South Africa has enormous mining potential, but a backlog of more than 5,000 mining, prospecting and permit applications has become a major obstacle to investment in the industry. 

The country is home to more than 50 mineral commodities and its mineral wealth is estimated at around $2.5 trillion. It has the world’s largest resources of platinum group metals (88% of the global total), manganese (80%), chromium (72.4%), gold (29.7%) and alumino-silicates (37%), according to South Africa’s Government Communication and Information System. 

It accounts for more than 40% of the global production of ferrochromium, platinum group metals (PGMs) and vanadium. Its mining industry contributes 52% of the world’s ferrochromium exports and 54% of alumino-silicates. It is one of the world’s largest exporters of PGMs, gold and vanadium, and a significant exporter of manganese ore. Other important export commodities include diamonds, ferromanganese and fluorspar.

The Witwatersrand Basin — located 15km west of Johannesburg, South Africa’s biggest industrial city — yields around 93% of the country’s gold output and contains considerable uranium, silver, pyrite and osmiridium resources. The Bushveld Complex — located mainly in the Limpopo province, north of Pretoria, the capital city — is known for PGMs (with associated copper, nickel and cobalt mineralisation), chromium and vanadium-bearing titanium-iron ore formations and industrial minerals, including fluorspar and andalusite. Platinum and chromium are mined at centres including Rustenburg and Steelpoort. 

The Transvaal Supergroup — located in northern South Africa and southern Botswana — contains enormous deposits of manganese and iron ore. The Karoo Basin extends through Mpumalanga, KwaZulu-Natal, the Free State and Limpopo, and hosts considerable bituminous coal and anthracite resources.  

The Phalaborwa Igneous Complex — located close to Kruger Park in Limpopo province — is home to extensive deposits of copper, phosphate, titanium, vermiculite, feldspar and zirconium ores. Kimberlite pipes — named after Kimberley, Northern Cape province’s largest city — host diamonds, which also occur in alluvial, fluvial and marine settings. In 2021, South African mines produced around 10mn carats of diamonds, valued at more than $1.36bn. The South African diamond industry is largely controlled by De Beers Consolidated Mines.

Heavy mineral sands — located in the western part of the country and in KwaZulu-Natal province — contain ilmenite, rutile and zircon. Titanium-bearing sands are common on the eastern seaboard. Significant deposits of lead-zinc ores associated with copper and silver are found near Aggeneys in the Northern Cape.

Around 77% of the country’s primary energy needs are provided by coal. Most electric power is generated by Eskom, the utility company, at huge coal-fired stations in Mpumalanga province. 

A number of the country’s minerals are vital to the ‘clean’ energy transition and South Africa has the potential to become a lot richer on the back of its mineral wealth.

However, for the country to fulfil its mining potential, experts say that it is essential that a functional, transparent, off-the-shelf cadastral system is in place, loaded with geological maps. A minerals cadastre lists available mining or prospecting rights, properties currently under a mining or prospecting right and the expiry of currently held rights. A digital system reduces human intervention and keeps corruption to a minimum. 

South Africa’s cadastral system is antiquated and hard to access, with limited data granularity and poor data formats, according to the Boston Consulting Group (BCG), a consulting firm. The poor quality of geo-mapping and the outdated cadastral system have triggered a lack of exploration appetite in the country, limiting its ability to uncover new deposits and identify new mineral types. South Africa is lagging behind the world in the digital management of its minerals, and it is vital that it has a proven system as soon as possible. 

Furthermore, a backlog of more than 5,000 mining, prospecting and permit applications at the country’s Department of Mineral Resources has been a long-standing obstacle to investment in exploration and mine development. The decline in the country’s share of global exploration spending has been dramatic — falling to less than 1% in 2023 from more than 5% in 2004.

A map of South Africa shows a concentration of mineral deposits in the northeast of the country. However, the Northern Cape is virtually an unexplored frontier. Zinc and copper deposits there are coming into production, but it has rich prospectivity for other minerals. 

Investors making long-term decisions about where to put their money require a stable, predictable regulatory environment with minimal red tape and bureaucratic delays. Experts say that, unfortunately, South Africa does not yet have such an enabling environment in place.  

South Africa has a $401bn economy — which should grow at 1.8% this year — according to IMF estimates. It has 62.4mn inhabitants and income per head is estimated at $6,400 a year. The unemployment rate is 33% of the total workforce. The mining sector remains an important engine of South Africa’s economy, making up 8% of GDP. Mining contributed almost 60% to South Africa’s exports, amounting to about $30bn in the first half of 2023, according to the South African Revenue Service. The sector employs more than 470,000 people. 

In June 2023, Gold Fields was South Africa's leading mining company in terms of market capitalisation (ZAR234bn or $12.5bn), followed by Anglo American Platinum (ZAR224bn), Kumba Iron Ore (ZAR142bn), Impala Platinum (ZAR108bn) and Sibanye-Stillwater (ZAR82bn).  

