Why South Africa needs a PGM Commodity Exchange for a sustainable future

South Africa should adopt a long-term beneficiation strategy for platinum group metals (PGMs) through establishment of a commodity exchange, experts said on Wednesday, while also calling for miners of the precious metal to deepen research on wider use cases as the uptake of green hydrogen is emerging off a very low base.

Despite their widespread use in internal combustion vehicles, PGMs are also considered essential for green energy transition as they can still be used in hybrid vehicles and in hydrogen vehicles.

Nimrod Zalk, the chief research officer for climate and development at the Nelson Mandela School of Public Governance, said on Wednesday that PGMs have become the largest mining sector in the South African economy as a big employer and revenue generator for the government. However, to sustain future benefits for the South African economy, PGM miners need to research and explore other industrial use cases.

“PGM miners really need to be putting a lot of resources and probably a lot more resources into the research and development that's needed to develop new industrial uses for PGMs to ensure that significant chunks of those industrialization opportunities actually take place in South Africa,” said Zalk.

One of the emerging use cases for PGMs was the metal’s in the green hydrogen economy under South Africa's green transition. Zalk said in addition to a just green transition, there was need for a balanced approach in relation to the resources that are put into the green hydrogen economy work.  

“By that I don't just mean financial resources, but also critically the time and attention that government officials spend on green hydrogen related activities relative to other green economy opportunities,” Zalk, who was speaking during a round table on PGMs organised by the Mapungubwe Institute for Strategic Reflection, said.

PGMs are imported for the green energy transition as they are required for the production of fuel cells, both for stationary uses, as well as for fuel cell powered vehicles. PGMs are also key in electrolysers that are required to produce green hydrogen.

However, said Zalk, the hydrogen economy has been slow to get out of the starting blocks, adding that “the fuel cell industry is emerging off, or for very low” base.

“As of now, green hydrogen is yet to emerge as a fully commercialised technology,” he said.

South Africa holds significant PGM reserves, necessitating the need for President Cyril Ramaphosa’s government to work on establishing a commodity exchange for the precious metals, said Iraj Abedan, executive director for Pan African Research and Investment Services.

“It's important to note that every day, every week, and every year that passes by, South Africa's strategic positioning in PGMs diminishes, because more and more secondary markets increase their share of the global supply. Recycling and re beneficiation of existing PGMs in different manufactured items around the globe has generated a growing secondary market,” said Abedan.

This was necessitating the case for enhanced beneficiation, which has to be premised on a strategic and long term basis. Other hubs such as the UK had established the London Gold Exchange which has retained value over the years, generating benefits for the country even without significant or large scale local production of gold.

The South African government was dragging its feet on establishing a PGM commodity exchange.

“It is somewhat disappointing that South Africa, as a whole, government, in particular, has neglected this (commodity exchange). The only institution that has shown keen interest and remains interested is the South African Reserve Bank, and that's a very important player,” explained Abedan.

Establishing a PGM commodity exchange was a strategic industrial policy for SA, with the “only missing element at the moment being a sleeping government and a non patriotic” local industry.

“Those two are the only two missing elements of a successful PGM exchange in the country,” Abedan

A PGM commodity exchange would link key service sectors to key beneficial sectors that include the financial, legal, insurance and logistics sectors. Moreover, being in a digital platform, the exchange will be future proofed given existing technological advancements and growing digitalization of assets.

BUSINESS REPORT