1

MC3SA Mining Supply Chain Conference

NASREC, 22 May 2019

Paul Jourdan

22 May 2019MMP MSC

Mining Supply Chain Conference

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Mining in economic development & industrialisation

REGIONAL ECONOMY

socio-enviro-political context

Consumption (induced) Linkages

Knowledge Linkages

HRD• Engineers &

scientists• Technicians• Operators, etc..

RDI• Universities• R&D entities• Firm RDI, et al

Geo-knowledge

Systematic geo-survey & target development

RMCs

Fiscal Linkages• Levies, ground rents, • Duties/tariffs/excise• Royalties, dividends (equity)• CIT, RRT, WHT, PAYE, et al • SWFs, Stabilisation Funds, etc.

Backward/upstream Linkages: Inputs into local/regional/global minerals sector

Capital Goods• Machinery• Equipment• Plant• Vehicles, • et al

Consumables• Explosives/caps• Grinding media• Wear parts, spares• Chemicals/reagents• Fuels & lubes, et al

Services• Drilling/exploration• Finance, ICT• Labour/skilling• Engineering/Analytical• Logistics, catering, et al

Other Inputs• Construction,• Utilities,• et al

Jobs/wages (also in backward, forward, knowledge and infrastructure linkages)

EXPORTS to world economy (into GMVCs)

Intermediates ManufactureRefining

SmeltingMineral

ProcessingMINING

Mine Developm’t

Exploration

Infrastructure Linkages (spatial) into regional economy

• Transport: roads/rail, ports, et al

• Power & transmission• Water & reticulation• ICT, other

Forward/ Downstream Linkages: Key

feedstocks into regional/local

economyManufacturing

(Fe/steels, polymers, Cu/Al, et al)

Agriculture(NPK, conditioners)

Construction(Fe/steels, cement, Cu/Al, aggregate)

Power(fossil fuels: coal,

oil & gas)

Other Sectors

Lateral Linkages: products into other sectors of the local/regional/global economy

© P.JOURDAN

3REGIONAL ECONOMY

socio-enviro-political context

Consumption (induced) Linkages

RMCs

Fiscal Linkages• Levies, ground rents, • Duties/tariffs/excise• Royalties, dividends (equity)• CIT, RRT, WHT, PAYE, et al • SWFs, Stabilisation Funds, etc.

Jobs/wages (also in backward, forward, knowledge and infrastructure linkages)

EXPORTS to world economy (into GMVCs)

Intermediates

ManufactureRefiningSmelting

Mineral

ProcessingMINING

Mine

Developm’tExploration

Infrastructure Linkages (spatial) into regional economy

• Transport: roads/rail, ports, et al

• Power & transmission• Water & reticulation• ICT, other

Forward/ Downstream Linkages: Key

feedstocks into regional/local

economyManufacturing

(Fe/steels, polymers, Cu/Al, et al)

Agriculture(NPK, conditioners)

Construction(Fe/steels, cement, Cu/Al, aggregate)

Power(fossil fuels: coal,

oil & gas)

Other Sectors

© P.JOURDAN

Knowledge Linkages

HRD• Engineers &

scientists• Technicians• Operators, etc

RDI• Universities• R&D entities• Firm RDI, et al

Geo-knowledge

Systematic geo-survey & target development

Lateral Linkages: products into other sectors of the local/regional/global economy

Backward/upstream Linkages: Inputs into local/regional/global minerals sector

Capital Goods• Machinery• Equipment• Plant• Vehicles, • et al

Consumables• Explosives/caps• Grinding media• Wear parts, spares• Chemicals/reagents• Fuels & lubes, et al

Services• Drilling/exploration• Finance, ICT• Labour/skilling• Engineering/Analytical• Logistics, catering, et al

Other Inputs• Construction,• Utilities,• et al

Mandela Mining Precinct (MMP)• Knowledge linkages (RDI & HRD)• Backward linkages (mining supply-chain)