International majors including Anglo-American, BHP Group and Rio Tinto also have an important presence in the country’s mining industry. 

The total net profits of 29 major mining companies in South Africa fell from $10.6bn in 2022 to $5.5bn in their latest financial year-end statements, according to a report by PwC, the consulting firm. One of the main factors behind the fall was the global decline in some commodity prices following the Covid-19 pandemic. Profits were still far above pre-pandemic levels but were almost half of the peak $10.8bn profits in 2021.

Other local challenges the mining industry faces include currency fluctuations, high inflation, power blackouts and logistical problems in exporting minerals because of deteriorating road, rail and port infrastructure. These have been factors behind the decline in miners’ profitability, as well. 

The country’s mineral deposits tend to lie inland in provinces such as Limpopo, Mpumalanga and the Northern Cape and far from ports and industrial hubs. Efficient and productive railways are vital to the movement of bulk minerals but, unfortunately, the country has a crumbling rail infrastructure. Railways are cheaper and more environmentally friendly than road transport, which destroys the country’s roads and causes enormous disruptions to communities and other road users. Its logistics infrastructure is also purpose-built for the transport of small-volume, high-value precious metals. It must invest in railways for the transport of the bulky and heavy minerals of the future. 

South Africa’s ports serve both the Indian and Atlantic oceans, giving it access to markets in Asia, Europe and North America. However, South African producers of magnetite, chrome and coal are increasingly using the N4 highway through the Lebombo border with Mozambique to ship their minerals from the Mozambican ports of Maputo and Matola, as their own country’s rail and port infrastructure are not up to scratch.  

The development of a better electricity transmission network — particularly in the more remote parts of the country — is also vitally important. South Africa’s electricity is costly, unreliable and unsustainable, with costs the fourth highest among its peer group of mining countries, according to BCG. In 2022, the country had a record 1,600 hours of load-shedding and around 500 hours of load curtailment. 

Unfortunately, scheduled power outages ('load shedding') is a reality the country will probably have to endure for the foreseeable future, as electricity demand growth expectations at around 2% compound annual growth rate rub up against supply constraints. Ageing coal plants are being closed down — while the building of renewable electricity and alternative energy sources will take time to fill the gap.

Many mines have been in operation for a long time and now require further investment if they are to continue operating well into the future. For example, the output from South Africa’s 130-year-old gold mining industry has been slumping for more than 20 years. The country was the world’s top gold producer until the mid-2000s but is now ranked number eight. Many existing gold mines are expected to end production during the next two decades if further investment does not take place, and the country’s gold industry may only be viable for another 30 years in a worst-case scenario, according to PwC.

Furthermore, the country’s iron ore mining industry may only last 13 more years in a worst-case scenario without further commitment from companies to identify, pursue and extract new deposits. 

Experts say that there is an urgent need for Africa’s most advanced economy to refocus part of its mining sector on green energy metals and minerals like copper, nickel, lithium and cobalt. They are in high global demand because they are used in electric vehicle batteries and other renewable energy sources. Exploration budgets must increase to determine whether South Africa has greater quantities of high-value energy transition metals.

Some of South Africa’s neighbouring countries (the Democratic Republic of the Congo, Zambia and Namibia) have huge reserves of energy transition minerals and that could create a massive opportunity for South Africa to become more involved in downstream ‘beneficiation’. Mineral beneficiation refers to when a mineral is transformed from a raw or primary product into a higher-value product through processes including smelting or refining. Essentially, these processes remove the valueless parts of the extracted mineral, improving its economic value. 

South Africa — by virtue of being a mining pioneer on the continent and having built up a high level of industry expertise — has a competitive advantage over its neighbouring countries in terms of beneficiation. It could partner with other African countries on skills, infrastructure and technology in order to ‘value add’ throughout the supply chain. However, one of the biggest obstacles to increased beneficiation is the country’s energy crisis, since smelting and refining are highly energy-intensive processes. 

Experts say that large-scale investments and strategic partnerships will be required to unlock the value of the mining sector and that the existing obstacles must be overcome. Three areas stand out where mining companies could take decisive action in the short term: improve exploration to uncover new reserves, address the unreliable and unsustainable energy situation, and improve the cost position of day-to-day mining activities. 

A resurgence in exploration is required to breathe new life into South Africa’s mining industry. This would rest on improved data analytics and new technologies applied to exploration, such as Artificial Intelligence, which could enable more effective, cheaper and faster exploration efforts, according to BCG.

The mining industry will remain an important contributor to South Africa’s economy for many years to come. However, the government must start to sift through the massive backlog of mining, prospecting and permit applications and dramatically improve the country’s cadastral system. Huge investments must also take place in improved railway and electricity infrastructure. Owing to its long expertise in mining, a great opportunity exists for South Africa to help neighbouring countries in the beneficiation of minerals for the energy transition. 

— Jason Mitchell is a British financial journalist, based in Africa, who writes about emerging markets, including Africa, the Middle East and Latin America. He specialises in topics related to wealth creation, mining, capital markets, banking and conservation.