1. HOW CAN BOTSWANA CAPITALIZE ON THE MINING SECTOR TO ENSURE ECONOMIC GROWTH & DIVERSIFICATION?
Botswana Investment & Trade Conference
20-21 November 2013
Bridgette Radebe
EXECUTIVE CHAIRPERSON: MMAKAU MINING
PRESIDENT: SOUTH AFRICAN MINING DEVELOPMENT ASSOCIATION (Junior Mining Chamber)

2. The African Socio-economic and Political paradigm shift and resulting economic successes
In 2011, the real GDP of Africa recovered and grew by 5.2% after increasing by 5.3% in and collapsing through
From 2009 to 2011, Africa’s GDP grew at an average annual rate of about 3%
In 2011, the GDP increased by an average of 6.3% in African petroleum-exporting countries
Africa’s economy is projected to grow by 4.8% in 2013 and accelerate further to 5.3% in (AFDB- Africa Economic Outlook)
To achieve the above we need structural transformation based on natural resources to address the socio-economic and political challenges created by the resource curse.
The resource producing countries in Africa need to function under a meaningful and effective transformative legislation.
Many countries are in the process of developing such legislative frameworks, eg:
The Mineral Petroleum Resources Development Act has been used in South Africa to redress the historic socio-economic and political imbalances in the mining sector.
Source: US Geological Survey Minerals Year book 2011

3. Historically, Investments in Mining had an exploitation culture in Africa:
Eg: Case Study South Africa
Militant labour force fighting exploitative labour practices
No black ownership
Monopolistic industry in South Africa pre 1994
No royalty payments to rural communities
Ghost towns
Neo-colonialism

4. Economic exclusion of the Majority – a recipe for instability
Barney Bernato
Monopolistic industry
dominated by large mining houses, large-scale mining operations
No junior companies
History of legal, institutionalized exclusion of blacks and women, eg
black advancement prohibited in the following fields: (eg. certificated miners, apprentices) in the mining sector impeded by law (eg. Scheduled Persons Clause, Mines and Works Act) until 1987
After 1987 the historic exploitation of black workers, rural communities and women in the mining industry prevailed
Unionisation and major labour uprising a daily practice
Civil unrest – the norm
Monopoly of the industry by four companies
The Junior Mining Sector stifled
Financial institutions adverse to junior mining investments
The state was not the custodian of the mineral rights hence Foreign investments stifled
Godfathers of the old order gold and diamond rush in South Africa
Cecil John Rhodes
Ernest Oppenheimer
Exclusion of Women

5. Post 1994: Legislative Transformation Major contributor towards paradigm shift
State intervention:
Need for legislative change recognized through:
The Mineral and Petroleum Resources Development Act
The State became the custodian of the Mineral rights
The Mining industry liberated to the inclusion of Historically disadvantaged South Africans
Foreign direct investment flowed.
The creation of the Mining Charter and the new mining legislation became the backbone of the paradigm shift
Fair Labour Laws
Rural Communities became beneficiaries of their Mineral Wealth.
Former President Nelson Mandela Opens Parliament 1997

6. SA Mining Charter from 2004 – Creating an enabling environment in the paradigm shift
26% equity participation in 10 years time
40% black managers within 5 years
10% women participation within 5 years
100% literacy within 5 years
BEE procurement
Beneficiation
Social plan and labour plan

7. Post 1994: The transformation march towards the paradigm shift
State becomes custodian of mineral rights
In line with international norms
Historically Disadvantaged South Africans and foreign investors get access
Growth in Junior mining companies
Balancing the playing field

8. The Mining Industry to Graduate from the following Historic Mining Investment Model:
Explore + Extract + Exploit + Export = Ghost Towns + Resource Curse
From Exploited Mining Environment To
Sustainable Mining Environment
Massacres and Ethnic Cleansing
Rape of Mineral Wealth fare - Weapon of war
Conflict Diamonds the Root of all Evil
Conflict Diamonds the Root of all Evil

