Deloitte SA Blog

Water is our most precious resource. Its availability transcends political borders. While the challenge for increased competition is global, the issues must be solved on a local level by governments, businesses, non-governmental organisations (NGOs) and domestic consumers, all working together.

The aim of this report is to highlight the top issues that the Deloitte Global Deloitte Energy and Resources Water practice regard as the most important for the water sector. These issues are of course all interconnected with each other and with other resource issues, and should not be considered in isolation.

Rapid growth in demand for for this finite resource is a central theme and is reflected in all of the issues we discuss. The global water sector’s future will be characterised by efforts to manage demand and increase supply. We thank that continued awareness campaigns, more effective water pricing, a better understanding of the relationship between water, energy and food, and technology advances will play an important role in these efforts.

Climate change is also a key theme. It increases the risk of volatility in the availability of water resources and exacerbates the impact of forces driving demand. Unpredictable weather conditions also adversely affect the functioning of water assets and make planning and investment in water infrastructure more expensive.

To meet further demand, trillions of dollars will be needed on a global level to update aging infrastructure and expand water related assets. With government funding and borrowing capabilities severely impaired as a result of the ongoing financial crisis, the private sector is likely to play a bigger role in the water industry in the future. More water suppliers may be privatised, and it may be necessary to find mechanisms that allow water to be priced as a true commodity.

Efforts to demonstrate water stewardship will be a key theme for utilities and water users in coming years. Close collaboration between utilities, regulators and all users of water is required to address the ultimate issue – the scarcity of water resources in many parts of the world.

Download the report . . . . Water Tight 2012 – The top issues in the global water sector

Do you require a more detailed discussion? Contact Deloitte Consulting Director, Shamal Sivasanker, at ssivasanker@deloitte.co.za

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Mining companies today face challenges on several fronts when it comes to addressing supply risk effectively. There are people challenges, which include high turnover rates, a limited supply of skilled labour and service providers, and the logistics around getting personnel to mining sites in remote locations. There are process challenges throughout the mining supply chain that include: limited negotiating power in sourcing and procurement; coordination of complex global distribution networks across multiple regions and modes; a lack of upstream information necessary to perform adequate planning and forecasting; and ineffective processes to assess and quantify the magnitude of various risk types. Finally, there are technology challenges related to poor quality of data and a lack of effective analytical tools to support the modelling and evaluation of risk.

Leading practices in supply risk management address risk quantitatively and strategically, and take an integrated view of risk across the value chain and the enterprise. Strategic risks need to be segmented and separated from financial and operational risks in the current environment. Identifying the key drivers of change can help organisations prepare for changes across different time durations. Core supply chain and supply management capabilities must include an organisation, with the appropriate skills and abilities, charged with managing and reducing overall supply risk. In addition, core supply chain processes in the areas of forecasting and planning, inventory management, strategic sourcing, contract management, and supplier relationship management are a basic first line of defence to combat supply risk.

Those organisations who are more advanced in addressing supply risk deploy specialised risk management capabilities to address the more complex threats posed by regulatory and geopolitical shifts. These advanced capabilities include: focusing on market intelligence by partnering with strategic suppliers to share and evaluate data on market and economic conditions; enhancing internal systems to capture data that supports dynamic decision making; and intelligent risk modelling tools to conduct scenario analysis and optimise supply decisions.

Overall, mining companies today are faced with pressure to meet rising demand for mining commodities in a climate where the cost of supply disruptions is greater than ever. Mining companies that effectively develop the capability to manage supply risk will be better positioned to meet market demand and exceed stakeholder expectations amid volatility and uncertainty.

Download the full article . . . .  A guide to effective supply risk management in the mining industry

If you require a more information on the topic of supply risk management, the South African members of the Deloitte Global Mining Team will be more than happy to have a more detailed discussion with you. Their contact details are Werner van Antwerpen, Manager – wvanantwerpen@deloitte.co.za, Genevieve de Carcenac, Manager – gdecarcenac@deloitte.co.za and Tomek Jekot, Senior Manager – tjekot@deloitte.co.za.

