Assessment of the potential socio-economic impact of a new silica sand mine within the Philippi Horticultural Area

Background and context

Nova Economics was engaged by Apex Mining (Pty) Ltd, a subsidiary of Consol Glass (Pty) Ltd, in early 2022 to perform an independent assessment of the socio-economic impact of a proposed new silica sand mine within the Philippi Horticultural Area. The assessment formed part of Consol’s Integrated Water Use Licence Application (IWULA) to the Department of Water and Sanitation (DWS).

At the time of the engagement, Consol was sourcing the approximately 94 kt to 110 kt of silica sand it required annually to produce 270 kt of glass containers at its Bellville plant, with the silica sand being sourced from a nearby mine. However, the mine was nearing the end of its useful life and Consol urgently needed to find a new source of silica sand for its plant. The proposed solution was to develop a new mine on-site containing a rich silica sand deposit in the Philippi Horticultural Area.

Consol’s initial application for an integrated water use license at this site was declined in 2019. Consequently, the company was in the process of reapplying. This study was commissioned to fulfil the requirements of the National Water Act (NWA), specifically outlined in Section 27. According to this section, the responsible authority must assess two key factors when deciding whether to issue a water license: 1) the socio-economic impacts associated with the proposed water usage compared to the potential impacts if the license is denied, and 2) whether the proposed water use aligns with the public interest, meaning it will benefit society.

Purpose of the assessment

The primary purpose of the study was to provide the DWS with an independent assessment of the socio-economic impacts that are likely to occur under two scenarios:

• If the use of water at Apex’s proposed new silica sand mine at Philippi were authorised; and
• If DWS rejected the application and Consol pursued one of the next best alternatives.

In essence, the study aimed to conduct a comparative analysis of the socio-economic impacts between the proposed mining project’s approval and the potential consequences of DWS withholding the license.

Key findings

In discussions with Apex and Consol, it was concluded that in the event of the DWS rejecting Consol’s water-use license application for a second time, the likelihood of Consol choosing to close its Bellville production facility was low. Instead, Consol would likely explore alternative avenues to secure silica sand. This would entail identifying another site or silica deposit within the Western Cape or seeking supply from existing domestic or international sources.

We conducted an analysis to evaluate the potential of four promising alternative sources of silica sand for Consol’s Bellville facility:

• The proposed Philippi mine;
•  Establishing a new mine north of Atlantis to extract silica sand from the silica deposits in that area;
•  Sourcing silica sand from inland locations; and
•  Importing sand from abroad, such as from Egypt.

After a comparative assessment of direct costs and benefits, broader economic impacts, and environmental considerations associated with each alternative, the development of a new mine at Philippi emerged as the preferred choice. This option proved to be the most economically viable and could be expected to deliver the greatest net benefit to South African society.

Outcome

The water use license application was filed, together with our independent report. As of writing this case study, the outcome is currently under review in court proceedings.