Oct 2012

0

5

10

15

20

25

30

35

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

% o

f G

DP

Fixed investment expenditures

World

Advanced economies

Emerging market and developing economies

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Copper, 27

Iron ore, 21

Thermal coal, 16

Gold, 15

Coking coal, 11

Nickel, 11Uranium, 1

Citibank - growth projects by commodity on a production volume basis, 2011-2020

Top 6 minerals, expected greenfield production growth for the period 2011-2020

Source: CitiBank

Shifting Risks: The Game is Changing (E&Y) (countries want a bigger share)

1. Skills shortage

2. Industry consolidation

3. Infrastructure access

4. Maintaining a social license to operate

5. Climate change concerns

6. Rising costs (cost inflation)

7. Pipeline shrinkage

8. Resource nationalism

9. Access to secure energy

10. Increased regulation

Source: “Business Risks Facing Mining and Metals, 2012-2013, Ernst & Young

1. Resource nationalism

2. Skills shortage

3. Infrastructure access

4. Cost inflation

5. Capital project execution

6. Maintaining a social license to operate

7. Price and currency volatility

8. Capital management & access

9. Sharing the benefits

10. Fraud and corruption

20122008

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Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

Perceptions about Mining by RSA’s people in general

•Little link made between role of minerals and the functioning of a modern society.

•Little credit given to the mining industry for playing a key role in South Africa’s economic development over past 130 years, which has transformed South Africa into the most industrialised country in Africa

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Metals and minerals in a Smart Phone

• Copper (16 grams) ¹

• Silver (0.35 grams) ¹

• Gold (0.034 grams) ¹

• Palladium (0.015 grams) ¹

• Platinum (0.00034 grams) ¹

• Ceramic magnetic switches containing rare earths ²

• Indium²

• Titanium dioxide ²

• Indium tin oxide ²

• ¹ source – USGS http://pubs.usgs.gov/fs/2006/3097/• ² source – NRC critical minerals report

Metals and Minerals in a car

• 960kg iron &steel

• 109kg Aluminum

• 22.7kg Carbon

• 19 kg Copper, 34kg for a

hybrid

• 19kg Silicon

• 11 kg Lead

• 10kg Zinc

• 7.7kg manganese

• 6.8kg Chromium

• 4.1kg Nickel

• 0.4 kg Platinum

•+Antimony, barium, beryllium, cobalt, gallium, gold, magn

esium, molybdenum, neodymium, indium, palladium, Sulp

hur, rhodium, silver, strontium, tin, titanium, tungsten, vana

dium, zirconium.

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Even a Wind Turbine uses a significant amount of metals and minerals

• 335 tons of steel

• 4.7 tons of copper

• 13 tons of fiberglass

• 3 tons of aluminum

• 1,200 tons of

reinforced concrete

• Silica

• Limestone

• Aluminum

• Phosphate

• Fluoride

• Titanium

• Mica

• Petroleum

Even a bright smile, even comes from mining…….

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Perceptions and realities about mining

PERCEPTION REALITY

Is a “Dirt Digger” Another R300 billion and 150 000 jobs

created in downstream industries

Is uncaring about the lives of workers and

does not pay well

67% reduction in fatality rate, average

wages per employee up 12% p.a.

Does not care about the environment,

communities –Poverty at the doorstep of

prosperous mines

Spent R1.4 billion on communities, R4

billion on skills and R25.8 billion in

corporate taxes in 2011.

Profits and benefits exported to a small

bunch of Capitalists

Shareholders balanced 50% local, 50%

offshore, R12 billion in dividends

Resistant to Transformation >R150 billion in BEE deals concluded,

good progress on all pillars of Charter

Does not matter to SA- Ingi Saldago-

Business Report-”Eskom was right to

switch off the Mines”

19% of GDP, 50% of exports, 1.3 million

jobs, 94% of electricity, 17.2% of

corporate tax

The ANC Mangaung Elective Conference

• ANC rejects wholesale nationalisation as a policy option.

• ANC has adopted the National Development Plan as a key

strategic area.

• Over the next five years, the ANC will take decisive and resolute

action to overcome the triple challenges of poverty, inequality and

unemployment, which are at the heart of South Africa’s socio-

economic challenges.

