RAPAPORT... Good morning ladies and gentlemen.  It gives me great pleasure to address this auspicious event which is being held for the first time in South Africa.  Our country is a primary producer of the precious metals and minerals that go into jewellery fabrication, so it is fitting that CIBJO be held at the source, so to speak, of the raw materials from which jewellery products are made.  The only quibble I have in this regard is the choice of city – Cape Town, after all, is not where most of the mines are located.

I would like to discuss today the issue of responsible mining, and how this ultimately assists in creating a viable and sustainable jewellery industry.  Within this framework I also wish to highlight some of the problems that can undermine the survival of the mining sector and its ability to support related industries.

I will start by expounding on the very positive contribution of mining to society and the economy as a whole, and not just downstream beneficiation.  The mining industry used to, and occasionally still does, suffer from bad press owing to safety records, environmental degradation, and social dislocation. 

Although there are still many challenges to be overcome, the mining industry has made tremendous strides in addressing safety, environmental, economic and social concerns to the benefit of the broader population.  Many mining operations and companies have been recognised for their leadership in aspects such as partnerships, research, rehabilitation, water treatment methodologies, improved infrastructure, and increasingly transparent disclosure of operating and governance practices through reporting.

The success of a mining company is no longer measured exclusively by the volume of ore or minerals mined but also by how much it invests in social upliftment programs.  To support this aspect of the mining sector the Chamber of Mines hosts a two-yearly Sustainable Development Conference, which acts as a platform for sharing good practices in promoting sustainable development.  In addition, the Chamber publishes a two-yearly sustainability and transformation report that outlines the advances made by the industry in achieving specific targets.  These targets relate to, among others, combating poverty and HIV/AIDS, providing housing, promoting skills development, and achieving transformation in the industry.

Through the World Summit on Sustainable Development in 2002, governments committed to report on the means of implementing sustainable development in mining by 2010.  The South African mining industry is working towards this goal with the Department of Minerals and Energy (DME) on its “Sustainable Development through Mining Programme.”  One of the objectives of the programme is to identify and prioritise derelict and ownerless mines for rehabilitation, and to develop a strategy to effectively prevent future derelict and ownerless mine liabilities.

The Chamber has publicly pledged its support to the DME’s initiative and this, although it does not place us on a par with our Australian and Canadian counterparts who each have developed responsible mining initiatives, certainly brings us closer to realising this aim.

Aside from sustainable development initiatives there are other contributions that the mining sector makes to economic and social upliftment.  Mining is widely acknowledged to be the backbone of South Africa’s highly industrialised economy.  Much of the country’s original infrastructure, world-class financial services, manufacturing industry and services industries are attributable to the mining sector.  Multiplier effects extend the role of mining in the economy in the form of the development of associated industries that supply the mines, infrastructure in outlying areas where the mines are located, and skills development and education. 

Many of the mining companies have programs to empower local people in the industry through ownership and procurement from local sources.  The multiplier effects of mining in South Africa are estimated to be two and a half times the direct effect of the industry.  Elsewhere in Africa mining has also played a crucial role in economic prosperity.  In Botswana and Namibia, diamond mining is the largest single industry and is an important contributor towards GDP, employment and export earnings. 

It is true that resource wealth in Africa has not always translated into economic and social development.  Poor institutional frameworks and governance, together with other factors, have spawned the trade in “conflict” diamonds.  In a clear show of responsible action diamond mining companies, with the co-operation of government, were quick to institute measures to curb the illicit trade of diamonds.  Through the Kimberley Certification Process conflict diamonds now account for less than one percent of the world’s traded diamonds.

Responsible mining initiatives do not end in the environmental and social development domains. 

In keeping with government objectives to add value to local resources, mining companies, although not directly responsible for downstream beneficiation, have been participants in a range of activities to promote jewellery manufacture and diamond cutting.  There is often the impression that little to no beneficiation takes place in South Africa.  This is a misguided perception.  Statistics indicate that between ten and 15 tons of gold are fabricated into jewellery each year in South Africa, of which five to six tons are exported.  On the platinum side, about 15 percent of the world’s platinum catalytic converters are manufactured in South Africa.  The diamond industry accounts for 550,000 carats of high quality gem diamonds cut locally.  In Botswana, De Beers and the government of the country have agreed to the establishment of DTC Botswana, which will sort and value all Debswana’s diamond production and will sell rough diamonds to the local cutting and polishing industry.

Precious metal mining companies also recognise the need to facilitate manufacturing beneficiation in the country and have intervened in this regard by sponsoring jewellery design competitions, developing special economic zones for manufacturing, providing material funding schemes and financial assistance to jewellery training schools.

I want to turn our attention now to a scourge in the mining sector that has the potential to undercut the efforts of mining companies to create a sustainable environment and enhance the value of our natural resources to the broadest benefit for all. I refer to the theft of precious metals from mines, an issue that has received prominent attention in the press of late.

Studies estimate that up to 35 tons of gold are stolen from mines and refineries a year.  Depending on the gold price this can translate into over two billion rands worth of metal that is forfeited by mining companies every year.  It is two billion rands less money that could be used for community development, housing, healthcare centres, combating HIV/AIDS, or any of the other social responsibility initiatives that mining companies are involved in.  Nor is the problem confined to gold – platinum mines face the same problems and diamond operations are not exempt either. 

Local investigations reveal that the theft is conducted through various syndicate groups, operating from source level on the mines, to disposing of the product internationally.  The gold is sold locally and to foreign markets through organised crime networks.

The effect of stolen precious metal on the mining industry and the economy is far-reaching.  The gold mining sector, in particular, is in a precarious situation as it grapples with more expensive mining processes and the general rise in costs of mining operations.  The theft of precious metals can erode the profitability of marginal mines to such an extent that they would have to stop production and lay off the workforce.  Even in the case of prosperous mines, theft has negative consequences in respect of revenue earned, the level of working costs, profits, dividends, capital expenditure, and number of jobs available.  Ultimately, the declining profitability of mines has a negative impact on government in terms of foreign exchange, income tax generated, VAT paid, and the number of persons dependent on social security benefits.  The criminal threat to the precious metals mining industry is thus a threat to South Africa’s national growth and economic future.

The mining sector is devoting enormous resources to combating the problem on a number of levels.  One of the more important initiatives has been the establishment of regional metal forums involving mine security, mine management and the SAPS at regional level.  These forums feed into a national forum so that the effort is an informed and co-ordinated one.

The jewellery industry can also play a role in eliminating or at least minimising this criminal element in the industry.  Ultimately, unwrought gold is sold to jewellery manufacturers for fabrication into jewellery.  We would appeal to all jewellery manufacturers to co-operate with the mining sector by refusing to buy gold that is not from legitimate sources.  Much of the metal that is stolen is destined for foreign destinations but a percentage of it is sold locally. Evidence of this is the discrepancy in the figures of two and a half tons of unwrought gold sold by Rand Refinery to the local jewellery sector, and the 12 to 15 tons of jewellery produced by the jewellery industry annually.  Naturally, jewellery manufacturers also obtain gold from used jewellery and sweepings.  Nevertheless, the shortfall between the gold that is sold through official channels and the volume of jewellery produced is significant indeed.

I believe that we can all work together to our mutual benefit and in the interests of a thriving South African economy and society. The jewellery sector cannot exist without mines to source the raw materials and there is little point in mining unless there is a demand for the product, and jewellery forms the overwhelming basis of that demand.  The image of the mining industry is therefore inextricably linked to that of the jewellery industry.  Consequently, a responsible mining industry has positive repercussions not only for communities and the environment but is also an enabler of a sustainable jewellery sector.