Beneficiation, which broadly speaking is adding value to raw minerals mined from the Earth that end up as finished products, is a strong focus of South Africa’s overall mining and minerals strategy.
Yet even the definition of beneficiation is open to interpretation and differing nuances and the lines drawn between manufacturing and beneficiation are often blurred and sometimes contradictory.
Beneficiation, for instance, spans a range of commodities, and not precious metals alone, a common misconception.
Individual mining company involvement in beneficiation initiatives has come about partly as a result of pressure from the South African government.
This has made mining companies at least partly responsible for precious metals beneficiation.
The government — specifically the Trade and Industry Department — initiated a major study in 2001/02 which looked at the prospects for the beneficiation of jewellery, gold and platinum. There was also a separate study on beneficiation prospects in the diamond industry.
Dr Maria da Silva, an authority on precious metals with the South African Chamber of Mines in Johannesburg, was project leader of the team of consultants that undertook these two comprehensive studies.
She says that subsequently some beneficiation initiatives were set up but faltered for a variety of reasons, including lack of funding. The jewellery industry in South Africa is extremely small, Da Silva says. “The fact that we have precious metals on our doorstep doesn’t give us any competitive advantage … and we don’t have any cost-benefit advantage either.”
She says countries such as India and China have surpassed European countries, including Italy, in being major jewellery suppliers.
Unlike South Africa, these Asian countries do not have large-scale mining operations or extensive gold-bearing reefs, which shows that mines on their own are not a prerequisite for becoming a jewellery producing country .
“Why China and India have triumphed is because of cheap labour and a skilled labour force. We don’t have cheap labour in comparison to countries such as India, China and elsewhere in the East and our productivity is nowhere near the level of theirs.”
There are also a number of historical factors that have come into play, many of these a legacy of the apartheid years.
There has always been a huge domestic demand for jewellery in countries that have traditionally thrived as jewellery manufacturers, such as Japan, India and China. But the domestic market in South Africa has always been small, Da Silva says. And, until fairly recently, all gold was controlled by government and whatever the mines produced was sold to the Reserve Bank.
South African jewellers had to give very detailed accounts of how much gold they had in their possession and of how much they had purchased.
In the late 1940s gold was used as bullion, thus giving government a pretext to justify its contention that gold used for jewellery was a waste of a strategic resource.
So during that period government restricted the availability of gold sold to jewellers to small amounts. This led to the closure of a number of jewellery businesses and the emigration of many jewellers.
Many of South Africa’s jewellers were themselves immigrants, mainly coming from European countries, including the United Kingdom. Another inhibiting factor at that time was that the black community was not allowed to manufacture jewellery.
The effect of these restrictions was that the country’s jewellery manufacturing base was limited and controlled by government.
When the government finally released most of the shackles on the jewellery industry in the late 1980s, it was too late for the industry to recover. By this time there were a number of other factors with which to contend, including the fact that the cost of purchasing precious metals, including gold, was a lot higher.
Compounding matters was the exchange rate of the rand against currencies such as the US dollar. This was a time when sanctions against South Africa were at their height and the rand was accordingly very weak.
Da Silva says another factor South Africa does not have a competitive advantage in buying precious metals is that these metals are priced in dollars. The weak rand makes it more expensive for jewellers in this country to buy precious metals than it is for their counterparts abroad.
During the 1980s, when sanctions were at their height and the rand was weak, the capacity of local jewellers to buy raw materials was at its lowest. In addition opportunities for exporting jewellery were nullified, says Da Silva. This was aggravated by Eastern markets that were starting to come to the fore as manufacturing entities.
Whatever advantages in exporting South Africa might have had in the past were eliminated because its production costs coupled with to these new, emerging countries was a severe barrier.