Terms to be attached to mining licences

Cape Town - Mining licences will in future be granted with attached conditions, to ensure a supply of raw material for local industries seeking to further refine, or beneficiate, the extracted minerals, MPs heard on Tuesday.

Briefing members of parliament’s economic development select committee on government’s beneficiation strategy, mineral resources chief director Siyabonga Ndabezitha said there was a need to do things differently.

"In the past when we issued mining rights and licences we did not attach certain conditions, like saying a certain percentage of your production must be available for local beneficiation.

"We just issued rights, and mining companies would mine and sign agreements with their customers because we did not put any restrictions.

"But now we have realised that maybe we need to do things differently, and make sure that in all the new licences that we'll be issuing, there would be certain conditions, which would make it possible for new entrants to have access to the required raw materials," he said.

The cabinet approved the draft beneficiation strategy in June this year. The department is now developing plans for two of five so-called pilot commodity value chains, which will go back to the cabinet in October.

The first of these, which focuses on the iron and steel industry, has been drafted; the second, which looks at energy commodities such as coal, uranium and thorium, is still being worked out.

The other three pilots involve the production of catalytic converters; jewellery fabrication, including gold, platinum and diamonds; and titanium metal and pigment production.

The development of a beneficiation strategy for South Africa comes almost 17 years after the 1994 RDP white paper that called for increased levels of beneficiation, and pointed out at the time that this would increase employment.

According to the document, "(Employment) could be much higher if our raw materials were processed into intermediate and finished products before export".

Ndabezitha noted that in 1994, the mining and mineral sector contributed three-quarters of the country's exports and employed 750 000 people.

"Now, in 2011, the situation hasn't changed much; the sector now accounts for 60% of exports and employs 500 000 people," he said.

He told the committee there were certain constraints hampering beneficiation of minerals in South Africa.

Among these was limited access to raw materials by new entrants to the market. However, the Mineral and Petroleum Resources Development Act was "currently being amended to strengthen beneficiation provision... and allow new entrants" to operate.

Another constraint was a shortage of critical infrastructure affecting access to water, power and rail links, among others.

Further constraints included a skills shortage and access to international markets.

Ndabezitha said the beneficiation strategy sought to address these constraints by providing a framework to allow "specific interventions" in the different value chains identified by his department.