Mining in economic development & industrialisation

4Minds for Mines 4

Key stakeholders

• 150 delegates for 5 weeks

• Government (DST, dti, DPME, DMR, National

Treasury)

• Mining companies

• SA Capital Equipment suppliers

• Mining Universities

• Science Councils

• Organised Labour

• Zero Harm Industry

• Globally competitive & Sustainable

• Need to maximise the mineral endowment

• A diversified strong economy

• Stimulate the local mining manufacturing

sector

Mining in Crisis

• Reviving investment

into mining

• Sustainable

communities

• Cluster employment

• Win-win beneficiation

• Advancing the cluster

Mining Phakisa outcomes

Mining Phakisa

National objectives

to keep the industry afloat during the commodity price

slump …put in place initiatives to place the mining

cluster on a firm foundation …to grow, transform &

contribute to the economy.

Mining Phakisa: Collectively addressing crisis in mining

5Minds for Mines 5

Phakisa: Collectively addressing crisis in mining

ADVANCING THE MINING

CLUSTER

Revitalise SA Mining R&DRevitalise SA capabilities around mining

specific research, development and innovation

Create local mining equipment manufacturing capability

Develop local manufacturing capability in narrow reef hard rock mining equipment

Maximise Local Supply ChainImport displacement through

localisation & enhanced export competitiveness

Modernisation of SA miningImprove OHS performance and mine efficiencies and to ensure long term

economic sustainability

6Minds for Mines 6

Partners and Stakeholders

Creating MMP MSC capacity

9Minds for Mines 9

Mining as a driver towards Industrialisation

Revitalisation of Mining Local Supply-chain Development Value Addition Post Mining Landscapes

Livelihoods

Mechanization & automation could be jobs neutral!

If the mining supply-chain is developed locally!

10Minds for Mines 10

SADC Imports of Mining Capital Goods (MCG) ($mn)

0

500

1000

1500

2000

2500

3000

3500

4000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SADC exRSA RSA Source: ITC Comtrade 2018

• The SADC imports roughly $3 to $6 billion of MCG annually

• SA about $2bn/an• Rest of SADC about $3bn/an

Massive import

displacement

opportunity of

~R75 billion/an!

SADC mining supply-chain is

dominated by imports

Mechanisation jobs lost are

gained overseas!

US$ millions

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Housing & Living

ConditionsPlan

Procurement & ESD

Employment Equity

30 points

HRD30 points

Ownership30% HDP

Mine Community

DevelopmentPlan

Procurement & ESD

(Enterprise & Supplier

Development)

40 points

Ring-fenced, 100% compliance required Below 50% Non-Compliant

Mining Charter III Compliance Scorecard for Mining Right Holders

Consequently, 83% compliance

for EE and HRD and ZERO for

Procurement & ESD appears to

result in 50% compliance! Based on factsheet by Deloitte , 2018.

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Procurement & ESD

40 points

15

20

570% of R&D budget in SA

100% of samples analysed in SA

2.5

2.5

R&

D

50% HDP owned& controlled co.

80

% o

f service

s

15% Women owned& controlled co.

5% Youth owned & controlled co.

10% BEE Compliant companies5

5

5

5

70

% o

f goo

ds

44% on BEE Compliant companies

Locally manufactured goods with 60% local content

5% on women/youth owned & controlled co.

21% on 51% HDP owned & controlled co.5

5

5

Procurement & ESD

Based on factsheet by Deloitte , 2018.

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• MC3 Local content definition excludes profit and intangible overheads - anti fronting• Local content to be verified by SABS (MC Guidelines)• BEE Compliant means 26% HDP owned and dti BEE Level 4 compliant• Standardised Coding System (taxonomy) prescribed by the dti• 5 Year ramp-up to 70% of goods

70

% o

f goo

ds

44% on BEE Compliant companies

Locally manufactured goods with 60% local content

5% on women/youth owned & controlled co.