9. This land must be healed
This land, the whole land
Will be healed, must be healed
These brazen cities, the swollen mines
The mineral of our sweat
The teeming ghetto, the dormitory cells
In towns and squalid squatter camps
Where hope smothers in a tyre
These furnaces of human indifference must incinerate
With all the heat of a healing fire
Those were the dark ages of mining
And now the winds of change are blowing
A brighter new future our way-
A future of Global Mining Transformation
A future of the paradigm shift
- Don Matera

10. Mining industry post state custodianship of mineral rights – the fruits of paradigm shift
Liberalisation of mining industry
Mining regulation in line with international practice
Development of junior mining sector
Mushrooming of exploration companies
Rural community equity participation and payment of royalties to rural communities
Creation of Integrated Development Plans and eradication of ghost towns
Robust procurement opportunities
Beneficiation - an engine for economic growth       

11. Robust growth opportunities in the South African mining industry
Total contribution of mining in South Africa – data (estimates)
Total contribution of mining:
GDP: $49-billion or 19%
Jobs: (16% of total employment)
Mining does not account for just 6.2% of GDP. Rather, if the indirect multiplier effects are included the total is closer to 19%.
The multiplier effects of mining are significant.

12. How did South Africa capitalize on the mining sector to ensure mining growth and diversification? Mining remains a key contributor to the South African GDP
19% of GDP (directly and indirectly)
38% of merchandise exports (primary and beneficiated mineral exports)
12% of fixed investment (directly and indirectly)
Attracts significant foreign savings (R1.9trillion or 43% of value of JSE)

13. How did South Africa capitalize on the mining sector to ensure mining growth and diverfication? Mining remains a key contributor to the South African GDP
Accounts for 13.2% of corporate tax receipts (R17billion in 2010 and R6billion in royalties.
16% of formal sector employment (directly and indirectly)
50% of volume of Transnet’s rail and ports
94% of electricity generation via coal power plants
40% of electricity demand.
About 37% of the country’s liquid fuels via coal

14. Mining remains a key contributor to the South African GDP
Accounts for R441billion in expenditure and R407billion spent locally.
The total mining expenditure in 2010 was R441-billion, of which:
R228.4-billion was spent on purchases and operating costs (timber, steel, explosives, electricity, transport, uniforms, etc.
R78.4-billion went on salaries and wages for mine employees.
R49-billion on Capex (the lifeblood of mining).
R17.1-billion in tax.
R16.2-billion in dividends (only 3.7% of total).
R38-billion on depreciation and impairments.
R13-billion on interest to the banks

15. Procurement since 1994 – the leading force behind enterprise development in the paradigm shift
Develop BEE mining support industries
Approximately $600 million to HDSA 500 Buyers 4
Total annual procurement budget – estimated at $6 billion 3
33 mining houses; 15 venues; 6 provincial governments 1
suppliers (2500 Narrow Based HDSAs
500 BBEE) 2
Source: SAMPPF

16. Procurement an Engine for Economic Growth
Develop BEE mining support industries
Approximately $950 million to HDSA 600 Buyers 4
Total annual procurement budget – estimated at $8.5 billion 3
66 mining houses; 15 venues; 6 provincial governments 1
suppliers (4500 Narrow Based HDSAs
12000 BBEE) 2
Source: DECTI

17. Botswana, A leading example of the country First strategy: A catalyst for economic growth and diversification
The Diamond Trading Company Botswana (DTCB), is a successful example of an economic paradigm shift.
The relocation of the Diamond Trading Company from London to Botswana is the new beginning of an economic revolution to develop from diamond sorting and valuing into beneficiation of minerals in Africa.
The country first approach is implemented through the creation of the DTCB
We salute President Khama and the people of Botswana for creating the Okavango Diamond Company which will secure the supply of diamonds to international diamond traders and investors. This is a great step towards liberating the diamond industry into beneficiation and diversification.
The Country First Strategy Prevails.