• The most effective weapon in the campaign against poverty is the

creation of decent work, and creating work requires faster and

more inclusive economic growth.

• Using South Africa’s natural resources in a manner that benefits

the nation as a whole.

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The ANC Mangaung Elective Conference

• State intervention with a focus on beneficiation for

industrialisation is urgently required.

• The state must capture an equitable share of mineral resource

rents through the tax system.

• Strategic minerals will be investigated and declared.

• Strengthening of the state mining company.

• Mining should create safe and decent work, and mineral

extraction should not compromise local communities or the

environment.

• There is a need to develop and enhance mineral knowledge

linkages.

The Chamber of Mines supports the ANC Policy Resolutions

• A greater degree of certainty is emerging.

• In a number of areas the “how” is critically

important.– Encouraging further beneficiation is an important issue and

further work on implementation plans is underway.

– Energy security can be guaranteed through private sector

investment and cooperation between government and the

private sector.

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Draft MPRDA Amendment Bill, gives expression to MIGDETT process and ANC Policy Resolutions

• Consolidate environmental licensing under DMR as the lead

authority (move to smart tape away from red tape).

• Streamline license application system.

• A strong emphasis on promoting greater downstream beneficiation.

Details of the beneficiation implementation plans still being

developed.

• Penalties for non-compliance are increased.

Stakeholder engagement process on Amendment Bill underway.

Mining taxation review announced

• The State President and Minister of Finance have announced a review of taxation, including a review of mining tax in 2H13.

• The Chamber looks forward to engaging government on this important review.

• Our objectives are to focus on a competitive, stable and predictable mining taxation and royalty system that encourages growth and investment, and fairly balances these industry needs with those of the State.

• The Treasury has a strong track record of significant engagement with affected stakeholders and pragmatism on competitiveness drivers.

• The taxation review will need to consider not only direct taxes and royalties, but the plethora of other indirect taxes (including social taxes) that the industry contributes to the country.

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RSA mining sector hit by unprotected strikes

• The industry was hit by a set of unprotected strikes in 2012.

• Platinum, gold and iron ore were all affected by the strikes.

• A confluence of factors contributed to the situation in certain areas such as Rustenberg:

– Weak local government

– High growth in urbanisation

– High levels of poverty and unemployment

– Inter union rivalry, etc.

• About R15 billion in production and sales was lost due to these strikes in 2012.

Marikana tragedy

• Illegal strike

• 50 people killed in August 2012

• Front line news around the world (SA’s image as investment

destination tarnished)

• Contagion to rest of mining sector

• Rand weakens

• Commission of enquiry appointed

• Sector moves quickly to calm down the situation and engage

key stakeholders

• Industrial unrest impacts platinum, gold and iron ore sectors

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The recent negative news items have resulted in volatile exchange rate

Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

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Role of Mining often Underestimated

•Key foundation industry (enabled SA to become the most industrialised country in Africa)

•Large employer of semi-skilled and skilled workers

•Critically important NET generator of FOREX

•Significant multipliers into the rest of the economy (large procurement, investment and wage spender)

•Equally important, very large magnet for foreign investment inflows (which help fund current account)

•Significant contributor to transformation in the economy

The linkages of mining to the economy

Mining’s direct contribution:

•GDP R230 Billion or 9% of GDP

•Jobs 499 217

The Induced Impact:

•GDP R136,1 billion or 6% of GDP

•Jobs 496,319

First round impact:

•GDP R59 billion or

2.3% of GDP

•Jobs 207 949

Indirect impact

•GDP R42.7 billion or

1.7% of GDP

•Jobs 149,898

The Total Contribution of Mining to the Economy

•GDP R468 billion or 18.7% of GDP

•Jobs 1,353,383 (16.6% of total employment)

Source: Quantec & IDC, 2010 data

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Downstream beneficiation is far bigger than people think!