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If you require a more detailed discussion with our mining leaders, contact the Deloitte South Africa Mining Leader,  Tony Zoghby, at +27 (0)11 806 5130 or tzoghby@deloitte.co.za and the Deloitte South Africa Mining Advisory Leader, Abrie Olivier, at +27 (0)82 874 6040 or aolivier@deloitte.co.za

Investing in African Mining Indaba Insomnia Index Findings

Delegates at the Investing in African Mining Indaba 2012 had the unique opportunity to participate in the Deloitte Insomnia Ondex. The fourteen themes selected had specific emphasis on challenges and opportunities mining companies could face when expanding their business into Africa. The Mining Indaba Insomnia Index results show that the top four opportunities mining professionals see in Africa are Exploration, Emerging Markets, Mergers & Acquisitions and Technology. The top four challenges identified by the Indaba delegates are: Infrastructure, Price volatility, Skills and Reporting & Compliance.

Mining the Detail

Opportunities

1. Africa is home to the majority of the world’s mineral wealth and is therefore seen as a huge opportunity for mines and making exploration top of the opportunity list. Many parts of Africa are seen as an untapped market and therefore a potential growth opportunity.
2. The expected demand from emerging markets for minerals could be seen as an offset to some of the risk that entering a new market brings. Africa’s relatively central location to emerging markets can be seen as a benefit from a supply chain perspective, both inbound and outbound.
3. The major players in mining are typically target acquisition of developed assets and possibly see acquisitions of existing mid-tier mines operating in Africa as a faster growth and penetration strategy. Mergers & Acquisitions could overcome the lack of skills, local knowledge, goodwill and technology that mines could encounter when expanding into Africa. The consolidation of the mid-tier market specifically in South Africa could be another influencer for delegates seeing Mergers & Acquisitions as a big opportunity.
4. Technology is an enabler for mines to mine deeper, assist with health and safety analytics and practices, employee training and to optimise operating efficiencies to name a few. It is therefore no surprise that miners see technology as an opportunity when considering expanding their business into Africa.

Challenges

1. The impact on operating efficiency due to lack of infrastructure in Africa is seen as a massive challenge for mines. The lack of rail and road, as well as power and water in large parts of Africa make it incredibly difficult for companies to start operations in Africa. Mines need to consider the extra funding and potential partnerships with local governments in order to operate in Africa.
2. Price volatility is a global challenge and so it is not a surprise that executives see this as a challenge when considering doing business in Africa. The large fluctuations could impact significantly on profitability, cash flow and input costs which ultimately negatively impact the investment case.
3. The respondents listed skills as a main challenge when considering doing business in Africa. Mid-tier miners who are not afforded the same access to a global network of skills that the large-scale miners have, may see this as more of a challenge as the cost of importing skills to remote areas in Africa can be very high. Attracting skills into remote locations continues to be a problem mines face as well as making careers in the mining industry attractive to Generation Y.
4. Reporting and compliance in the different countries in Africa can be difficult to navigate without local knowledge and understanding of the specific requirements. Respondents listed this as the fourth biggest challenge when looking to expand their operations into Africa.

Summary

Africa clearly has many growth opportunities for the mining industry. The questions now are how do mines overcome the major lack of infrastructure, skills and local knowledge in order to leverage off these opportunities? And will the demand from emerging markets continue to grow and will mines in Africa be able to supply this demand in time in the most cost efficient manner?

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Access to electricity stands at 26% in sub Saharan Africa, the lowest worldwide and the picture is even worse in rural areas where it is estimated that only 5% have access to electricity (WHO, 2009). All agree that significant change is needed in order to rectify the imbalance.

The effect of a different kind of change – climate change – has resulted in a massive push worldwide for the growing need for electricity to be met by renewable energy sources and Africa is no exception. The South African National Energy Association believes that Africa’s energy supplies would have to increase at least fourfold by 2025, if the continent were to meet the energy demand of its people. Ideally the largest portion of that supply should come from renewable sources.

The perplexing energy security situation contrasts strikingly with the abundant natural resources of the sub-Saharan Africa region: most countries in the region have renewable energy potential many times the current demand and the potential is exploitable using currently proven technologies and available know-how in electricity generation from hydro-power, as well as geothermal, wind, biomass and solar energy sources.

To date, the potential benefits of renewable energy have to a large degree not been seized in the sub-Saharan African region, despite the many economic, social and environmental advantages associated with it. Renewable energy can put an end to South Africa’s reliance on fossil fuels such as oil and coal and can be an avenue to better exploit the economic opportunities offered by international carbon markets.

