SOUTH AFRICA BUSINESS ENVIRONMENT & OPPORTUNITIES IN THE MINING SECTOR MAY 2015 LIMA, PERU

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1 SOUTH AFRICA BUSINESS ENVIRONMENT & OPPORTUNITIES IN THE MINING SECTOR MAY 2015 LIMA, PERU

2 South Africa in the world Korea

3 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

4 South Africa Economy at a Glance

5 South Africa s leading Export Partners (2014) Leading export partners 2014 (%) Export Country US$ (billions) INDIA 9% UNITED KINGDOM 8% CHINA 21% 1. China United States Japan 5.05 NAMIBIA 11% GERMANY 11% UNITED STATES 16% 4.Botswana Germany Namibia 4.70 BOTSWANA 12% JAPAN 12% 7. India United Kingdom 3.58 Source: Quantec

6 South Africa s leading Import Partners (2014) UNITED KINGDOM 6% Leading import partners 2014 (%) Import Country US$ (billions) INDIA 8% JAPAN 7% CHINA 27% 1. CHINA GERMANY SAUDI ARABIA 7.35 NIGERIA 9% 4. UNITED STATES 6.81 UNITED STATES 12% SAUDI ARABIA 13% GERMANY 18% 5. NIGERIA INDIA JAPAN UNITED KINGDOM 3.40

7 South Africa Trade: Major Export Products Iron Ores Platinum Gold Motor Vehicles and Components Coal Ferro Alloys Diamonds Catalytic Converters Chrome Manganese

8 South Africa Trade: Major Import Products Crude Oil Motor Vehicles and Components Telephone sets Computing Equipment Pharmaceuticals Earth Moving Equipment Electric Generators Industrial Machinery Printing Machinery Rubber Tyres

9 Bilateral Trade Peruvian Exports to South Africa (2013): USD South African Exports to Peru (2013): USD

10 Important Peruvian Exports to South Africa Zinc and zinc products Fish and sea food Inorganic Chemicals Synthetic Fibres Cereals Non-woven Fabrics Coffee Mining and other Equipment

11 Important South African Exports to Peru Steel and Articles of Steel Mining Equipment and other Machinery Agricultural Chemicals Explosives, Fuses and Detonators Preserved Fruit Plastics and Articles Ferro Alloys

12 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; STRATEGIC CONTEXT Beneficiate of own minerals and natural resources; Improve physical industrial infrastructure; Regionally spread industrial development. Integrated into the mainstream economy, in terms of value chains and localisation initiatives including skills, technology, tooling and supplier development initiatives

13 The South African Business Environment Sound Economic Policies High level of macro economic stability Reduced taxes and import duties Central Bank independent from Government Inflation targeting

14 South Africa- global perspective 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 & 27 th largest economy The country is also regarded as the gateway to Africa. South Africa has the 2 nd largest economy on the African continent, accounting for approximately 25% of the continent s GDP. According to the World Bank, South Africa ranked 41 st out of 189 in the world for the Ease of Doing Business in The JSE Securities Exchange is Africa s largest and most developed Securities Exchange and one of the world s top 20 exchanges.

15 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.

16 ROLE OF SA IN WORLD MINERAL PRODUCTION,

17 ROLE OF SA IN WORLD MINERAL RESERVES 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, Zirconium # 2 Titanium minerals #4 Alumino-silicates #1 Gold #2 Vermiculite #2 Vanadium #2 PGMs #1 Chromium #1 Manganese # Percentage of World Total

18 South African Mining Sector Information

19 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.

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21 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.

22 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 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 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.

23 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. SELECTED VALUE CHAINS ENERGY STEEL/STAINLESS STEEL PIGMENT AND TITANIUM METAL PRODUCTION AUTOCATALYST AND DIESEL PARTICULATE DIAMOND PROCESSING AND JEWELLERY SELECTED COMMODITIES (SOUTH AFRICA SHARE OF WORLD PRODUCTION (2005)) 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 Mineral Beneficiation - Exploration of the Partnership Potential between China and South Africa

24 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.

25 Mining Sector Information Mining industry performance Foreign Direct Investment in the mining industry grew considerably from R112 billion to R389 billion, from 2004 to Gross fixed capital formation (GFCF) increased from R40 billion in 2007 to R75 billion in Employment in the mining industry grew from approximately in 2007 to in Number of women employed increased from in 2007 to in The number of operating mines has increased from 1414 in 2007 to 1637 in 2012.

26 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%

27 Mining Investment Opportunities

28 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 biand multilateral agreements and partnership

29 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.

30 Identification of Beneficiation Opportunities Development of Action Plans Detailed industry analysis Applications PGMs How it works Substitutes 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 ongoing on base metal catalysts instead of platinum and biofuel cells main use of the catalytic activity of living cells and/or their enzymes. Filter 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 PGMs example

31 South Africa s investment environment South Africa today is one of the most sophisticated and promising emerging markets globally, mainly because of Abundant natural resources Excellent transport & logistical infrastructure World class financial system Political & economic stability with sound macro-economic management Competitive sectors/industries Skills availability Favourable cost of doing business

32 CONCLUSION 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.

33 the dti s Investment Services 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 Contact Details Mrs Manone Madyo, Deputy Director: Investment Promotion MMadyo@thedti.gov.za Mr Paul Pieterse, Deputy Director: Export Promotion PPieterse@thedti.gov.za

34 THANK YOU GRACIAS