• About 99% of RSA's cement is made locally from locally mined products

• 80% of RSA's steel is made locally from locally mined iron ore, chrome, manganese, coking coal

• 30% of RSA’s liquid fuels are produced from locally mined coal

• 94% of RSA's electricity is produced from locally mined coal

• Most of our domestic chemicals, fertilisers, waxes, polymers, plastics, etc., are fabricated using locally mined minerals & coal

• 13% of the world's platinum catalytic converters are made in RSA, and so on

Overall another R300 billion in sales value and >150 000 jobs are created in the downstream beneficiation industries. Extra value is

being created where the commercial opportunities exist

Side-stream beneficiation is a significant industry in its own right

• Significant industries have developed to provide goods and services to the mining sector:

• The Johannesburg Securities Exchange was established in 1887 and is the world’s 22nd largest exchange.

• Financial and legal services were started to support mining and now accounts for 20% of GDP.

• Significant education, skills development and knowledge cluster has evolved and developed around mining.

• The development of infrastructure (rail, ports, electricity, etc.) is still dominated by demand from mining.

• A significant manufacturing sector still supplied goods into mining, steel, mining equipment, explosives, etc.

Overall, this industry is significant (2.3% of GDP and >200 000 jobs) and has become a big exporter into the rest of Africa.

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Minerals & Metals In South Africa: A Significant Value Added Cluster

ScienceTechnology

Exploration

Geoscience

Suppliers

Mining is one of the most extensive and best developed South African industrial clusters

Extensive sciences & technology network/research

Broad expertise in geoscience

Large exploration expertise

Large number suppliers of equipment and services

World class educational and skills development systems and institutions

Sophisticated financial institutions (JSE, banks, legal)

Large scale smelting and refining.

Mining

SmeltersRefineries

GovernancePolicy

Equityfinancing

Professional

schools

South Africa has significant geological potential

0 10 20 30 40 50 60 70 80 90 100

PGM's

Manganese

Chromium

Gold

Alumino-Silicates

Vermiculite

Vanadium

Zirconium Minerals

Titanium minerals

Fluorspar

Antimony

Phosphate rock

Nickel

Uranium

Lead

Coal

Zinc

Silicon

Iron ore

% of global .South African reserves for key minerals, 2008

1

1

1

1

1

2

2

2

2

2

4

4

5

5

6

8

8

8

9

South Africa, is not mature mining real estate! The country still has

significant geological potential

Global rank

Source: DMR/USGS

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Mining has significant potential

• If growth constraints can be removed mining can:

– Grow at 3% to 5% p.a., resulting in a much more balanced

country growth rate (double size of mining by 2028).

– If mining had grown at same pace as rest of economy

between 1994 and 2011, it would have increased the

country’s growth rate to 3.9% from 3.2%, a significant

difference.

– At a 5% growth rate, the mining industry can increase

exports and reduce the savings-investment constraint.

– Add another 100 000 to 200 000 direct jobs.

Rough growth potential of some of the bulks:

• Iron ore could double production within 5 to 10 years to >100

million tons (MT) per year by 2020. Employment could rise from

18 000 to 30 000 people. Biggest constraints: rail

• Coal production has to rise from current 254 MT p.a. to 355 MT by

2020 to satisfy Eskom, Sasol & exports. Jobs could increase from

current 73 000 to 100 000 by 2020. Biggest constraints:

rail, regulatory issues (environmental).

• Manganese could double/treble production from the current 7.2

MT to 15MT/20MT by 2020. Employment could rise from current

5879 to >10 000 in this period. Biggest constraint: lack of access

to efficient cost competitive heavy haul rail

These three bulks could significantly increase their export

earnings and GDP contribution and add about 50 000 jobs, if

the constraints are resolved.

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Two scenarios were developed for the forward looking scenarios

Current constraints are

relieved

Constrained by current

bottlenecks

Costs grow at

historic rates

Cost increases are

reduced to half of

historic rates

Cost Management

A‘Low

road’

‘High

road’

CB

D

Prod

uct

ion

gro

wth

A “high road” is very possible for South Africa’s

mining sector

Source: McKinsey

But RSA mining has not met its potential

• RSA mining missed out on the last commodity boom with a -

1% p.a. decline in mining GDP between 2001 and

2008, versus 5% growth rate in top 20 mining economies

mining sectors.

• Sector has been affected by a set of unprotected strikes.

• Investor confidence in RSA mining and RSA economy has

been affected.

• RSA only accounts for 3% of new Greenfields projects in next

decade (versus 38% share for Australia) despite having

world’s largest in situ value of mineral resources.