The most severe challenges facing the continent, with regard to power generation include inadequate development of the energy infrastructure, high capital costs attached to energy projects, the lack of technical expertise and perhaps most importantly, the lack of finance and investing in energy projects.

Thankfully, a broad range of financial institutions are starting to invest or lend money into the renewable energy sector in sub-Saharan Africa. Global investment in the renewable energy sector grew exponentially from $22 billion in 2002 to $155 billion in 2008 (UNEP, 2009) when, for the first time, investment in new renewable energy power generation capacity was greater than investment in fossil fuel generation worldwide. The financial crisis in late 2008 did hit the sector heavily, although investor interest in the sector has returned and is growing steadily.

It is estimated that South Africa would need approximately R110 billion in investment to meet the renewable energy capacity as envisaged in the government’s Integrated Resource Plan (Loni Prinsloo, 2011). A large financing gap exists in the power sector as the focus of much of the current spending is on maintenance and operation of the existing power infrastructure, the new build programme of coal-fired stations and the re-activation of previously mothballed coal plants, with little remaining to fund long-term investments and to address the power supply crisis by means of renewable energy sources.

For this gap to be closed, private financiers and investors need to be involved. This is a somewhat new approach given that, traditionally, the bulk of investments in infrastructure (electricity included), have been made by government. Private institutions are becoming increasingly active in a variety of roles across the energy sector, including as debt and equity financiers, advisors and in public-private partnerships.

The private sector, however, approaches investments in renewable energy in the same manner as any other investments. Renewable energy investments, though, have certain characteristics that require an additional level of understanding. These include the influence of policy and regulation on the viability of an investment, including the legal basis and durability of any subsidies, grants, tradable certificates or tax credits. These factors are layered on top of the basic financial analysis of any renewable energy project.

Financial institutions operate on a risk and return basis evaluating each potential investment opportunity on its merits, with financial return and risk being co-dependent categories. Project sponsors, lenders and investors, want to make a return proportional to the level of risk they undertake. So as with all other classes of projects and investment, renewable energy investment becomes more likely and frequent if the perceived levels of investment risk are reduced for a given level of return, or returns are increased for any given level of risk.

The financial profitability of the underlying technology and the extent to which it is financially competitive compared to other competing technologies is critical in driving the financial return of any energy investment. In the context of electricity generated for large, centralised grids, it is still the case that, electricity generation from renewable sources is generally more expensive than from conventional sources.

Nonetheless, generation costs for renewable energy generation are decreasing and certain technologies are already competitive, or at ‘grid-parity’, with conventional forms of electricity generation in many parts of the world. In South Africa, solar photo voltaic generation is expected to be fully financially competitive with conventional coal-fired generation as soon as 2015 (PV Magazine, 2010).

When it comes to the financiers’ assessment of risk, regional circumstances in particular include a variety of investment related risks (country, regulatory, commercial and market risks) that will be more pronounced in sub-Saharan Africa and other developing countries than in developed countries or emerging economies. These risks will immediately increase the return expectations of investors and thus, any project’s cost of capital. Lenders also stress the importance of a credible offtake agreement, with acceptable costing, and ‘take or pay’ features – lenders need to know that their returns are adequate to support the serviceability of the funding over the long project lead time. The combination of these risks and lender requirements, often leads to capital-intensive energy options being discouraged, and the focus being placed on less capital-intensive, conventional energy technologies.

The range of renewable energy risk profiles can nonetheless be matched to the spectrum of financial institutions from banks, pension funds, private equity and venture capital providers. However, the renewable energy sector requires a clear policy environment to deliver the project economics to attract private debt and equity. Policy and regulation continue to be central to ensuring the long term stability of projects from a revenue and operation perspective.

It is thus imperative that both regulation and policy be clear, of a long duration, and legally based in order to deliver growing volumes of private funds into the renewable energy sector.

Sources:

Loni Prinsloo, 2011 – (R100bn investment needed to meet SA’s renewable energy aspirations)

Magazine, 2010 – (South Africa: Grid parity within sight, but Refit needs to be implemented soon)

UNEP, 2009 – United Nations Environment Programme, 2009 (Private Financing of Renewable Energy – A Guide for Policymakers)

WHO, 2009 – World Health Organization (The Energy Access Situation in Developing Countries)

by Dr Jacek Guzek, Director at Deloitte Consulting

For more information or a detaled discussion on the subject, contact Abrie Olivier (Mining Industry Leader) at aolivier@deloitte.co.za  or +27 (0)82 874 6040 and Jacek Guzek (Associate Director) at jguzek@deloitte.co.za or +27 (0)82 940 6896.

