National Union of Metalworkers of South Africa (NUMSA) Submission to the Portfolio Committee on Mineral Resources on the Review of the Mining Charter

Beneficiation Of particular concern to the Union is the issue of beneficiation of mineral resources and its impact on the development of the metals and engineering sector in South Africa. Maree et al. (2008: p 1) defines beneficiation as “the additional processing of a metal to a stage where it becomes a final product such as a machine, stainless steel utensil, or jewel. In the processing value is added at every stage of production”

IPAP (2010: 58) The South African economy has been built upon the back of mining and electricity intensive resource-processing activities. Mining and semi- processed raw materials continue to make up a large part of SA’s export basket. … However, this economic structure is not sustainable. Minerals are a non-renewable ‘wasting asset’ which need to be leveraged during their lifespan to build a more diversified, labour intensive and value-adding economy.

Table 1. Benefits of Beneficiation: selling price, employment and investment in different stages of carbon steel Nature of productSelling price per ton of steel ($) Employment per 1000 ton of steel Investment (R million per job) Stage n.a.1 Iron1200.6R2m2 Hot rolled Steel3001.1R6m3 Cold rolled Steel R8.5m3 Pipe and Tube6507R1.5m3 Structural Steel100075R0.1m4 White Goods R0.4m4 Mining Equipment R0.6m4 Source: DTI, 2005:16

Table 2. Stages of Beneficiation and Levels Achieved CommodityStage 1 Ores / Concentrates (%) Stage 2 Processed / Refined (%) Stage 3 Primary Manufacture (%) Stage 4 Finished Manufacture (%) Gold PGM (Platinum Gp of Mts)100 n.a.6 Iron ore to steel Chrome to stainless steel Aluminium Zinc Manganese Titanium100154Small Copper Source: DTI, 2005:16

Currently a very small proportion of most metals is beneficiated through to stage 4 in South Africa, where most employment creation occurs. This is quantitatively demonstrated in Table 2. The table clearly reflects the overall underdevelopment of the downstream metal products industries. In each column it indicates the percentage of a particular metal that reached the stage of beneficiation indicated by the column. For instance, 100 percent of gold mined in South Africa is refined (Stage 2), but only 2 percent is beneficiated into a final product (Stage 4). The level of beneficiation of chrome, platinum, aluminium, iron ore and manganese up to stage 4 are also all extremely low. There is therefore great potential to grow the downstream higher value- added end of the metals production chain. (DTI, cited in Maree et al. 2008: 7)

Problems that hamper the development of downstream steel production: - Pricing Steel (Import Parity Pricing) For some time now Arcelor-Mittal has benefited from hefty steel prices (Import Parity Pricing) and as Creamer (2010) argues the steel monopoly continues to maximize profits under a new price “benchmarked model” that is fundamentally the same as Import Parity Pricing (IPP): According to Creamer (2010) the new model “sets domestic selling prices after an analysis of domestic selling prices in four markets (the US, Germany, Brazil and China) and then adjusting these to its expectations for the South African currency for the forthcoming month.

Electricity Pricing According to studies by the DTI (cited in Maree et al. 2008: 8): The primary and secondary producers get their supply directly from Eskom at pre-negotiated rates while the downstream producers have to pay higher municipal rates. The primary and secondary producers (Stages 1 and 2) are thus the main beneficiaries of the country’s competitive advantage in electricity. (DTI, 2005:52)

Problems compounded by Availability of skilled labour Training and development

Capital Equipment / Medium & Heavy Commercial Vehicles / Catalytic Convertors -SA produces 80% of world’s platinum – should become major global player in producing catalytic converters

Capital Equipment / Medium & Heavy Commercial Vehicles / Common Denominators amongst stakeholders: using procurement / local content as instruments to leverage and develop a competitive capital equipment industry beneficiation of our natural resources Job creation skills development

Way Forward NUMSA believes that a new or revised Mining Charter must take cognizance of the following: to ensure that the new or revised Mining Charter does not undermine the objectives of IPAP2 the urgent need to align the new /revised Mining Charter with the Key Action Plans of IPAP2 Strategic leveraging of public procurement across a range of sectors to facilitate metals beneficiation (Annexure 1): · Metal fabrication, capital equipment and transport equipment. · Buses and other medium and heavy commercial vehicles. · Electronics such as set-top-boxes.

Import Parity Pricing NUMSA repeats its call to scrap Import Parity Pricing – the new “benchmarked model” of pricing serves only to reinforce the monopolistic pricing of steel by Arcelor Mittal and must come to an end. It is imperative for government to act decisively on this matter - failure to do so could compromise our attempts to make beneficiation of our natural resources successful and frustrate attempts to develop our manufacturing base and create decent work.

References /11 – 2012/13 Industrial Policy Action Plan, February Creamer, T “State should seize iron-ore initiative and move debate into developmental realm”. Polity, 12 March debate-into-developmental-realm debate-into-developmental-realm Maree, J, Lundall, P and Godfrey, S (2008) ‗The Dynamics and Skills Requirements of the Metals Beneficiation Sector‘. Paper presented at the XIV SASA Congress, University of Stellenbosch, Stellenbosch, 7-10 July 2008

Thank You