SA promotes local mineral processing

South Africa is planning incentives to promote local mineral processing to miners, according to Buyelwa Sonjica.

BEIJING (Reuters)  - 

South Africa hopes to phase in measures to convince miners to process more of their output locally to encourage growth of industry and skills in South Africa, the minister of minerals and energy said on Tuesday.

South Africa's beneficiation policy already requires that 10 percent of diamonds be processed in-country, helping develop a downstream cutting and polishing industry employing more people.

Officials have said in the past that diamonds were a test case for other minerals such as steelmaking raw materials, including iron ore and chrome, as well as platinum group metals, base metals and uranium.

"The effort is two-pronged. We will continue to supply raw materials. But we also encourage companies to beneficiate in South Africa, through incentives," Buyelwa Sonjica said at a conference in Beijing.

"It will be phased in, we will do it by phases.

The effort to develop a downstream diamond industry and counteract the economic distortions left by apartheid has been hampered by South Africa's relatively high wages and low skills, compared to longer-established centers like India and China.

Diamond producers sell their 10 percent to State Diamond Trader, which then sells to black-owned cutters and polishers. They have disagreed with the firm over prices.

Issues like pricing are still being ironed out, said Mosa Mabuza, in charge of policy and promotion at the ministry.

"The important thing is that not a single producer is not participating."

At the moment, the policy to encourage local processing of other minerals does not have a firm quota, and could be offset by other factors, for instance increased black ownership in the firm, Sonjica said.

Investors in processing capacity could, in the short-term, face difficulties in financing projects, given a sharp decrease in loans due to the global economic crisis, although Sonjica said South Africa's banking sector has coped relatively well.

South Africa would also have to address worries about power supply. Supply to mines is already restricted, after shortages caused by faster-than-expected industrial growth and an expansion of the grid to poorer communities.

The country is building new coal-fired power plants, and strategic coal stocks have risen to nearly 30 days, after dropping to 13 days during the power shortages early this year.

© Reuters 2008. All Rights Reserved.  

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