Who actually benefits from mining?

Although the tide of resource nationalism has risen globally, with countries from Africa to Australia, Brazil, Canada, Chile and India considering options to increase state interventions in the mining sector, nowhere is the debate as high-profile, emotionally charged, divisive and potentially damaging as in South Africa.

The country is admittedly sitting on a mineral treasure trove second to none: 52 commodities reside under its surface, including the world’s largest reserves of platinum, manganese, chrome, vanadium and gold, and major reserves of coal, iron ore, zirconium and titanium minerals – all at an estimated in-situ value of $2,5 trillion¹. It is evident that the South African mining and minerals sector has immense value generation potential.

But in spite of its mineral (and other) riches, the country has been criticised for being seemingly slow in addressing what Mineral Resources Minister, Susan Shabangu, called South Africa’s “evil triplets”, namely: poverty, inequality and unemployment. Against this context, the proponents of a radical state intervention into the South African mining industry assert that the mineral wealth of the country ends up in the pockets of “monopoly capital” rather than benefiting its population at large. Who actually benefits from mining, they ask, and is it at the expense of those who truly should be benefitting? Let’s examine the question simply from the high-level value creation (or destruction) point of view.

Each (not only) mining opportunity has an inherent, or “in-situ”, value, which could eventually end up in the pockets of enterprising investors, if not for various concessions necessary to convert it into a commercial value all along the life-cycle of the project. These concessions, at a very high level, could include: R&D capital, investment capital, operating costs (including salaries of employees and procurement from suppliers), time value of money, royalties and taxes, etc. (refer to figure 1 below).

In the end, only a small residual portion of the inherent value of an opportunity finds its way to original private shareholders. In our experience, there are many successful mining projects where this residual value is only a lower single-digit percentage of the primary in-situ value. The remainder, in fact the lion share of the inherent value of any commercial opportunity, ends up in the economy at large, either through state treasury or through private sector spending, where it benefits all and translates into wealth and jobs.

Citigroup Global Markets² estimates that “only 7% of the value generated by SA miners gets distributed to shareholders i.e. the entrepreneur and risk taker. The biggest beneficiaries are in fact suppliers to the industry, mining sector employees and the government. To turn opportunity into this value (and many fail along the way) requires substantial upfront investment capital and specialised and scarce skills.

Figure 1: In-situ value graph

The question remains, why would government want to assume full risk of a complex entrepreneurial activity for such an incremental value, given the significant investment requirement?

In spite of some notable exceptions, governments’ track record in managing commercial entities the world over is, at best, inconsistent³. One can therefore question what value will ultimately accrue to society by replacing the role of the entrepreneur with a government institution. Transferring ownership from private shareholders to the state, to ensure “fair” distribution of generated value, creates a different set of incentives for public sector entities, potentially resulting in consequences contradictory to the primary intentions. While maximising shareholder value is what drives the management of private companies, the definition of objectives for a state principal is a lot more complex and politically charged. Alternatives such as financial sustainability, job creation, fair distribution, or community development often require trade-offs between efficiency and policy imperatives, blurring the overall mandate. In addition, performance of managers in the public sector companies is not always subject to the same level of scrutiny as is standard in the private sector. Furthermore, public firms do not face take-overs or bankruptcy, with all their threatening but performance-enforcing consequences.

On the other hand, for a relatively small reward or incentive, private investors shoulder the entire burden of risk in developing and managing complex opportunities. They are also usually willing to wait for returns throughout volatile economic and commodity
cycles. But any entrepreneur has to be assured that this risk is worth taking, considering the alternatives to deploy their capital in the most productive manner, and the security of tenure is the very basic consideration.

It therefore appears that the intensity and profile of the debate on nationalising the mining industry in South Africa is far out of proportion with respect to the actual value that its resolution is capable of generating or redistributing.

Rhodes University economists, Gavin Keeton and Greg White, estimated in 20104 that had the nationalization of the South African mining industry been carried out then, the bill to the government would be around R850bn (i.e. the market value of listed SA mines).

