BY Ntsiki Adonisi-Kgame AND Zinzi Lawrence
The Energy Transition: Opportunities for the South African Mining Industry
The race to attain net-zero by 2050 requires mining companies to prepare themselves to respond to the demands of a low carbon economy. To do this, they should start adopting sustainable mining practices and other nimble solutions suitable for their specific operations. The ever-growing threat of climate change has resulted in countries across the globe making commitments in both international and domestic instruments to adopt measures to mitigate against climate change, by transitioning to a low carbon economy. The South African government sees itself as a responsible citizen in the global village. This is evident in the country’s commitments in various international instruments such as the Kyoto Protocol, 1997, the Paris Agreement, 2015 and the country’s stated aspiration to reach net zero by mid-century in the Low Emission Development Strategy, published in 2020.
The mining industry remains a significant player in the South African economy and is set to continue to play a pivotal role, especially with the predicted increase in demand for clean technology minerals or so-called ‘metals of the future’ such as platinum, aluminium and manganese, to name a few. In the context of the transition to a low carbon economy, South Africa faces unique challenges in that over 70% of South Africa’s energy needs are currently being met by coal. However, the transition to a low carbon economy not only poses a major threat to economies and livelihoods but it also places a significant challenge on mining companies to adopt environmentally sustainable methods of mining.
The recently published Exploration Strategy for the Mining Industry of South Africa(“Exploration Strategy”), which seeks to attract exploration investment into the country and secure a 5% share of global exploration expenditure in the next five years, recognises the significance of the minerals of the future and the potential these minerals have to reinvigorate the country’s mining industry. These include cobalt, nickel, copper and rare earth minerals. The Exploration Strategy identifies these minerals of the future as “critical minerals and metals that are essential for responding to the shift towards a green economy”.
Additionally, according to a World Bank Group report titled “Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition”, the production of minerals like lithium, cobalt and graphite could increase by 500% by 2050 in order to meet the increasing demand for clean energy technologies.
Mining companies must be alive to the opportunities presented by the energy transition and begin positioning themselves in a manner that will enable them to take full advantage of the future commodities market. Some of the measures that mining companies can take include:
- Investing in renewable energy for the generation of electricity. In the South African context, renewable energy has the potential to guarantee security of supply while also helping mining companies to minimise their carbon footprints, a factor which has become key for major stakeholders given the rise of environmental, social and governance (“ESG”) principles. In 2021, amendments to Schedule 2 of the Electricity Regulation Act, 2006 which saw an increase in the threshold for embedded power generation from 1MW to 100MW, made the use of renewable energy at mines a possibility;
- Investing in sustainable mining practices to secure and maintain the social licence to mine. In this regard, South Africa’s robust environmental legislation already provides a good basis for mining companies; and
- Incorporating ESG principles in their operations.
The opportunity for the mining industry in the transition to a low carbon economy is clear and has been endorsed by the government in the Exploration Strategy. It is now in the hands of all key stakeholders, including the government and mining companies, to ensure the realisation of the transition to a low carbon, while also deriving substantial economic benefits in the process.
Reviewed by Ntsiki Adonisi-Kgame, head of ENSafrica’s Natural Resources and Environment department.
Natural Resources and Environment | Associate