• The largest component of mining, platinum mining, is

experiencing significant challenges with about half of the

industry being marginal at current prices.

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Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

South Africa: Going for Sustainable, Balanced and Labour Absorptive Growth

•Progress has been made to get the economy back on to a higher growth path (3.2% 1994 to 2012).

•However, SA’s labour participation rate at 42% is low vs peers (~61%), its unemployment rate is too high (>20%), its levels of income inequality are very high (Gini coefficient 0.59) & too many people are caught in the poverty trap.

•Government has now placed the creation of meaningful employment as a central objective of economic policy.

•All parties recognise that higher levels of sustainable, balanced and labour absorbing economic growth is key to reducing unemployment

•Government has developed the National Development Plan and the New Growth Path focusing on economic growth and employment creation.

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South

Africa

While South Africa’s growth rate has risen to 3.2% p.a. 1994-2012, it is just too slow to meaningfully tackle

unemployment & poverty

Too much of the economy’s recent growth has been driven by credit fuelled non-tradable demand side, &

tradable export sectors have languished…..

Non-tradable sectors

Source: StatsSA

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2 000 000

R'm

illio

ns

South Africa: Contribution to GDP in real terms, non-tradable vs tradable sectors of economy (real terms)

Non-tradable

Tradable

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The Only Way that South Africa can reduce its high unemployment rate is through more balanced growth and the growth of the key export sectors (e.g. mining)

•RSA cannot solve its unemployment and poverty challenges on

the basis of an advanced economy “American growth model”

(credit fueled, consumer driven, import intensive and imbalance

creating growth in the non-tradable sectors).

• All parties recognise that higher levels of sustainable, balanced

and labour absorbing economic growth is key to reducing

unemployment (i.e. get tradable export sectors to boom).

•Government has developed the New Growth Path focusing on

economic growth and employment creation.

To ensure more balanced and higher levels of growth & job creation the country needs its tradable

export sectors to grow at a much faster pace

THIS IS WHERE MINING FITS IN.

• Mining has a very large employment, foreign exchange earning and

GDP multipliers.

• The New Growth Path and National Development Plan both

recognise the critically important role that mining can play in growing

investment, exports, GDP and the multiplier effects.

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Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

Competitiveness drivers

The key threats to competitiveness of SA

mining are:

▪ Infrastructure (electricity, rail)

▪ Policy uncertainty and some challenges in regulatory framework

▪ Social licence to operate1

▪ Human capital/ skills

▪ Institutional capacity

▪ Rapidly rising costs

Competitiveness drivers of mining

SOURCE: McKinsey & Company

Competitiveness threat

Competitive advantage

Mixed picture

Market context

Regulatory environment

Product demandEnabling factors

Infrastructure

Ease of doing business▪ Social licence

▪ Security of tenure▪ Rule of law

▪ Macroeconomic stability

Factor market efficiency

Industry structure

Inherent potential

Natural resource endowment

Human capital/ skills

Geographical factors

Accessibility of markets

Domestic demand

International demand

Regulatory and legal requirements

Institutional capacity

1 Dealt primarily in sustainability and transformation workstreams

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Enabling factors:

• Ease of doing business – SA favourably ranked in top quartile.

• Infrastructure – at a general level SA’s infrastructure is ranked as

reasonable, but specific constraints have emerged (rail & electricity)

• Social license to operate (safety, health, environment, etc.,) -

important component of the industry’s long term license to operate.

• Macroeconomic stability – the country has adopted prudent

macroeconomic policies, but volatile exchange rate is a challenge.

• Political stability – SA is a stable constitutional democracy.

• Technological readiness – SA ranks in 3rd quartile, but firm level

technology absorption is in top quartile.

• Business sophistication – SA ranked favourably in 2nd quartile.

• Innovation capability – SA ranked favourably in 2nd quartile, with

quality of R&D & scientific research organisations in top quartile.

South Africa is ranked 39th easiest place to do business

(out of 185 economies)

BadGood

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South Africa has excellent policy potential assuming best practice

• The country’s mineral laws are congruent with global best practice (MPRDA, taxation system and Royalty Act).

• Recent policy uncertainty regarding the nationalisation debate has been negative (but is now resolved).