18. Country First Economic Policies in the Paradigm Shift
The majority sentiment is that strategic minerals should not be foreign owned. E.g. let us learn from the example in Canada.
The Canadian government blocked BHP Billiton's $39 billion bid for Potash Corp, the world's biggest producer of a key crop nutrient, halting what had been the world's biggest takeover.
Industry Minister Tony Clement said "In Canada, our natural resources are an important economic driver,. "...I have come to the conclusion that BHP Billiton does not present a likely net benefit to Canada.” (2011).
‘Country First Strategy!’ Should result in a net benefit for its people and its economy.

19. Beneficiation a catalyst for economic growth and diversification
In 2010, South Africa as a resource economy was estimated to possess approximately $2.5 trillion in non-energy in situ mineral wealth, making it one of the wealthiest mining jurisdictions in the world. There was a need for South Africa to transform its mining industry culture from exporters of mineral ores or semi-processed minerals to high value intermediate and finished products (Beneficiation).

20. What has South Africa learned from Botswana’s and Canada's Country First Mining Strategy?
South Africa identified 11 Strategic minerals,
SAMDA has included two additional minerals which are strategic and pivotal for the country’s developmental needs
Rank
Commodity
Needs of the Country and the Value Chain 1
Coal
Energy supply risk 2
Gold
Job creation potential - jewellery beneficiation 3
Iron Ore
Infrastructure and job creation prerogative 4
Manganese 5
Diamonds
job creation potential 6
PGM
SA’s international dominance; job creation– energy supply 7
Chrome
SA’s international dominance 8
Vanadium 9
Titanium
High technology industries 10
Nickel
Niche steel products 11
Uranium
Clean Energy
SAMDA proposed the following minerals to be Additional Strategic Minerals 12
Phosphate
food security and fertilizer supply 13
Limestone
Required for cement manufacture and construction projects
*SAMDA - South African Mining Development Association

21. Beneficiation: A Government Led Value Chain Strategy
The 11 commodities have been clustered according to their value chains. The government has identified five value chains that will be the preliminary focus of the new Beneficiation Strategy. There are instances where some of the commodities share value chains, such as Gold and Platinum. The five value chains are:
• Energy commodities(coal, uranium and thorium)
• Iron and steel (iron-ore, chromium and manganese)
• Pigment and titanium production (titanium and vanadium)
• Autocatalytic converters and diesel particulate filters(platinum)
• Jewellery fabrication (diamonds, gold and platinum)
Each value chain requires specific collaboration and interventions in order to maximise the value extraction of the associated minerals. Each value chain has its own unique beneficiation strategy, which can be further unpacked.

22. Iron and Steel Value Chain
Jewellery Fabrication
Infrastructure
PGM Value Chain (Energy- Fuel Cells)
Energy Value Chain

23. Beneficiation Incentives Created By Government Through The Following:
Industrial Development Zones, eg: Airports or Harbours (Mining companies have the opportunity to establish beneficiation plants at an IDZ)
Special Economic Zones (SEZ) - A geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. "Nationwide" laws may be suspended inside a special economic zone – eg: Tax incentives from 28% to 15% Corporate tax rate reduction.

24. Section 12 I Tax Allowance Incentive (12I TAI) (SARS)
The Section 12 I Tax Incentive is designed to support Greenfield investments (i.e. new industrial projects that utilise only new and unused manufacturing assets), as well as Brownfield investments (i.e. expansions or upgrades of existing industrial projects). The new incentive offers support for both capital investment and training.
The incentive offers:
R900 million in the case of any Greenfield project with a preferred status;
R550 million in the case of any other Greenfield project;
R550 million in the case of any Brownfield project with a preferred status;
R350 million in the case of any other Brownfield project;
An additional training allowance of R per employee may be deducted from taxable income; and
A maximum total additional training allowance per project of R20 million, in the case of a qualifying project, and R30 million in the case of a preferred project

25. INTERGRATED RESOURCES DEVELOPMENT MODELS
A Integrated Mining Development Partnership with Local, Provincial and National Government, as well as Producers, Labour, Rural Communities, Business and various other stake holders.
Objective is to create a sustainable mining economy in the rural areas where mining production takes place in a model that will develop the mining areas , rather than creating Ghost Towns.

