Mining Indaba Review: The Future of Mining

Bird’s eye view: historical context?

The mining sector has been the backbone of the South African economy for more than 100 years. It financed the expansion of cities like Johannesburg and its infrastructure. Today the mining sector still contributes tens of billions of rand to the fiscus annually– spurred by the 2021-2022 commodity boom. Simply put, mining plays a seminal role in South Africa’s economic development, with the sector contributing almost R500 billion to our GDP and employing more than 475 000 workers in 2022, according to the Minerals Council of South Africa. In any currency, these are massive numbers (larger than the population of small nations and their GDP figures). Although mining once contributed more than 20% to South Africa’s GDP, in the last decade, the sector has contributed less than half of that (which is understandable if you consider how we've evolved into a more diversified economy).

Mining is an incredibly capital and labour-intensive sector. As one of the richest mineral regions in the world, South Africa’s mining sector had always attracted keen global interest since the late 19th century when diamonds and gold were discovered in the old Transvaal. Today, the landscape is vastly different – perhaps for the better. Mine workers have better working conditions, earn better wages and salaries, and workers’ rights are protected by Section 23 of the Constitution of South Africa, permitting workers to join labour unions of their choice. Various other labour legislation advocates for the interest of workers, including the Basic Conditions of Employment Act, Labour Relations Act, and Employment Equity. These laws apply to workers in all other sectors (of course); however, we must recognise how far the mining sector has come.?

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2023 Mining Indaba

The 2023 Mining Indaba attracted a broad range of delegates from heads of state; ministers of mining & energy of several African countries and others, ambassadors; senior representatives of the U.S. Secretary of State for Economic Growth, Energy & the Environment; senior members of the European Commission and the industry leaders, CEOs of mining companies (including some of the largest mining conglomerates in the world). Last but not least, our very own executive leadership team attended the event and, in traditional HumanInsights fashion, flew the flag high for our company.

Our executive team attended the recent 2023 African Mining Indaba in Cape Town, motivated by our keen interest in Africa’s development in all sectors. As the lifeblood of the South African economy for more than a century, the mining industry remains inextricably linked to Africa’s growth and development. Diversifying mining activity into ‘alternative’ metals like platinum group metals (PGMs) presents numerous opportunities for many mining companies to tap into new markets. Our experience has shown that our work is replicable in every industry and sector. We’re obsessed with human factors and ergonomics (how humans interact with technology). Our consulting blueprint can be applied to safety-critical environments like mining, healthcare, aerospace, nuclear energy and aviation.? ???

Climate change and international capital

Spurred by the 2023 World Economic Forum discussions, one of the central topics of discussion at the Mining Indaba was climate change and how the mining sector in Africa can evolve to become globally competitive in the ‘new’ ESG-driven global economy. A senior U.S. representative raised a few concerns about mining. African nations must build coherent policies and solutions to combat climate change to convince institutional investors in the Global North to invest billions of dollars into our mining sector (which they can at a whim). He further mentioned that many U.S. pension and sovereign wealth funds want to invest in Africa’s mining; however, they operate under strict mandates and investments in Africa are usually considered risky.?

Developed nations and financial markets want to see progressive policy certainty around mining rights and coherent policies around labour and regulation. Institutional investors want to know your stance on climate change and if you’ve legislated (but more importantly, implemented) renewable energy plans. Is the law upheld in your country? Are legal and licence agreements honoured? Do your government’s economic policies encourage foreign investment? Sounds like a laundry list, right? Unfortunately, that’s what it takes to raise international capital. The Asian Tiger economies went through the same phase to increase global investment when they industrialised aggressively from the 1960s to the 1990s.???

Fortunately, many home-grown mining companies are well-capitalised and occasionally go on sporadic spending sprees, searching for revenue-generating assets abroad. There’s increasing demand for minerals like copper and cobalt assets in the Democratic Republic of Congo (DRC) and Zambia as the biggest producers in the world. Lithium has also become a sought-after commodity as the demand for batteries in applications such as electric vehicles, renewable energy storage sources, and consumer electronics rises. Mining has become increasingly competitive as mining companies diversify into PGMs.

Technology in the mining sector

Technology has advanced the risk reduction of mining fatalities, improved process efficiencies and energy reduction, and sped up capital spending on sustainable energy generation efforts. Some examples of how technology has improved South Africa’s mining sector over the years:??

