SOUTH AFRICA

BUSINESS ENVIRONMENT

&

OPPORTUNITIES IN THE MINING SECTOR

MAY 2015

LIMA, PERU

South Africa in the world

Korea

SADC and South Africa

• SADC FTA signed in August 2008 –

market of 200 million consumers

• Future FTA with SADC, COMESA &

EAC with a market of 700 million

consumers

South Africa Economy at a Glance

South Africa’s leading Export Partners (2014)

Export Country

US$

(billions)

1. China 8.96

2. United States 6.67

3. Japan 5.05

4.Botswana 4.95

5. Germany 4.72

6. Namibia 4.70

7. India 3.92

8. United Kingdom 3.58

Source: Quantec

CHINA 21%

UNITED STATES

16%

JAPAN 12%

BOTSWANA 12%

GERMANY 11%

NAMIBIA 11%

INDIA 9%

UNITED KINGDOM

8%

Leading export partners 2014 (%)

Import Country

US$

(billions)

1. CHINA 16.01

2. GERMANY 10.37

3. SAUDI ARABIA 7.35

4. UNITED STATES 6.81

5. NIGERIA 5.34

6. INDIA 4.71

7. JAPAN 3.91

8. UNITED KINGDOM 3.40

South Africa’s leading Import Partners (2014)

CHINA 27%

GERMANY 18%

SAUDI ARABIA 13%

UNITED STATES 12%

NIGERIA 9%

INDIA 8%

JAPAN 7%

UNITED KINGDOM

6%

Leading import partners 2014 (%)

Iron Ores

Platinum

Gold

Motor Vehicles and Components

Coal

Ferro Alloys

Diamonds

Catalytic Converters

Chrome

Manganese

South Africa Trade: Major Export

Products

Crude Oil

Motor Vehicles and Components

Telephone sets

Computing Equipment

Pharmaceuticals

Earth Moving Equipment

Electric Generators

Industrial Machinery

Printing Machinery

Rubber Tyres

South Africa Trade: Major Import

Products

• Peruvian Exports to South Africa (2013):

USD 12 097 000

• South African Exports to Peru (2013):

USD 57 767 000

Bilateral Trade

• Zinc and zinc products

• Fish and sea food

• Inorganic Chemicals

• Synthetic Fibres

• Cereals

• Non-woven Fabrics

• Coffee

• Mining and other Equipment

Important Peruvian Exports to South

Africa

• Steel and Articles of Steel

• Mining Equipment and other

Machinery

• Agricultural Chemicals

• Explosives, Fuses and Detonators

• Preserved Fruit

• Plastics and Articles

• Ferro Alloys

Important South African Exports to Peru

SA’s vision for inclusive growth & development – decent jobs and equity;

NDP, NGP and IPAP - promoting a globally competitive economy that produces and trades with the rest of the world in innovative & value added products & services;

Create 5 million jobs by 2020;

Beneficiate of own minerals and natural resources;

Improve physical industrial infrastructure;

Regionally spread industrial development.

STRATEGIC CONTEXT

Integrated into the mainstream economy, in terms of value

chains and localisation initiatives including skills, technology,

tooling and supplier development initiatives

• Sound Economic Policies

• High level of macro economic

stability

• Reduced taxes and import duties

• Central Bank independent from

Government

• Inflation targeting

The South African Business Environment

• South Africa is one of the most sophisticated and promising emerging markets, offering a unique combination of highly developed first world economic infrastructure with a vibrant emerging market economy.

• South Africa is one of the world’s 26 industrialised nations & 27th largest economy

• The country is also regarded as the gateway to Africa.

• South Africa has the 2nd largest economy on the African continent, accounting for approximately 25% of the continent’s GDP.

• According to the World Bank, South Africa ranked 41st out of 189 in the world for the Ease of Doing Business in 2014.

• The JSE Securities Exchange is Africa’s largest and most developed Securities Exchange and one of the world’s top 20 exchanges.

South Africa- global perspective

• South Africa is ranked #1 for the regulation of securities exchange, strength of auditing & reporting standards, legal rights & efficacy of corporate boards by WEF’s Global Competitiveness Report 2013/14.

• South Africa scored well in various categories according to the 2013/14 WEF’s World Competitiveness Report (149 countries ranked) with overall competitiveness we ranked 53 in place.

• South Africa remains the world’s top producer of minerals such as gold, platinum, rhodium, chrome, manganese and vanadium.

