2. “..specific (RDP) policies aim to expand the competitive advantage already enjoyed by the mining and capital and energy-intensive mineral processing and chemical industries that lie at the core of the economy and which provide the bulk of the country's foreign exchange” The “RDP must strengthen and broaden upstream and downstream linkages between the burgeoning mineral-based industries and other sub-sectors of industry.” Pricing of mineral inputs: “Where conglomerate control impedes the objectives, anti-trust policies will be invoked”.

3. “an effective review of the minerals rights regime, lowering the cost of critical inputs including logistics and skills in order to stimulate private investment in the mining sector, and setting up a state-owned mining company that … promotes beneficiation, as well as greater utilisation of the mineral resource base of the country for developmental purposes, including potentially through a sovereign wealth fund.” “Refocusing the beneficiation strategy to support fabrication (stage 4) (rather than only smelting and refining, which are both capital and energy intensive), including stronger measures to address uncompetitive pricing of intermediate inputs, such as where appropriate, export taxes on selected mineral products linked to clear industrial strategies.”

4. “if the mineral endowments are used to facilitate long-term capabilities, these resources can serve as a springboard for a new wave of industrialisation and services for domestic use and exports”; “attention will be devoted to stimulating backward linkages or supplier industries (such as capital equipment, chemicals, engineering services), especially as demand is certain, there is an opportunity for specialised product development, and the product complement is diverse. They are also more labour absorbing than typical downstream projects. Such products have the potential for servicing mining projects globally” “The (growth) differentiator is how much the country invests in human capital, product development and technology.”

5. Minerals in the ground belong to the people as a whole and should benefit the economy as a whole; The state must capture the mineral resource rents and deploy them in developing long-term physical and human infrastructure (inter-generational equity); Mining must catalyse broader industrialisation through the realisation of all the economic linkages: Mining must catalyse broader industrialisation through the realisation of all the economic linkages: Backward Linkages into capital goods, services & consumables; Backward Linkages into capital goods, services & consumables; Forward Linkages into manufacturing, energy and infrastructure Forward Linkages into manufacturing, energy and infrastructure Destructive monopoly pricing of mineral feedstocks must be stopped! Minerals must be available for transformation at facilitatory prices, all along the mineral value chains. Investment in STEM skills and RDI is critical for realising the vast beneficiation opportunities.

6. What is Beneficiation? Narrow definition: –Value-added above a “base” state (ore, concentrate, metal) Broader definition: –Total domestic VA (value-addition), excluding all imported inputs. Ore exports Bene= ∑SA_VA ∑VA = imports + local VA Mining Concen- tration SmeltingRefiningSemis Manu- facturing ∑VA = Imports + local VA Conc exports Bene= ∑SA_VA Alloy exports Bene= ∑SA_VA Metal exports Bene= ∑SA_VA Semis exports Bene= ∑SA_VA Manu. exports Bene= ∑SA_VA Beneficiation is the sum of local VA in the exported product = VA in all inputs plus the VA in the process. = both backward and forward linkages!

7. Two approaches to DOWNSTREAM BENEFICIATION: domestic demand driven methodology For rapid Job Creation, the domestic demand driven methodology is preferable, except for minerals with potential “producer power”. The DTI/IDC value chains approach reflects this. “Demand-side” rapid job creation 2) “Demand-side” Methodology: Identifies critical mineral inputs into the economy needed for rapid job creation and then develops strategies for the cost-effective supply of those mineral feedstocks. “Supply-side” 1) “Supply-side” Methodology: Starts from the national mineral endowment and then develops strategies for their beneficiation. (This generally appears to be the DMR approach in “A Beneficiation Strategy For The Minerals Industry Of South Africa”)

8. 8 The Principal Mineral-Based Feedstocks for rapid JOB CREATION SA has ample resources for the cost-effective production of all of these critical feedstocks for downstream job creation!