1. Automated mining equipment: Self-driving trucks, drilling machines, and loaders have significantly reduced the number of workers required to work in potentially hazardous areas.
2. Real-time monitoring: Many mining companies use sensor technology to monitor mining activities to detect threats like potential natural hazards and ‘zama-zama’ insurgencies (illegal mining).??
3. Virtual reality training: More mining companies are leveraging the power of technology by simulating real-world situations in staff training and induction programs
4. Drone surveillance- Mining companies increasingly use drones to protect workers from potentially dangerous objects and detect any other threats before they happen.??

However, technology adoption is usually slower than it could be due to the sheer size and complexities of running a mining operation. Several mining companies rely on external consulting expertise to recommend and implement process improvements to drive cost efficiencies, get market intelligence on competitors and manage risk.??

Mining is synonymous with the adage: ‘High risk, high reward’

Mining is notoriously unforgiving; only the strong survive– just look at history. Even if a mining company meets its production guidance (or exceeds it), it may not necessarily guarantee a profitable year. As a cost-driven business, profit margins are precariously thin. Exogenous factors like global commodity prices, the rand/dollar exchange rate, production costs, and supply chain bottlenecks influence the sector’s profit potential. In higher inflationary cycles (like we’re currently in), mining companies’ profits are increasingly under pressure, as we’ve seen in the early earnings season numbers reported by JSE-listed miners. Yet, the super profits generated by mining companies in 2021 and 2022 would convert even the most sceptical investor to buy shares in a mining company or two.?

According to the Minerals Council of South Africa, 2022 was a good year for the mining sector. South Africa’s mineral production rose to a new record, marking the second consecutive year when the industry exceeded R1.1 trillion in production value (driven by high commodity prices). Mining contributed almost R74 billion to the South African Revenue Services (SARS) in corporate taxes. By all accounts, these are colossal numbers. However, corporate taxes declined from a peak of R81 billion in 2021, mainly due to rising inflationary cost pressures on mining companies and, of significant concern, our crisis-level road and rail infrastructure issues.

The future of mining innovation?

Human-centred design (HCD) theory has changed how businesses view innovation. Organisations must reimagine their entire design process by developing their products and services through the lens of the ‘user’ (in this context: mining operators and employees). Several studies have been conducted by research institutes and consulting firms on the topic. If mining companies adopt HCD from a top-down approach, mining operators and employees (users) will be empowered when systems, machinery automation and processes are designed with their needs and behaviours in mind. It’s easier said than done when you consider that the big mining conglomerates employ well over 100 000 workers globally.

What is design thinking??

Design thinking is a process for solving problems by prioritising the user’s needs over everything else. It relies on observing, with empathy, how people interact with their environments and employs an iterative, hands-on approach to creating innovative solutions. While it may seem like design thinking is more relevant to fields such as technology and product design, it can also be applied to the mining sector to identify and address problems in a user-centred way. The design thinking framework can also be used in the mining sector. Our process involves taking our clients through what we call the rigorous six stages of the design thinking framework:

1. Understand the user: Identify the various stakeholders involved in the company, such as employees, management, labour unions, regulators & government, and last but not least local communities. Frame your understanding of the user on empathy and observation to understand their needs, desires, and pain points by visiting mining sites regularly, conducting interviews and surveys with all stakeholders, analysing the data and interpreting it in a meaningful way.
2. Define the problem: Use the insights gained from step one to define the problem your company is trying to solve. It could be a specific issue that affects the user (mining operators), such as safety standards or an issue that affects the broader stakeholders, like environmental impact, cost reduction, illegal mining, optimising efficiencies or any other challenge.?
3. Ideate solutions:? Brainstorm ideas with diverse stakeholders to ensure multiple perspectives are considered before developing potential solutions to the problem(s). Use techniques like mind-mapping, sketching, and prototyping to ideate solutions.
4. Prototype: Build a prototype based on the refined solutions in step 3. Create a mock-up of new equipment or software, or implement a new process or system.?
5. Test your solutions: A critical step of the design thinking process is collecting regular user feedback and data to test your solution(s).??
6. We've added a 6th step. Continuously measure and improve solutions using agile development.??

What does the future look like?

The reality is that mining continues to face several sustainability headwinds like declining mineral deposits worldwide, rising costs, increasing regulatory uncertainty and lack of adequate investment. Regardless, mining remains a key sector in our economy. The rhetoric around sustainable mining will continue, and technology can be leveraged to accelerate user-centred digital transformation adoption that can have a lasting positive impact on mining operations. One can only hope that our mining companies have enough cash stockpiles to navigate the looming headwinds and commodity price downturn– after all, what comes up must come down.??

By: Dumile Sibindana