• Unfortunately, this uncertainty is reflected in the 2013 Fraser Institute Survey which ranks South Africa in position 64 out of 96 countries.

• An MPRDA Amendment Bill has been released for public comment (significant engagement is taking place).

• A country taxation review is scheduled for 2h13.

Infrastructure challenges/opportunities:

Example of Rail

•Only 13% of SA’s freight is carried by rail, but more than half of

Transnet’s business is bulk commodities.

•Coal exports on Coalink line in 2012 only back to 2005 levels and

below installed capacity of 74 MT and 90MT capacity of RBCT.

•Cost effective rail capacity critically important for growth of the

coal, manganese and ferro-chrome sectors.

•Getting rail right presents significant opportunities for unlocking

growth in bulk commodities.

•Mixed messages from Transnet – they believe bulk exporters are

cross-subsidised by other users.

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0

10

20

30

40

50

60

70

80

90

China Brazil Australia South Africa Other

% o

f g

lob

al

Global manganese basins and production

reserves Share of global production

Despite having 80% of the world’s HG manganese, RSA supplies only 15% of supply

Input costs are increasing at a very rapid pace

A large proportion of the input costs are driven by “administered prices” such as electricity & water or by international pricing (steel

and diesel). Between 2007-2012:

• Electricity prices to the mining sector has risen from 18 c/kWh in 2007 to 61c/kWhin 2012. This is a significant 238% increase.

• Diesel costs have risen by an average of 15.7% per annum on the back ofhigher international oil prices (up 69.3% overall).

• Reinforcing steel prices have increased by 15.3% per annum in the sameperiod (57.5% in total).

• Average remuneration paid per worker employed in the RSA mining sectorgrew by 12% per annum between 2007 and 2012, nearly 5 percentagepoints higher than producer inflation.

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Inflation in input costs has simply been too high (and mostly out of control of the miners)

4.4

7.2

9.1

11.2

12

15.3

15.7

18.1

26

0 5 10 15 20 25 30

Mining machinary

Total producer price inflation rate

Cement

Structural steel

Labour costs

Reinforcing steel

Diesel

Pgm mining cash costs per 4e ounce

Electricity prices for mining

Cost inflation affecting the mining sector, average annual increase in costs, 2007 to 2012 (Source: StatsSA, CoM EAU)

Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

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Resolving the challenges in the mining sector

• Very strong level of commitment in MIGDETT by

industry, government and labour leadership to resolving the

challenges.

• MIGDETT Platinum Task Team looking at short term and long term

solutions to challenges faced by PGM mining sector

• Commission of enquiry into the Marikana tragedy.

• Signed a stability and peace accord with all the stakeholders in

the mining sector.

• PGM sector investigating move to collective engagement on

wages.

• Engaging all stakeholders including government, unions (including

AMCU), the investment community, local communities and other

parties.

The mining industry is making a positive contribution

• The industry is making significant progress on the Mining Charter

targets and is committed to “Placing South Africa First”.

• Industry is contributing significantly to community development

(R1.4 billion last year), but can make this more effective in terms

of better partnerships.

• Other role players have just as important role to play (such as

local government) in service delivery and community

development.

• Industry spent R4 billion on skills development and training

(excluding the skills levy).

• Average wages in mining lift the average for all workers (R89

billion paid in wages in 2011).

• R25.8 billion paid in corporate taxes in 2011.

• Industry is procuring significant % locally.

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Presentation outline

The Local Context

Unpacking the growth constraints

RSA Mining “Putting South Africa First”

Why Mining is Crucial to South Africa

Resolving the challenges

Recognising the industry’s potential

The Global Context

What is the mining sector doing to help resolve issues?.

• The Mining Company Leadership through the Chamber have agreed to

“Put South Africa First”

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What is the mining sector doing to help resolve issues?.

• Getting its house in order:

– Demonstrating positive role industry does play in economy and society.

– Upping game in areas where industry lags.

• Developing a positive contribution model:

– Improving effectiveness on issues such as community development through establishment of regional processes.

• Engaging with relevant movers and shakers on key issues:

– Mining industry’s potential contribution to the NDP

– Competitiveness

– Labour market stability

– Community investment

– Environmental taxation

– Improving SHEC performance

Conclusion

Mining matters for the growth, development and transformation of South Africa