9. Forward Linkages Forward Linkages: Intermediate products => Manufacturing; Logistics; other sectors (agriculture, forestry, fisheries, etc.) Forward Linkages Forward Linkages: Intermediate products => Manufacturing; Logistics; other sectors (agriculture, forestry, fisheries, etc.) Backward Linkages Inputs: Capital goods Consumables Services Backward Linkages Inputs: Capital goods Consumables Services Knowledge Linkages HRD: skills formation R&D: tech development Geo-knowledge (survey) Knowledge Linkages HRD: skills formation R&D: tech development Geo-knowledge (survey) Spatial Linkages Spatial Linkages: Infrastructure (transport, power, ICT) and LED Spatial Linkages Spatial Linkages: Infrastructure (transport, power, ICT) and LED Fiscal linkages Fiscal linkages: Resource rent capture & deployment: long-term human & physical infrastructure development Fiscal linkages Fiscal linkages: Resource rent capture & deployment: long-term human & physical infrastructure development Knowledge linkages are a prerequisite for developing the crucial back/forward beneficiation linkages! Mineral Based Development Beneficiation: Maximising the Mineral Economic Linkages:

10. Finland managed to shift from a 1970 resources (pc) trajectory to a 1998 manufactures (mf) trajectory, through the development of its resources inputs (machinery) and outputs (value-addition) sectors (source Palma, G. 2004) Finland: e.g. Forestry- grew capital goods (machinery) & value-added exports (wood manufactures, pulp/paper) Thru’ investment in R&D! Finland: 1970 on primary commodities (pc- mining & forestry) inverted U-curve, but shifts to 1998 manufacturing curve (mf- resources inputs & outputs/beneficiation). Chile: 1970 on manufacturing U- curve (ISI), but shifts to 1998 primary commodities (mining & agriculture) curve, after opening up its economy (coup) in the 70’s.

11. Prolong the life of the resources, migrate to exports of resource techs and value-added products: survive beyond resource depletion! (Norway hydrocarbons: OG21 tech strategy) International Lessons: Norway (Norway hydrocarbons: OG21 tech strategy) >Tech exports >Gas VA >resources >recovery R&DHRD Statoil 75k Extraction ex-linkages

12. Minerals often have large Resource Rents (unearned) = better deposit = Demand > Supply: limited resources Resource Rent = Return on Investment (ROI) > minimum ROI to effect the investment Use Resource Rents to dramatically increase beneficiation and jobs! Inputs (purchases) Labour “Normal” ROI Resource Rents = “luck” rents (unearned) MinerMiner StateState Time t Tax (CIT) Impose Resource Rent Tax (RRT) of 50% on ROI > normal SA ROI Allow reduction of RRT rate through greater beneficiation (offsets) Impose Resource Rent Tax (RRT) of 50% on ROI > normal SA ROI Allow reduction of RRT rate through greater beneficiation (offsets)

13. Constraints to SA up- & down-stream beneficiation Lack of coherent state beneficiation strategy across the critical ministries (DTI, DMR, EDD, Treasury, DST, et al). Each department has its own strategy; Monopoly pricing (IPP) of mineral feedstocks by venal companies (Sasol, AMSA, et al) destroys downstream opportunities; Disappearance of national mining technology development (RDI) capacity (demise of COMRO and exit of Mining Houses) has severely compromised the upstream capital goods cluster; Shortage of STEM skills due to problematic schooling pipeline (matric maths & science graduates); Lack of local content, value-addition and RDI requirements in Mining Licenses; Lack of mineral value addition incentives such as tax incentives/offsets (RRT); Constrained National budget to facilitate (need RRT)

14. Towards a National Beneficiation Strategy? 1.Ensure tight coordination of ministries (DMR, DTI, DoE, DST, EDD, DPE, Treasury, at al) to maximise the linkages through strategy alignment. PICC-type structure? 2.Amend the MPRDA objectives to include the maximisation of the developmental impacts of mining, to allow for backward and forward linkages conditionality and minimum RDI spend in mining licenses (local content, value-addition milestones and local RDI spend); 3.Amend the MPRDA to cater for a category of “strategic minerals” (critical feedstocks into job-creating sectors) with extraction and pricing conditions (especially steel and coal/gas); 4.Introduce a Resource Rent Tax (50% on returns above normal ROI) with deductions for greater beneficiation (local content and further value addition); 5.Public tender (“price discovery”) of all known un- concessioned mineral assets against developmental goals (up- & down-stream beneficiation); State beneficiation levers lie in ownership of mineral resources!