If the government were to borrow this sum at the current interest rates, annual interest payments would amount to R72bn, almost 8% of total state spending. Even if state ownership had been limited to 51% and nationalisation without compensation was considered, the interest payments would still be close to R20bn, as foreign owners of SA mining assets would have to be compensated based on international and

bilateral investment treaties. In return, the government would gain some R20bn of extra after-tax profits of nationalised companies belonging to the state. Claims that nationalisation will enhance the state’s “fiscal capacity” are therefore false.

“It therefore appears that the intensity and profile of the debate on nationalising the mining industry in South Africa is far out of proportion with respect to the actual value that its resolution is capable of generating or redistributing”

Historically, metals and mineral resources seem to have been the favourite nationalisation targets – especially at the peak of commodity cycles when windfall profits have been evident. Only the banking sector can be said to have been targeted for nationalisation with similar resolve. What is conveniently forgotten is that the global mining industry goes through alternating cycles of poor- and super-profitability, and a steady stream of positive free cash flows is not guaranteed.

The South African mining industry, although neither the biggest contributor to domestic product nor the largest employer, cannot be underestimated in terms of its importance to national economy or, indeed, to national identity. It is only natural that a society with the South African level of inequality, debates the best use of its resources. However, the focus of such a debate should rather
shift from re-distribution of relatively insignificant residual value to identifying and removing impediments to growth of the mining industry, which has the potential to generate far greater wealth than is presently the case. More so, considering that efficiency, diversity, and the competitiveness of the mining sector are not questionable.

In the words of the State President, Jacob Zuma: “The state prepares the environment for economic growth and provides support to the private sector by providing enablers and removing obstacles” (a speech prepared for delivery at the World Economic Forum in Davos, Switzerland, January 2012). In such an environment both the state and the private mining sector have at their disposal multiple instruments and tools to optimize components of the industry value graph, which can forward the developmental agenda of the government as well as accommodate just rewards for entrepreneurial risk. Exactly who benefits from mining is as important a question as who would lose on its nationalisation.

For more information, please contact Abrie Olivier (Mining Industry Leader) at aolivier@deloitte.co.za  or +27 (0)82 874 6040 and Jacek Guzek (Associate Director) at jguzek@deloitte.co.za or +27 (0)82 940 6896

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1. Chamber of Mines, Facts & Figures 2010

2. Nationalisation – killing the goose that lays golden eggs, 29 June 2011

3.“The return of state-owned enterprise: should we be afraid?”, A. Musacchio and F Flores-Macias, Harvard International Review, 31/07/2009

4. Nationalising the mines will be an expensive business, Business Day, 20/09/2010

by Johan Theron, Director at Deloitte Consulting

The new mining environment in South Africa and Africa is all about entrepreneurial flair and fast reaction to volatile commodity markets. These miners want flexible, scalable and affordable back-office support.

This article was written by Johan Theron at Deloitte Consulting. If you have any questions or would like to arrange a more detailed discussion, contact Johan at jtheron@deloitte.co.za or +27 12 482 0514

It seems like there is a new scramble for Africa under way at the moment. Africa’s rapidly urbanising and increasingly affluent populations are certainly an attractive potential consumer market, but the real driver is global hunger for Africa’s mineral wealth. There’s also no doubt that Africa’s attractiveness as a market for goods and services also ultimately depends on the profits from mining Africa’s minerals.

The markets may be hungry for African minerals but they are also highly volatile—and look set to remain so. Long-term planning is thus much more difficult, but mining still requires significant long-term investment. Strong demand has also bred strong competition: it is now feasible to exploit smaller, less concentrated ore bodies. As a result, there are many more mining operations across the continent, and ownership is not nearly as concentrated as it once was. In part, at least, this trend is driven by Africa’s determination to participate much more actively in the mining value chain in order to ensure that more benefits remain on the continent.

In South Africa, in particular, the need for black economic empowerment has seen the birth of many junior miners, some of which have been hived off from larger entities. However they were formed, these ventures are primarily aimed at spreading South Africa’s economic wealth more broadly.

This changing mining landscape is driving the emergence of a new breed of entrepreneurial miners.

A new breed of miner

These new-generation miners are a far cry from the traditional mining houses with their impressive head offices and centralised, highly skilled finance, HR and IT teams. The new miners are building up their businesses—thus they are concentrated on exploration, followed by the creation of the infrastructure to support a mining operation and get the product to market.