21% on 51% HDP owned & controlled co.5

5

5

Procurement of Mining Goods

Shortfall in local procurement may be offset by ESD (30% for goods & 10% for services)

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Enterprise & Supplier Development

Supplier Supplier OEMMine(Right

Holder)

Local Content Local Content Local Content

Mine Supplier Development via OEM

16Minds for Mines 16

Summary of MC3 Supply-chain development

➢ HRD spend of 5% of pay-roll (+1% Skills Levy);

➢ 70% of R&D spend must be in SA;

➢ 70% of goods purchases from firms with ≥26% black ownership, ≥B-BBEE Level 4 and ≥60% local content;

➢ SABS certification of local content;

➢ 80% of services purchases from local firms;

➢ 5 years to ramp-up purchases requirements & local content;

➢ Company 5y Inclusive Purchase Plan by 2019;

➢ Common mining purchases taxonomy (under dev. by the dti);

➢ Preferential purchases from black-, women- & youth-owned firms

MC3 supply-chain development provisions include:

18Minds for Mines 18

Doubling the SA MCG sector!

Key Facilitation Interventions could include:• Targeted dti scheme for MCGs as per APDP (capex grants prototypes)

• Specialised mining supply-chain VCF for new products & prototypes (TRL7 to 9);

• Funding window for pre-prototype product development (TRL 3 to 6);

• JV w/MMP to establish a start-ups incubator & accelerator (TRL7 to 9);

• PPFA designation of MCGs (“Yellow Metal”) by the dti & Treasury;

• Targeted funding facility to grow black-owned MCG firms (TRL 5 to 9);

• “Test Mine” partnership: MMP, Minerals Council, MEMSA (TRL 5-9);

• MMP mining supply-chain capacity (warm bodies) to build the sector;

• Competitive credit facility for machinery leasing to "level the playing field" with foreign importers (Volvo, Cat, Komatsu, et al);

• Et al

19Minds for Mines 19

Conclusion for Mining Supply Chain:

MC3 a big step forward, but NOT a silver bullet

Need to constantly increase our cost competitiveness and value offering through:

• Building strong supply chain clusters

• Constant technology development (SAMERI et al)

• UNSPSC/GS1 coding for standards, inventory and supply chain control

• Working closely with dti on manufacturing and export facilitation

• Being a key partner in the Mandela Mining Precinct initiatives such as “Test Mine”

• Ongoing engagement on the Mining Charter

20Minds for Mines 20

Resources-based Industrialisation (RBI)

Thank YouMMP Contacts

Navin Singh: nsingh1@csir.co.za

Alastair Macfarlane: amacfarlane@mandelaminingprecinct.org.za

Paul Jourdan: paulj1952@gmail.com

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33 Member Companies & growing …

• 13 Founder members, grown to 33• 13 Members ≥51% black-owned (40%)• 25 Members ≥26% black-owned (76%)• 22 members ≥ BBBEE Level 4 (67%)• including emerging companies, software

developers/IT, supply chain (components)

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Recent Activities

MMP & MEMSA launch exhibition &Lean manufacture factory training

Innovation

• 3 Finalists in Isidingo Drill Challenge

• On-going Product innovation

• Engaging with MMP research streams

Growth & Competitiveness

• Expanding into export markets - 49% growth to 11% of turnover. Africa, North and South

America, Europe, Asia, Australia.

• World Class Manufacturing Techniques (lean) - Team Leader training by MEMSA

Standards

• Member and Board Codes of Ethical Conduct

Cooperation: dti, DST, DMR, MCSA, SAMERDI, SAMPEC, SACEEC, ECIC, IDC, National

Cleaner Production Centre, CSIR

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Collaborate - Building the SA Supply Chain

Partner with us through procurement, and two flagship programmes for 2018-9:- Development of a Test Mine (with MMP)- Supply Chain Localisation & Development