26. The Integrated Solution Model26

27. Municipalities in Context27

28. The Mining Industry in Context
SLP – Social Labour Plan
LED – Local Economic Development 28

29. Mining Companies involved in Rural Upliftment Partnership Models through Producers Forums:
Akanani Mining (Pty) Limited
Anglo Operations Limited
Anglo Platinum
ARM Platinum (Pty) Limited
ASA Metals (Pyt) Limited
Assmang Limited (Dwarsrivier Mine)
Barplats Mines Limited (Rhodium Reefs)
Boynton Investments (Pty) Limited
Chromex Mining (Pty) Limited
Corridor Mining Resource (Pty) Limited
Eastern Platinum Limited
Impala Platinum Limited
Lebowa Platinum
Marula Platinum
Modikwa Platinum Mine Joint Venture
MTC Minerals
Northam Platinum Limited
Pan Palladium South Africa (Pty) Limited
Plateau Resources (Pty) Limited
Platreef Resource (Pty) Limited
Rustenburg Platinum Mines (Pty) Limited
(Eastern Limb Development)
Samancor Chrome Limited
Sishen Iron Ore Company (Pty) Limited
Two Rivers Platinum (Pty) Limited
Umnotho weSizwe Investment Holdings Limited
Veremo Holdings Limited
Westen Platinum Limited (On behalf of Messina
Platinum Mines Limited)
Xstrata South Africa (Pty) Limited
SLP – Social Labour Plan
LED – Local Economic Development 29

30. Public Private Partnership Funds Invested in creating a Sustainable Rural Economy in Sekhukhune District Limpopo 30

31. RBCT COAL EXPORT ENTITLEMENT

32. Richards Bay Coal Terminal

33. Trans Kalahari Corridor
T K C

34. Paradigm Shift Success Stories: The Rural Community Perspective
Royal Bafokeng Holdings is an excellent role model for rural community ownership initiatives:
Market Capitalisation: R40 billion (This is a combined figure of all its investments on the JSE ).
Dividends are invested in rural renewal projects.
In past 10 years over R5 billion invested in clinics, education, public utilities.
Great mentorship to other rural communities and other socio-economic development projects.
Most its mines are situated in rural areas.
Mining is a catalyst for rural development.
Source RBN financial report : 2006

35. Paradigm Shift Success Stories: Women in Mining Perspective – MMAKAU MINING
ENERGY
STEEL AND ALLOYS
PRECIOUS METALS
26%
6.5%
65%
Eureka Gold Mine
Karoo Uranium 9%
Hernic Ferrochrome
Marula Platinum Mine
100%
15%
Mmakau Energy
Madibeng Exploration
51%
Mmakau Coal SA
26%
51%
26%
26%
100%
Dorsfontein Coal Mine
Tumelo Coal Mine
Brakfontein Reserve
Forzando Coal Mine
Schurvekop Reserve

36. Paradigm Shift Success Story: Patrice Motsepe - African Rainbow Minerals
African Rainbow Minerals (ARM), is a diversified mining company with interests in platinum, coal, gold, iron ore, manganese and chrome.
Market Cap of R41,7 Billion (2013).
ARM has spent R300 million in 3 years on Local Economic Development and Social & Labour Plans.
R85 million on Rural Community, women, youth, church and trade union upliftment projects.

37. The Mining Industry Paradigm Shift

38. Many achievements in the Long Road to Economic Freedom
I have walked that long road to freedom. I have tried not to falter; I have made missteps along the way. But I have discovered the secret that after climbing a great hill one only finds that there are many more hills to climb. I have taken a moment here to rest, to steal a view of the glorious vista that surrounds me, to look back on the distance I have come, but I can rest only for a moment, for with freedom comes responsibility, and I dare not linger, for my LONG WALK HAS NOT YET ENDED.
(Nelson Mandela)

39. THANK YOU