Modern Mining March 2023

COLUMNIST

Declaring a state of disaster in SA won’t solve the disaster By Ross Harvey, director of research and programmes at Good Governance Africa (GGA)

I f it isn’t farmed, it’s mined. Even farming depends on mining for fertiliser and equipment. Moreover, any hope of a ‘green transition’ depends deeply on mining the minerals and metals required to feed electric vehicle, wind turbine and solar panel production. The World Bank estimates that by 2050 more than double the current volume of minerals and metals produced will have to be extracted. No surprise, then, that the focus of this year’s Investing in African Mining Indaba was on securing critical raw materials responsibly. Cobalt, copper, lithium, platinum group metals, titanium, chrome and man ganese supply must expand if the global demand for clean technology is to be met. African countries need to gear up to attract responsible investment into extracting these minerals and metals. Zambia appears to be making strong headway in this respect. It had a united team approach at the Indaba – the first time that the private sector, state owned entities and government ministries banded together to attract investment. Other countries, however, look more precarious. There are massive

wealth are strongly correlated with underdevelop ment. This is partly because resource rents crowd out governance incentives for building a broad based economy with a diversified tax base. They also fund patronage networks and alter the risk reward ratio for ruling elites – the transaction costs of reform are perceived as higher than the costs of repression or co-optation. In other words, transpar ency, accountability and participation, the three key pillars of governance, go out the window. In the worst cases of the resource curse, station ary bandits maraud lootable point-source resources and exacerbate violent conflict. This conflict often pre-exists and is attributable to a lack of service delivery and investment. In other, perhaps equally disturbing, cases the state employs its security apparatus to appropriate resources and forms joint ventures with unscrupulous entities to sell those resources into global markets. South Africa is an unusual case of the resource curse. Its relative economic muscle in the region and across the continent is a partial function of a sordid history of mineral extraction at the expense of most citizens. But twenty-nine years of poor governance since 1994 has only made the situation worse. There are multiple manifestations of this on display, the most glaring of which is the electricity crisis. Eskom, the state-owned monopoly responsibly for electricity production, transmission, and large parts of local distribution, is highly indebted (to the tune of about R400bn, about a third of the entire country’s annual budget). Its energy availability fac tor (EAF) is down to about 40% of total capacity. This

Ross Harvey, director of research and programmes at GGA.

The World Bank estimates that by 2050 more than double the current volume of minerals and metals produced will have to be extracted.

Goldfields South Deep mine.

risks and opportunities for mineral-wealthy African countries, but at this stage the risks appear to be out weighing the potential benefits. The ‘resource curse’ literature is unequiv ocal that weak institutions at the time of discovering commercial quantities of mineral or hydrocarbon

is almost entirely attributable to the intense corruption that has per meated the entity since 2009. Of course, even prior to that, it failed to expand its fleet of power stations. However, even where it did expand (by building two of the world’s larg est coal-fired plants), corruption in the distribution of contracts under mined the EAF of those stations. They are still not fully functional and were meant to be onstream by 2012. A decade later, the gov ernment has declared a state of disaster in relation to the electricity supply. In fact, President Cyril Ramaphosa announced the state

36  MODERN MINING  March 2023