Can you give a brief overview of SRK Consulting (SRK) and the company’s operations in South Africa?

SRK Consulting (SRK) was established in 1974, and today we have 45 offices across six continents. We operate as an independent, international consulting practice providing focused technical advice and solutions to the earth and water resource industries. Within the mining industry, we offer multi-disciplinary services from exploration to mine closure including environmental and social, infrastructure and energy-related expertise. Currently we are very focused on due diligence studies for companies looking to acquire projects and assets in South Africa. The global Group's independence is ensured by the fact that it is strictly a consultancy organization, holding no equity in any project, which permits our consultants to provide clients with conflict-free and objective support on crucial issues. Our mining clients represent approximately 75% of our international business.

The issue of power is undermining the development of South Africa’s mining sector. Can you give us your views of the situation?

South Africa’s power supply is nationalized, and I believe the path to cheaper and more reliable energy supply is to open up this market for private investment. Eskom has agreements with neighboring countries such as Zimbabwe, Botswana and Namibia, but the grid is tightly held. There has been some important progress with government’s Renewable Energy Independent Power Procurement Programme, but the proportion of the country’s energy coming from these sources remains small.

Inadequate energy supply has ramifications reaching beyond the mining sector – negatively affecting vital social components such as the health and education system.

South Africa has made an investment in order to receive power from the Grand Inga Dam, which is a proposed hydroelectric dam on the Congo River at Inga Falls in the DRC. So far, the project has been constantly delayed, and I doubt it will come online anytime soon – if at all. Therefore, the China Energy Investment Limited (China Energy) initiatives in southern Africa look more promising.

There are mixed feelings about China’s growing influence on the African continent. Should it be welcomed?

Whether the influence should be conceived as positive or negative has much to do with the host country’s ability to consolidate the gains from the investments. This includes good guardianship of revenues earned from mineral projects and effectively implemented national policies that ensure local empowerment from all foreign investment. In terms of South Africa, I see a positive future in relation to China. The Chinese have been active in gold mines in Africa for quite some time, and they are also very active in the chrome and steel markets.

What is your perception of the trajectory of South Africa’s mining sector looking at specific key commodities?

Traditionally, the South African mining industry has been dominated by gold. In the 1970’s, South Africa was the world’s number one gold producer by a large margin but has since dropped to number five on the list. The power costs for deep-level gold mines currently in operation are horrendous, with power costs having risen 523% since 2006. In summary, I believe the country’s gold mining industry is experiencing a sunset that will have serious implications for the national socio-economic fabric. There are approximately 110,000 people directly working in gold mines, which means there are about one million people dependent on these sub-sectors.

In terms of platinum mining, the industry is still using traditional methods, even on new-generation shafts. The sector has benefitted from high palladium prices, but as new entries saturate the market, the prices will decrease again. The future for the platinum mining industry in South Africa will be dependent on the development of alternative markets, outside of the combustion engine, for platinum group metals.

Besides power, what are some of the main challenges facing the mining industry?

There is the idea that South Africa should encourage the development of junior mining companies. However, the South African market is not known for its appetite for risk as exists in Canada and Australia, for example; it is therefore difficult to raise money for exploration and small mining ventures. Exploration and development were traditionally done by the large mining houses, which had access to capital; this tradition will be difficult to reverse. In addition, there is minimal investment into the South African mining industry as the Mining Charter requires companies to cede 30% of their business to another party before commencing operations. South Africa should create policies and regulations that will attract investment to the mining industry rather than repelling investment from both junior mining companies and multinationals.  The South African mining industry will not attract meaningful investment with the Mining Charter in its current format.

If we instead focused on creating jobs, there would be no need for stringent regulatory policies in the mining space. Although the policies are geared toward local content development, the effect is merely less profit for all as investors turn to markets with more attractive business environments. While the mining industry can and should be used as a way of creating jobs and national wealth, the public and private sector must put their heads together to find viable solutions. Sadly, the people who are most affected by this lack of communication are the workers on the ground.

Where does SRK see the most opportunity moving forward?

Environmental and social governance (ESG) holds huge opportunity as investors are becoming increasingly concerned with these aspects. Moving forward, we would like to further increase our capacity in the field of ESG, particularly in countries like DRC. Given the demand for these services, we are currently expanding these capabilities at SRK.

Do you have a final message for our international readership?

I hope and believe that South Africa will eventually emerge from this rut and reap the benefits of its riches. For that to happen, leaders need to come together and make creation of jobs and the country’s economy a real priority.