All of this activity is, one should not forget, taking place at a time of severe fiscal constraint. Overheads thus need to be kept low, and fixed costs are much preferred because they make planning much easier. At the same time, as I noted earlier, demand has bred fierce competition: these companies definitely need to be run efficiently and to meet their delivery commitments.

These conditions place executives in a tight spot. Their main focus has to be entrepreneurial as they help to clinch new deals and partnerships, and generally create the strategy needed to prosper. They don’t have time to worry about day-to-day back-office operations although, at the same time, of course, they are dependent on them for cash flow.

A long established solution to challenges of this nature is, of course, to outsource some of the vital but non-core processes like payroll, HR or IT. Talking to these executives, it becomes apparent that payroll and IT are the processes most outsourced, but that other processes are rapidly catching up. The benefits include reduced risk and increased efficiencies—not to mention cost savings that, in our experience at Deloitte, can reach 30%. Benefits also include the flexibility to scale operations up or down according to business strategy, better regulatory compliance, a stronger control environment and access to global skills as needed.

Next-generation mining outsourcing for next-generation miners

Mining is one of the engines of our country’s and Africa’s future prosperity. I believe that this new breed of miner cries out for a new outsourcing model in which the key non-core back office processes are outsourced to a single vendor. The reason behind this thinking is, I think, compelling.

The first element of this thinking is that mining companies need to standardise on best practices appropriate to their sector. The days of extensive (and expensive) customisation are over. Both the systems and the back-office processes they enable should become background utilities comparable to water and electricity.

This is a welcome development because at one stroke it prevents companies from remaining hostage to the status quo—especially as the status quo might not have been optimal in the first place. It also means that software upgrades are easy and quick as there is no need to undergo the expensive customisation process each time.

Another key driver for today’s miners is the need to be able to predict costs accurately. This ability helps protect the bottom line and gives companies the flexibility to invest in their core activities.

Pulling all of this thinking together, I would propose the creation of an integrated solution based on an enterprise system that is preconfigured with best-practice mining processes. I would argue that it makes sense to outsource the financial processes that are enabled by this preconfigured system to the same vendor—along with the necessary IT infrastructure. It’s a winning approach because it enables process efficiencies across what is essentially a tightly integrated ecosystem. Along with these process efficiencies come significant cost reductions, as well as an easy-to-manage relationship with a single vendor.

The benefits for the next-generation mining house are manifold. As I have made clear, these operators are entrepreneurial in nature and are heavily into the investment phase of their life cycles. This type of approach gives them the freedom to focus on their core business strategy, secure in the knowledge that their non-core business back office operations are taken care of—and are optimised for the mining environment. The fixed, “pay as you go” cost structure means that CFOs can plan better, and can focus their efforts on growth activities.

A solution constructed along these lines has the advantage of being quick to implement (anything from four to six months would be standard, in our experience)—and it gives the small or mid-sized mining house a Rolls-Royce engine that it does not need to own or manage, but that that will give it the power it needs to do great things. Deloitte makes pioneering on the world’s final investment frontier easy.

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This paper was authored by Papi Melamu, a senior manager within the Strategy and Innovation team at Deloitte Consulting, South Africa. If you have any questions or require additional information, you may contact Papi at pmelamu@deloitte.co.za. I have provided an introduction to the paper below.     

The South African commercial and residential energy context

Although gas has been globally accepted as an important source of energy, its usage for this purpose in the South African economy is still small compared to other mid-income countries.  Until now, the use of gas in South Africa has been largely limited to applications in the industrial market.

There are two types of gas for consideration in the local market: the natural gas imported from Mozambique for petrochemicals production and liquid petroleum gas (LP gas which is produced as a by-product of crude on coal to liquids (CTL) refining processes.

South Africa has enjoyed a period of accelerated economic growth post the apartheid era accompanied by historically low electricity prices to lure foreign direct investment.

The delay of investment in new generation capacity since 1970s and 1980s to support the country’s economic growth has resulted in demand for power being disturbingly close to supply.  Due to the tight supply, the local energy sector has experienced a dynamic shift over the last three years, which has seen end users experience more than a 30% price increase during the period to help the national power utility finance the construction of its new generation capacity.

Download the paper . . . .  Unfolding scenarios within the South African residential and commercial gas industry

We welcome your comments and feedback. Please share this paper with your network

This paper, prepared by Ebrahim Takolia of Deloitte Consulting, South Africa, is aimed at all decision-makers, across all industries. I have provided an introduction below and welcome you to download the full paper which is very comprehensive and highlights challenges, opportunities and the effects mineral beneficiation will have on businesses. If you have any questions or require additional information, you may contact Ebrahim Takolia at etakolia@deloitte.co.za. Click Here to download the Deloitte Mineral Beneficiation paper.