15. Impose local content milestones (year 5, 10, 15, 20) and RDI targets (3%VA/an) in all mining licenses; Introduce RRT and allow RRT offsets against greater local content; Ensure harmonised minerals and industrial strategy- create strong cluster (“PICC” for MEC?); Base the BEE purchase requirements in the Mining Charter on the BEE proportion of local value added, not total (imported) value; Establish beneficiation SEZs (e.g. Pt Valley); Invest in the development of upstream technologies (rebuild COMRO) and STEM skills (fund from RRT); Beneficiation: Backward Linkages Strategies

16. Introduce domestic pricing controls on “strategic mineral feedstocks” at EPP or cost plus reasonable return on investment (ROI); Align beneficiation strategies- strong state coordination through a “MEC” ministerial cluster; Impose beneficiation milestones in mining licenses at 5, 10, 15 & 20y (NGP proposes: ~50% in 20 years); Develop an RRT – value-addition offsets scheme; Impose a small export tariff on select raw mineral exports to encourage beneficiation, where viable; Establish new steel producers to sell at EPP in domestic market and discipline current IPP abusers; Ban all scrap metal exports (reserve for domestic use); Producer Power- PGMs: Introduce single-channel exports to facilitate downstream beneficiation; Establish “Beneficiation SEZs”; Support beneficiation technology and skills development; Link utility tariffs to value-added (transport, energy, etc.); Develop regional power solutions (HEP, gas, etc.). Downstream Beneficiation Strategies:

17. Rebuild a mining technology development capacity as a PPP with the mining companies, mining capital goods cluster and the state; Set minimum local RDI spend (%VA/an) and STEM HRD spend in all mining licenses; Dramatically increase funding for R&D (from RRT); Dramatically increase funding for STEM HRD (from RRT): school maths & science, STEM graduates and technicians/artisans; Make engineering & science degrees free (notional state loan only). Discourage exit of tech skills- Convert state tertiary education subsidies into a notional “loan” (payable on exit). Beneficiation - Knowledge Linkages Strategies

18. Regional Integration: We must increase our market to compete globally Progress the extension of membership of the Southern African Customs Union (SACU) to increase market for linkages industries; Consider the formation of a SADC free trade zone for iron/steel, petrochems and energy (similar to ECSA- 1951 Treaty of Paris, precursor to the EU); Invest in long-term trade infrastructure across the southern African region (NGP- from RRT), Include regional producers in Producer Power strategies (e.g. PGMs); Develop and support a regional mineral inputs strategy; Develop a regional HEP strategy; Develop a regional gas utilisation strategy; The regional mining capital goods market is larger than the EU’s!

19. Share of diversified manufacturing exports, by region Mining Capital Equipment Exports to Africa have grown 400% ($ million) Note that this excludes mining based services. The export of mining-based services is extensive and growing very rapidly. Source: Roberts 2011 Source: Kaplan 2011