• South Africa holds 80% of global manganese reserves, 72% of chrome, 88% of platinum-group metals (PGMs), 40% of gold and 27% of vanadium.

South Africa - global perspective

ROLE OF SA IN WORLD MINERAL

PRODUCTION,

ROLE OF SA IN WORLD MINERAL RESERVES

0 20 40 60 80 100

Manganese #2

Chromium #1

PGMs #1

Vanadium #2

Vermiculite #2

Gold #2

Alumino-silicates #1

Titanium minerals #4

Zirconium # 2

Percentage of World Total

ranked as the world’s richest country in terms of its mineral

reserves. (est. largest in situ non energy mineral resource base in

the world, valued at US $2, 5 trillion) Citibank,

South African Mining Sector

Information

Mining Sector Information Overview

• Mining remains a critical sector that supports and impacts indirectly on range of related sectors.

• South Africa’s total mineral reserves are estimated at US$4.71 trillion, with PGMs contributing 49% of the value.

• South Africa is home to 80% of the world’s reserves of Platinum Group Metals positioning our mineral deposits as one of the most valuable in the world.

HOW MINING IS STRUCTURED in RSA

• Department of Mineral Resources-regulator

• Chamber of Mines (CoM)

• South African Mining Development Association

(SAMDA)

• Organized Labour

• Mining Industry’s Growth, Development and

Employment Task Team (MIGDETT)

• Department of Trade and Industry on

industrialization.

Legal Framework • Minerals and Petroleum Resources Development Act of 2002 (as amended), which

came into effect in 2004 and vested custodianship of all minerals to the State on behalf of the

nation. Currently under review

• Mine Health and Safety Act 29 0f 1996 (as amended), came into operation on the 1st of

May 2009. Currently, under review to strengthen enforcement provisions; to simplify the

administrative system for the issuing of fines; to reinforce offences and penalties

• Minerals Beneficiation Policy -adopted by Cabinet in the 2012 is part of a broader

strategy by Government to create a diversified and sustainable economy which is not overly

reliant on the exploitation of RSA abundant but finite mineral resources but is manufacturing

led and labour intensive to overcome the triple developmental challenges of unemployment,

poverty and income inequality

• Geoscience Amendment Act 16 of 2010 - to mandate the Council for Geoscience to be

the custodian of geotechnical information, to be the national advisory authority in respect of

geohazards related to infrastructure and development, and to undertake reconnaissance

operations, prospecting, research and other related activities in the mining sector.

South Africa needs to beneficiate more of its minerals In 2010, South Africa as a

resource economy was

estimated to posses

approximately US$2.5

trillion in non-energy in

situated mineral wealth,

making it one of the

wealthiest mining

jurisdictions in the world.

Despite this, South Africa

continues to export most

of its minerals as ores or

semi-processed minerals

rather than high value

intermediate to finished

products. South Africa has

developed a beneficiation

strategy based on five

identified value chains to

create jobs and drive

enhanced revenue

creation.

Mineral beneficiation has been identified as one of six key sectors in Government’s

New Growth Path (NGP) strategy for creating five million new jobs by 2020 23 Mineral Beneficiation - Exploration of the Partnership Potential between China and South Africa

SELECTED

VALUE CHAINS

SELECTED COMMODITIES

(SOUTH AFRICA SHARE OF WORLD

PRODUCTION (2005))

ENERGY

STEEL/STAINLESS STEEL

PIGMENT AND

TITANIUM METAL

PRODUCTION

AUTOCATALYST AND

DIESEL

PARTICULATE

DIAMOND

PROCESSING AND

JEWELLERY

Mining Sector Information

Mining industry performance

• The mining sector contributes 19% of GDP (9% Direct,

10% indirect and induced).

• The industry is a critical earner of foreign exchange,

approximately 50%.

• Mining accounts for 12% of total investment in the South

African economy.

• When indirect multipliers are considered, the total

fixed investment in the SA economy flowing from mining

activity reaches a significant 25% of total investment.

Mining Sector Information

Mining industry performance

• Foreign Direct Investment in the mining industry

grew considerably from R112 billion to R389

billion, from 2004 to 2010.

• Gross fixed capital formation (GFCF) increased

from R40 billion in 2007 to R75 billion in 2012 .

• Employment in the mining industry grew from

approximately 495 150 in 2007 to 524 632 in 2012.

• Number of women employed increased from 24

659 in 2007 to 48 420 in 2012.