Positioning for mineral beneficiation – Opportunity knocks

Mineral beneficiation is a priority for governments of resource rich countries that would like to leverage the potential of mineral beneficiation to create local employment and drive economic growth. Many governments are developing strategies for domestic mineral beneficiation.

South African President, Jacob Zuma, has said that mineral beneficiation is a priority for his government and will finalise and adopt a beneficiation strategy as its official policy. In June 2011, government released a strategy that identified a number of instruments such as policies, legislation and incentives that can be put in place to enable beneficiation.

A mining company will typically be in one of the following assessment phases with respect to beneficiation:

Strategic Assessment: an analysis of the strategic considerations as well as risks and opportunities for mineral beneficiation, particularly focusing on the business case and taking into consideration government incentives and social imperatives like job creation;

Feasibility Assessment: the beneficiation opportunities have been identified and feasibility studies need to be undertaken to determine the viability of such initiatives; or

Implementation: the feasibility of an initiative has been determined and an implementation plan and schedule needs to be developed.

This paper is the first in a series about beneficiation and will be updated as legislation and incentives come into effect, which assesses the merits of beneficiation.

Download the full article . . . . Positioning for mineral beneficiation – Opportunity knocks

We welcome your feedback on this interesting and topical subject!

This report was published by the Deloitte Global Energy and Resources. Should you require any additional information, you may contact Shamal Sivasanker who heads up Power and Utilities in South Africa. Shamal’s email address is ssivasanker@deloitte.co.za. Learn more about  Deloitte Power Solutions.

Empowering Ideas 2011 – A look at ten of the emerging issues in the power and utilities sector

“The end of the global economic crisis has forced electric utilities companies to confront new challenges. While the demand for energy continues to increase as a result of the growing global population, security of supply represents a major challenge. The reputation of nuclear energy was hard hit by the recent Japanese earthquake and resulting tsunami. While renewable energy continues to enter mainstream utilisation, unconventional gas has become more economically attractive based on improving drilling technology. LNG and coal are abundant sources and remain important parts of many nations’ fuel mix but coal could be helped by clean coal technologies and coal-to-liquids processes.

Investments in renewable energy, in the form of solar, wind and geothermal resources, continue to increase at the expense of new build nuclear energy which, in many countries, continues to be a subject of debate. In heavily regulated markets, mergers and acquisitions may be one option for utilities to grow as organic growth prospects may be limited. Energy efficiency aand demand side management programs offer a ‘win-win-win’ for governments, utilities and consumers. A clear trend is the growing importance of data analytics applied by power companies. Advanced IT techniques are helping power companies to analyse enormous data sets to create scenarios and make informed decisions”.

Download the full report . . . . Deloitte report – Ten emerging issues in power and utilities

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The world is in the midst of creating a new development model that, at the corporate level, could bestow competitive advantages and create sustainable corporate futures, while fostering more equitable global economic growth and also tackling climate change. The opportunities for sustainable energy strategies are everywhere evident, beginning with the training of architects who design buildings, to construction processes, to insulation, the HVAC system, the lights, the water, the elevators, the power and cooling for technology, the heating and cooling for people.

Today, citizens and corporations everywhere have been awakened and empowered. The use of energy is now a conscious act—and an act of conscience. This conscious action is a key to economic solvency and sustainability. It’s not about being virtuous, it’s about being profitable—and, at no cost, virtue is achieved.

Individuals and companies are becoming increasingly aware of their own energy P&L and carbon footprints. Businesses and governments should respond to this new reality by creating the products and services that will help consumers manage their energy consumption. Corporations, meanwhile, should realize that in addition to their core business, each and every one of them is an energy company, too, with the potential to produce their own energy, and that managing their energy usage can be critical to their bottom line. Policymakers can amplify these trends by creating the rules of the game and funding the research that will position all developed countries at the cutting edge of the Clean Energy evolution.

The drive to sustainability is a drive to creativity and innovation. May the cleanest, most energy efficient corporations win.

Download the full article . . . . Every company is an energy company

Click Here to learn more about Deloitte’s Power Solutions

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