20. SIMS Indicative JOB CREATION Guesstimates (400k to 1 million) ACTIONS Categorisation of SA into “Known” & “Unknown” geo-terrains (CGS) Amend MPRDA to impose linkages conditions on licenses Amend MPRDA for “Strategic Minerals” w/pricing conditions Invest in Mineral Infrastructure (PPPs) Introduce small export tax on select crude mineral exports Build SMC (State Minerals Company) for Strategic Minerals & BEE Introduction of a 50% Resource Rent Tax (RRT) Develop new EPP iron ore & steel project: Amend Exchange Control Regs for sales of “precious metals” Poss. nationalisation of obdurate IPP suppliers Lower royalties to 1% Ban scrap metal exports Apply IPP rail & power tariffs to IPP abusers Forensic audit of mineral rights “conversions” Forensic audit of mineral rights “conversions” JOBS in new mines & linkage sectors, >BEE JOBS in New Mines & Expanded production JOBS in New Mines & Expanded production JOBS in Up- and Downstream (manufacturing & services) Industries JOBS in manufacturing JOBS across the economy JOBS in agric & Lower agric product prices Up- & downstream JOBS. Grow B-B BEE. JOBS in HRD, R&D Up- & downstream JOBS. Grow B-B BEE. JOBS in HRD, R&D JOBS across the economy JOBS in construction & infra. inputs industry JOBS in construction & infra inputs industries JOBS in PGM-based industries (H 2 economy) Fiscal Stability (JOB protection in slumps) JOBS in expanded production & new mines JOBS in LED (local & sending communities) IMPACTS

21. 1.Much greater coordination of key Ministries (DTI, DMR, DOE, DST, Treasury, DPE, et al) through a strong MEC Cluster with tight coordination (PICC type structure?); 2.Eliminate abusive pricing (IPP) of our resources! 3.Introduce a RESOURCE RENT TAX (RRT) of 50% (ROI>15%) and use it to drive value-addition through RRT deductions for downstream and upstream beneficiation; 4.Amend MPRDA for license linkages conditions (up- & downstream VA and HRD & RDI spend) and, for “strategic minerals”, with extraction and pricing conditions; 5.Investment in STEM skilling (incl. school maths & science), tech development (RDI) and geo-sciences (geo-mapping for future resources) from RRT receipts. 6.Maximise the development impact of mineral resources through Public Tender (price discovery) of all known unencumbered mineral assets; 7.Establish a Presidential task team to drive beneficiation.

22. We have the vision, the tools and resources to make it happen! Thank You Ke a leboga Ngiyabonga Dankie Inkosi

23. Extra slides PPC T&I Beneficiation Aug 2014

24. National COMPARATIVE advantage Resources Depletion (mining finite resources) Capture Resource Rents Invest rents in long-term Human & Physical Infrastructure (skills, power, transport, water, ICT) Invest rents in long-term Human & Physical Infrastructure (skills, power, transport, water, ICT) National COMPETITIVE advantage Beyond finite resources = inter-generational equity Finite Mining Capture RESOURCE RENTS Invest rents in competitive advantage: STEM SKILLS INFRA: ICT, transport, power, etc. Sustainable development (beyond resources) Hartwick’s Rule on inter-generational equity in the extraction of finite resources

25. IPAP 2014/15: Beneficiation Initiatives Mineral Beneficiation (Upstream and Downstream) Leveraging state tariffs for mineral value addition Viability of an Iron/Steel and Titanium Pigment Industrial Complex Development of Resources Capital Goods Development Plan Metal Fabrication, Capital & Rail Transport Equipment Leveraging the government’s CAPEX and OPEX programmes Promoting localisation in the private sector National Tooling Initiative National Foundry Technology Network Plastics, pharmaceuticals, chemicals and cosmetics Plastics (coal/gas MVC) Plastics trade policy measures Upstream and Midstream Oil and Gas (HCs) Strategy to leverage opportunities presented by SA’s shale gas resources The Saldanha Bay IDZ/SEZ (HC capital goods) Transversal Interventions Public Procurement, Industrial Financing, Developmental Trade Policy, Competition Policy, Innovation and Technology, Special Economic Zones (SEZ) Regional integration

26. South Africa is well-endowed with mineral resources South Africa’s Mineral Reserves, World Ranking, 2009 Production & Nominal Life (assuming no further reserves) at 2009 Extraction Rates Source: SAMI 2009/2010, DMR 2010; and Wilson & Anhaeusser 1998: “The Mineral Resources of South Africa”, CGS Pretoria (for BC- Bushveld Complex)