• The number of operating mines has increased

from 1414 in 2007 to 1637 in 2012.

Mining Sector Information

Mining’s contribution to provincial economy:

• Western Cape 0.4%

• Eastern Cape 0.2%

• Northern Cape 5.9%

• Free State 7.6%

• KwaZulu-Natal 3.3%

• North West 26.1%

• Gauteng 11.5%

• Mpumalanga 21.5%

• Limpopo 23.5%

Mining Investment Opportunities

Mining Investment opportunities

•South Africa has the world’s highest in situ mineral

resources

• A predictable mining regulatory framework, congruent

with global best practice, and is in sync with the dynamic

socio-economic and political landscape of our country

•The beneficiation framework presents mechanism to

leverage the country’s mineral endowment into a

competitive advantage for downstream mineral

beneficiation.

•The opportunities for companies in the manufacturing

space seeking to increase their productive capacity.

•Guarantee security of raw material supply

•Leveraging on the international market-leverage on bi-

and multilateral agreements and partnership

SPECIAL ECONOMIC ZONES (SEZS)

• Government has identified Special Economic Zones as a

mechanism that will contribute towards the realisation of its economic growth and development goals;

• And is committed to support and facilitate the designation, regulation and development of Special Economic Zones in South Africa;

• Special Economic Zones will be designated in areas to promote targeted economic activities, supported through special arrangements;

• 2 of the SEZs, in North West and Limpopo will be dedicated to beneficiation of minerals.

Identification of Beneficiation Opportunities Development of Action Plans – Detailed industry analysis

Auto

catalysts

Mainly Pt,

and Pd

but also

Rh

Converts over 90% of hydrocarbons, carbon

monoxide, and oxides of nitrogen from gasoline

engines into less harmful carbon dioxide, nitrogen

and water vapours- over a PGM catalyst.

There are currently no substitutes for PGMs in the

manufacture of auto catalysts or hydrogen fuel

cells. Various combinations of PGMs have been

shown to be more efficient, but there are no

examples of non-PGM metals showing the same

level of performance.

Fuel cells Mainly Pt Fuel cells generate electric power, similarly to

batteries but , unlike batteries, can operate

permanently when supplied with fuel (hydrogen and

oxygen from air). The cells produce electricity by

combining hydrogen with air over a catalyst such as

Pt.

As for catalytic converters above, but research on-

going on base metal catalysts instead of platinum

and biofuel cells main use of the catalytic activity of

living cells and/or their enzymes.

Industrial Pt

Pt

Pd

Ir

Manufacturing of specialty silicones - highly

durable materials with excellent resistance to

chemical corrosion, fire and extremes of

temperature; pliable, waterproof and electrically

insulating.; applied in variety of industries

Hard disks manufacturing - the disks are coated

with a cobalt based alloy which has magnetic

properties, adding platinum enhances the magnetic

qualities of the cobalt alloy, enabling data to be

stored at higher densities and improving access

times

Electronic components - Pd is widely used in

electronics applications on account of its electrical

conductivity and its durability

Crucibles - due to its high melting point and

resistance to chemical attack, iridium is the preferred

material for crucibles used in the production of high

purity single crystals of various metal oxides

Filter

PGMs example

Applications PGMs How it works Substitutes

South Africa’s investment environment

South Africa today is one of the most sophisticated and promising emerging

markets globally, mainly because of …

Political & economic

stability with sound

macro-economic

management

Competitive

sectors/industries

Favourable cost of doing business

Skills

availability

World class

financial

system

Excellent

transport &

logistical

infrastructure

Abundant

natural

resources

• Despite the current cyclical downturn in the

mining industry, South Africa by virtue of the

being a leading country with reserves in number

of key commodities remains an extremely

attractive mining investment destination.

• The mining industry is a well established and

resourceful sector of South Africa’s economy

and has a high degree of technical expertise.

• South Africa is ready to work with Peru in this

regard.

CONCLUSION

• Sector Information

• Finance to explore investment opportunities in SA

• Facilitating direct Government support in the form of:

• - information on investing in SA and the Business Environment

• - detailed investment Incentives

• - investment facilitation

• - after care – ongoing contact

the dti’s Investment Services

Contact Details

• Mrs Manone Madyo, Deputy Director: Investment Promotion

Email: MMadyo@thedti.gov.za

• Mr Paul Pieterse, Deputy Director: Export Promotion

Email: PPieterse@thedti.gov.za

THANK YOU

GRACIAS