R814bn at stake as exploration cash dries up in SA mining

R814bn in export revenue, barely 1% of global exploration spending. That is the mismatch executives and investors laid out at the Joburg Indaba, warning that South Africa’s mining sector is running down the capital pipeline that converts mineral endowment into future mines. That pipeline, they argued, has withered.

Minerals Council SA president Paul Dunne told the conference, hosted by Resources4Africa, that exploration expenditure has collapsed by 80% over the past two decades, leaving production below levels achieved more than 20 years ago despite what he called an extraordinary endowment. “These realities carry implications far beyond the mining sector because they represent deferred investment, unrealised production, forgone economic activity and employment opportunities that never materialised,” he said.

The timing sharpens the risk. Newmont CEO Natascha Viljoen identified exploration spending as the growth lever the country is failing to pull, noting that while the current commodity bull market rewards the industry today, the concern is what happens when the cycle turns. “We talk about mineral endowment in South Africa; the question is: are we continuing to build on that mineral endowment? Are we spending and investing in the mineral endowments that is in South Africa?” she asked. Challenges such as load-shedding have been overcome, she said, but rebuilding investor trust takes time. “The reality is capital is mobile. The moment capital has left to rebuild trust to get capital back into the country is one of the biggest challenges,” she said.

Viljoen also flagged the risk embedded in record gold prices, which have followed the war in the Middle East and will sharpen scrutiny of how mining companies deploy capital. The biggest mistake a company can make at the top of the cycle, she said, is poor capital allocation. “It’s easy to lose focus and then when the cycle turns we make really bad decisions.”

By contrast, not all signals point downward. Anglo American CEO Duncan Wanblad maintained that South Africa remains one of the world’s premier mining jurisdictions, pointing to his company’s R11.2bn investment in a separation plant using beneficiating technology at Kumba Iron Ore’s Sishen mine in the Northern Cape as evidence that large-scale capital still flows to the right projects. The country’s skills base and solid capital markets are genuine strengths, he argued, but competitiveness depends on conditions beyond geology. “We have to continue to address administrative complexity that too often delays investment decisions or creates unpredictability as far as investors are concerned,” he said, stressing that an efficient regulatory environment, crucially including the long-awaited modern cadastral system for displaying the country’s mineral wealth, should improve transparency and investor confidence.

Government officials acknowledged the friction. The department of mineral resources & energy said it is pushing for a single licensing platform. Industry had earlier flagged inconsistent requirements across departments after the department of trade, industry & competition published its new industrial development strategy in June, which proposed overhauling mining legislation so the state can link beneficiation conditions to mining right allocations in the interest of transformation, a move that irritated the industry. Deputy director general Ntokozo Nzimande said her department is working with the water & sanitation and forestry, fisheries & the environment departments to align licensing timelines. “We acknowledge that there is a fragmentation, but we are working towards pulling all of us together,” she said, adding that progress since 2018 includes the 2022 exploration strategy that created a R100m exploration fund for junior companies, and a critical metals strategy under which Eskom tariffs were negotiated to support smelters and protect jobs.

Dunne said specialist mining investors know the country and its mining methods and are not anti-South Africa, but want legislation that serves both economic transformation and the investment community. DA shadow minister James Lorimer was blunter, citing a succession of anti-investment laws, weak accountability and too much ministerial discretion.

The capital mathematics remains unforgiving: a country with one of the most attractive geological opportunities in the world is attracting a fraction of the exploration money needed to sustain its flagship export earner. Whether the licensing reforms and the R100m exploration fund can rebuild that pipeline before the commodity cycle turns is now the industry’s central question.