27. The in-situ value of South Africa’s mineral resources is estimated at an astounding $6.24 trillion (2012). By value they comprise: Source: EcoPartners 2012, www.ecopartners.co.za

28. Main Formations & Bodies The Witwatersrand Basin: Gold (>90% of current production), as well as considerable resources of uranium, silver, pyrite & osmiridium; The Bushveld Complex: PGMs with associated copper, nickel & cobalt. Also, chromium (chromite seams) and vanadium & titanium bearing magnetite (iron ore) seams, as well as industrial minerals, such as fluorspar & andalusite; The Transvaal Supergroup: Large resources of manganese & iron ore; The Karoo Basin: Considerable bituminous coal & anthracite resources; The Phalaborwa Igneous Complex: Copper, phosphate, titanium, vermiculite, feldspar & zirconium; Kimberlite pipes: Diamonds (also occur in secondary alluvial, fluvial and marine deposits); Heavy mineral sands: Titanium (ilmenite & rutile), zircon and magnetite, mainly in coastal paleo-dunes; Bushmanland Group: lead-zinc with copper & silver.

29. Source: www.cgs.gov Only a few areas are endowed with mineral assets: Most parts of SA have little on no economic minerals!

30. Global Minerals Intensity of GDP (steel proxy) Source: Adapted from http://advisoranalyst.com Global Context (demand)

31. In addition to the beneficiation embodied in the final exported product (∑VA = all up/downstream VA), there is also indirect “beneficiation” to the wider economy through building the national factor & infrastructure endowments. Justin Lin argues that “a developing country can change its industrial and economic structure by changing its endowment structure” consisting of both its factor endowments (land/natural resources, labour, and physical & human capital) and its infrastructure endowments: both hard/tangible infrastructure and soft/ intangible infrastructure (institutions, regulations, social capital, value systems, etc.). However, Thus, indirect beneficiation in the wider economy includes: Building the knowledge linkages (human capital & tech) Building the spatial linkages (hard infrastructure) However, in order to change the factor and infrastructure endowments, the resource rents need to be reinvested in building them. = Fiscal Linkages

32. 5. FORWARD Value-addition: (beneficiation) Export of resource- based articles 3. BACKWARD Inputs: Capital goods, consumables, services, (also export) 4. KNOWLEDGE Linkages (HRD & R&D): “Nursery” for new tech clusters, adaptable to other sectors 2. SPATIAL Puts in critical infra- structure to realise other economic potential & could stimulate LED Narrow “beneficiation” = forward linkages; Total product beneficiation = back- & forward linkages (∑VA), Total economy-wide beneficiation = all the linkages 1. FISCAL: Capture & invest of resource rents (RRT) in long-term economic physical & human infra (inter- generational) Use depleting assets to change national endowment structure HRD, R&D

33. Mineral deposits embody a massive variation in resource rents (returns above those necessary to attract investment = average return on investment: ROI), much greater than any other sector except for hydrocarbons (oil and gas). In SA ROI in mining varies from average (ca 15%, e.g. marginal gold deposits) to several hundred percent (e.g. iron and manganese ore deposits) = resource rents. Consequently it is difficult to design a minerals regime with generic linkage conditions (local content, value-addition, skills formation, etc milestones) that will efficiently maximise the potential development impact of all deposits over time. In general, a mineral regime will set minimum linkage development obligations in order to make investment into marginal deposits attractive. The best way to flush out the maximum linkage development that any specific mineral deposit could support, would be to get a market response through the public tender of the property against linkage development commitments (a form of developmental “price discovery”). Mineral deposits embody a massive variation in resource rents (returns above those necessary to attract investment = average return on investment: ROI), much greater than any other sector except for hydrocarbons (oil and gas). In SA ROI in mining varies from average (ca 15%, e.g. marginal gold deposits) to several hundred percent (e.g. iron and manganese ore deposits) = resource rents. Consequently it is difficult to design a minerals regime with generic linkage conditions (local content, value-addition, skills formation, etc milestones) that will efficiently maximise the potential development impact of all deposits over time. In general, a mineral regime will set minimum linkage development obligations in order to make investment into marginal deposits attractive. The best way to flush out the maximum linkage development that any specific mineral deposit could support, would be to get a market response through the public tender of the property against linkage development commitments (a form of developmental “price discovery”). MVCs and Mineral Deposit Variability

