Mining

FORESIGHT, THE MISSING LINK IN AFRICA'S MINING VALUE-CHAIN

by Marius Oosthuizen

The extractive sector has been the bedrock of economic activity and industrialization in much of Africa, and especially in South Africa, for decades. The mining boom of the early 1900s was responsible for much of the infrastructural development and affluence amassed at the southern tip of the continent in the last century. However, the progress of mining has seldom translated into the equitable and sustainable upliftment of communities affected by mining operations. The cliché among miners, of ending up with no more than a "whole in the ground", speaks volumes of the inadequacy of the dominant model still used to conceive of the business of mining. The mining industry, a core driver of global economic advance, needs to undergo fundamental change if it is to meaningfully reduce it's harmful impacts on the environment, and importantly, translate its impact into lasting socio-economic well-being. Deep systemic change is required if the business of mining is to fulfill its promise, of being the stepping stone to an industrious, and prosperous African continent.

However, transforming the mining industry is no simple task. It is an industry that depends on large capital investments, often in risk-laden environments, where corruption is rife, and regulatory and legislative regimes tend to be as unstable as the political contexts that inform them. Often, input costs teeter towards being prohibitive, as has been the case recently where tariff hikes by Eskom, South Africa's power supplier, has left domestic mining houses reeling as profitability dwindles. Mining is especially vulnerable to market conditions, where any reduction in growth is translated into a direct reduction in demand for commodities. In addition, labor market instability and skills shortages leave the industry particularly vulnerable, as we saw in 2012 when the South African Treasury lost an estimated R10billion due to protest action by workers on mines. Then there is the challenge of unsustainable shanty towns, springing up in close proximity to mines as job-seekers and the relatives of miners, gravitate towards the limited but promising prospect of the mines.

While many mining houses have gone to great lengths to address some of the more archaic permutations of the industry, much more needs to be done. Mine-sponsored schools and clinics have been built. In some instances, valuable infrastructural investments such as roads and bridges, fresh water supplies and even electricity, have been a byproduct of selected mining operations. However, the vast majority of these social investments have been once-off attempts at improvement that amount to a mere patch, covering the deeper systemic problem that the activity of mining has not been understood within the required contextual, systemic, and future-orientated framework. Foresight methodologies offer a toolkit with which to begin to approach this complex and demanding challenge.

Earlier this year we participated in a roundtable discussion hosted by the South African Institute of International Affairs (SAIIA) on "State-Owned Enterprises in Africa", with particular emphasis on state intervention in the mining industry. Due to the recent Marikana tragedy, in which 34 striking miners were gunned down by police officers at the Lonmin Platinum mine in South Africa, there has been increased pressure on the government to facilitate change in the industry.

What has also emerged from our research, is that mining in South Africa has historically taken a shareholder approach, when what is direly needed today, is a stakeholder approach. In fact, the critical stakeholder which has been largely excluded from the process, has been mining communities and those communities affected by mining. Yet, the very suggestion of such an approach implies complexity and the need for the creation of shared-vision, making mining an ideal case for the application of foresight tools.

Foresight can add value in the transformation of the mining industry in three distinct ways.

1) The fact that "systems thinking" is the de facto "paradigm of foresight" (Bishop, 2006), means that it inherently possesses the intellectual room to accommodate the multi-faceted nature of the industry. Our own recent application of systemic thinking in seeking to understand the current "economic crisis" in the South African Platinum sector, is an example of how this element of foresight is able to come to terms with the challenges faced by players in the industry.

Explanation: Fig 1.: The South African Platinum Sector is being impacted by number of endogenous and exogenous variables, that are negatively affecting the sector’s profitability. Firstly, the negative growth levels of the international economy, a result of the global recession, are slowing global demand for platinum. While demand for platinum has been resilient compared to other metals, and global demand ought to have driven productivity up, and in turn driven supply levels upward, in the context of South Africa, increased labour unrest have dampened the productivity levels of platinum mines. As productivity slow and supply levels dwindle, the profitability of the sector has been eroded, having the knock-on effect affect of harming consumer confidence, already weakened by increased labour unrest. In addition to weakened supply’s negative effect on profitability, the sharp increases in electricity costs have driven up the input costs of mining operations in general, in so doing lowering profitability further. As lowered profitability persists, the deficit between demand levels, and weakened supply from mining operations, has been met by increases in supply from scrap metals. Overall, the platinum sector is suffering from systemic deficiencies compounded over time as the negative effects of labour unrest and the rising input costs of mining reinforce one another to weaken the sector. Source: Oosthuizen. M. (2013) Exploring the Sustainability of the SA Platinum Sector. CUSP Consulting. www.strategysource.wordpress.com Accessed at: http://wp.me/p2LXv0-29

2) The ability of foresight tools such as scenarios to synthesize seemingly unconnected or event divergent drivers of change into coherent forward views, make them an invaluable mechanism for bringing the stakeholders affected by mining together in a collaborative effort at creating a shared-vision. Not only can mining operations benefit from industry-level foresight, but the developmental agendas of entire regions can be consolidated and aligned to the pragmatic business interest of impending mining operations to ensure that mutually beneficial implementation is achieved. There is no reason for instance that once the "life of mine" has been reached, and the mineral reserves depleted, the enormous capital investments in buildings, roads, and other structures should go to waste. Foresight offers the tools to prepare for the utilization of those investments once mining has ceased. As our study of the "eras" that shaped South African mining indicated, the days of "mining for profit", and even "mining for profit and people", are fast coming to an end. The demands of an informed electorate in Africa, requires "mining by the people", whereby mining can be the flywheel from which economic growth draws momentum, given of course that all the requisite elements of development are integrated upfront.

Source: Oosthuizen. M. (2013) Policy-dialogue: Social-Cohesion in SA Mining. Presented at: State-Owned Enterprises In Africa – Challenges and Prospects. Roundtable hosted by the South African Institute of International Affairs (SAIIA). Accessed at: SAIIA http://wp.me/p2LXv0-1K

3) The capacity of foresight to take an interdisciplinary view of the long term impacts and changes that will result from mining, mean that it is well placed to conceive of the possible opportunities for upstream and downstream linkages, whereby local industries can be spawned from the occurrence of mining, and lasting economic activity created through targeted procurement practices and the preferential integration of local service providers.

For the mineral wealth that lies beneath the African soil, to transform the material well-being of her people will require more than business acumen and good governance. It will require the integration of long-term thinking into the planning processes of all industry stakeholders. It will require the cooperation of stakeholders in constructing alternatives to harmful industrialized extraction practices, that instead take into consideration the holistic impacts and ultimate aims of mining. It will require visionary leadership that sees beyond the profits to be made from commodity markets alone and forge ahead to create a sustainable, inclusive, socio-economic order as the primary achievement of what remains a pivotal industry. In our estimation, foresight is the missing link in Africa's Mining Value Chain, and as described here, specifically systems thinking, applying foresight tools to obtain a coherent view and the interdisciplinary approach in foresight.

Marius Oosthuizen

Futurist (Theologian, Strategist, Entrepreneur)
Strategic Foresight Professional: CUSP Consulting

Read more about the author and his view on being a futurist.

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