34. Hybrid free mining (FIFA) and tender system Exploration Terrain (FIFA) Exploration License (Mining Licence Automaticity) Resource Rent Tax “Mining Charter” type socio/labour conditions & Minimum up- & down- beneficiation milestones 3.Known Mineral assets 1.Unknown Mineral assets Delineation Terrain (Auction) Public Tender on: Tech & Fin Capability Rent share (tax) Up/downstream beneficiation Infra development HRD & R&D, tech transfer Mining Concession/Licence 2.Partially Known Define 3 Types of Mineral Terrains: Geo-Reserve Terrain Further geo-survey: CGS SMC, or sub- contractors Risk exploration for future step-in rights.

35. Hybrid free mining (FIFA) and tender system Exploration Terrain (FIFA) Exploration License (Mining Licence Automaticity) Resource Rent Tax “Mining Charter” type socio/labour conditions & Minimum up- & down- beneficiation milestones 3.Known Mineral assets 1.Unknown Mineral assets Delineation Terrain (Auction) Public Tender on: Tech & Fin Capability Rent share (tax) Up/downstream beneficiation Infra development HRD & R&D, tech transfer Mining Concession/Licence 2.Partially Known Define 3 Types of Mineral Terrains: Geo-Reserve Terrain Further geo-survey: CGS SMC, or sub- contractors Risk exploration for future step-in rights. However, this hybrid regime requires substantial amendments to the MPRDA!

36. Finland: The mature forestry industrial cluster 1997 a BACKWARD LINKAGES 1.Specialized inputs Chemical and biological inputs (for production of fibres, fillers, bleaches) 2.Machinery and equipment For harvesting (cutting, stripping, haulage) For processing (for production of chips, sawmills, pulverization) For paper manufacture (30% of the world market) 3.Specialized services Consultancy services on forest management Research institutes on biogenetics, chemistry and silviculture NATURAL COMPARATIVE ADVANTAGE Abundant forestry reserves and plantations (400-600m 3 per capita) b FORWARD LINKAGES 1.Roundwood Sawnwood Plywood (40% of the world market) 2.Wood products Furniture For construction 3.Wood pulp 4.Paper and cardboard Newsprint Art paper (25% of the world market) Toilet paper Packaging Special products Source: Ramos 1998 p111 (CEPAL Review, #68, 12/1998); a: Generates 25% of Finland’s exports; b: Compared with 25-30m3 per capita in the rest of the world. (SA has a similar comparative advantage in minerals) SIDE LINKAGES Related activities Electricity generation Process automation Marketing Logistics Environment industries (paper) Mining (sulphuric acid) Using a natural comparative advantage to develop a competitive advantage

37. Linkages in the SA PGM industry and the relationship between firms (Lydall 2011) Forward Beneficiation Backward beneficiation

38. In 2011 The Research Institute of the Finnish Economy (ETLA) completed a major study on the broader economic impact of their minerals sector and showed a 6:1 employment generation (50% abroad) in other upstream and downstream industries, due to their well-developed mineral linkages.

39. Mining MineralProcessing Exploration Smelting & Refining Fabrication(manufacturing) expl. capital goods geophysical drilling survey etc. mining capital goods drilling cutting hauling hoisting, etc. processing cap. goods crushers/mills hydromet plant materials handling furnaces, etc. Refining Cap. Goods Smelters Furnaces Electro winning cells Casters Fabrication Cap.goods Rolling Moulding Machining assembling exploration services GIS analytical data processing financing etc mining services mine planning consumables/spares sub-contracting financing analytical, etc processing services comminution grinding media chem/reagects process control analytical, etc Refining services Reductants Chemicals Assaying Gas & elec supply Value adding services Design Marketing Distribution Services

40. Markets: Sub-Saharan Africa & World GDP Growth Source: IMF, World Economic Outlook (WEO) Database, October 2012 Regional Trade Strategies are Critical to Growing the Backward MVCs

41. Estimates of further downstream beneficiation in South Africa, (2007 data) Source: Adapted from Migdett 2010 and ANC SIMS 2012 Estimates of further downstream beneficiation in South Africa, (2007 data) Source: Adapted from Migdett 2010 and ANC SIMS 2012

42. Private Shareholders Combine State & Union Holdings to exert control over supply into domestic economy?

43. However, the monopoly pricing (IPP) of steel severely curtails manufacturing jobs Hot rolled coil steel prices, US$/t Value received on exports (EPP) Value received on local sales (IPP) Source: Iscor 2004 in DTI presentation to the Portfolio Committee of Trade & Industry, 24 Aug 2010 Amount that local customers pay above exports World export price Transport costs might be as high as 47% of the cost of importing flat steel!

44. Fertilisers: Grain production Costs in SA Source: Corné Louw 2011, Fertilisers constitute 30-50% of grain/oil seeds input costs, and the IPP-EPP differential is 30% to 50% : Competitive fertiliser prices could have a significant impact on both job retention and expansion in the agricultural sector

45. Total employment in agriculture in South Africa, 1968-2010 Source: Sandrey, R. et al. (2011), Around 1 million jobs have been lost since 1970, aggravated by monopoly fertiliser pricing!

46. Use state ownership of coal mineral rights to apply cost- plus domestic polymer/fertiliser pricing conditions on Sasol; Regulate polymer/fertiliser prices against a basket of international prices (ICISLOR, Platts, Harriman); Strengthen the Competition Act to allow for the effective imposition of competitive pricing in the domestic market (amend the Competition Act) Introduce competition through state facilitation of new players by the reservation of suitable coal/gas resources for tender against new capacity at EPP or cost plus into domestic market; Increase state control of Sasol (currently 26% owned by the IDC & PIC) to >50%, through a strategic alliance with the Union pension funds; Use state infrastructure tariffs (energy, transport) to leverage competitive prices from Sasol. Putative Coal/Gas MVC Strategies

47. Platinum and palladium resources in other countries, compared to South Africa Source: Cawthorn R.G. 1999 PGM MVCs Pt 75% & Pd 50% Case for producer power to effect price stability and greater value addition?

48. Titanium Mineral Concentrates World Mine Production & Reserves 2012 However, SA potentially has 70% of global reserves in the Bushveld magnetites!

49. MVCs should encompass all the SA value in the final consumed or exported product, i.e. both local content and beneficiation; Little MVC headway has been made, principally due to widespread monopoly pricing (IPP) of mineral feedstocks and the decline in upstream industries and R&D due to exit of the old “Mining Houses”; Nevertheless there appears to be strong case for MVCs, particularly the critical feedstocks in job-creating sectors: manufacturing, energy, agriculture and infrastructure, as well as minerals where SA has potential producer power, and in inputs industries (capital goods); Regional markets (economic integration) could facilitate beneficiation (economies of scale), particularly in inputs industries (local content); MVCs could gradually transform SA’s comparative resources advantage into a competitive advantage, especially the local content (capital goods & services) dimension; Wide-ranging instruments could be available to the state to facilitate beneficiation, including conditions on mining licences, anti-trust legislation, incentives, HRD and R&D, but many will require amendments to current legislation; There appears to be substantial potential for downstream beneficiation in the ferrous, coal/gas, PGM and titanium job-creating value-chains (MVCs).