Platinum Trust of South Africa

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Introduction to the Business Initiative and Concept

The Platinum Trust of South Africa (PTSA) was formed in 2003 on the back of legislative changes in the mining and beneficiation environment in South Africa. While the Trust uses the name of the precious metal, its efforts are not limited to platinum but incorporate all Platinum Group Metals (PGM).

The Trustees of PTSA have determined to take advantage of this progressive legislation by establishing a platinum beneficiation facility. This facility, to be based in the North West Province, will initially manufacture high quality platinum jewellery for selected local markets and export markets.

The facility, in helping to address the socio-economic challenges facing South Africa, will also include a training centre, leveraging off the infrastructure and working capital of the facility, to ensure skills transfer to and upliftment of historically disadvantaged South Africans.

1. Mineral Beneficiation in South Africa

Historically, South Africa's mining legislation was designed to ensure that every ounce of precious metal produced in South Africa was exported to guarantee an inflow of foreign currency. A culture of downstream beneficiation was, as a result of this legislation, not fostered in South Africa.

The South African government has recently overhauled the mining legislation through the tabling of the Beneficiation Bill. This Bill revisits the ownership of unwrought precious metals and clarifies the uncertainty around the beneficiation process and as a result, removes the barriers that previously inhibited the beneficiation of precious metals.

2. The seda Platinum Incubator

Through the strategic input of the Platinum Trust and the backing of the seda Technology Programme (STP) – a division of the Department of Trade and Industry, the incubator will take advantage of the new legislation by amalgamating the skills and product offering of key stakeholders in the industry. These stakeholders include existing platinum miners, South African jewellery manufacturers other private sector players, tertiary institutions and research houses.

However, the traditionally high risks associated with a start-up venture are mitigated by the Platinum Trust's facilitation of the key players' businesses, processes and channels of distribution. In this light, the business concept of leveraging off the stakeholders skills to produce a commercially viable project with positive social spin-offs is pioneering.

A corollary to the historical inactivity of the South African jewellery sector is that the skill base of South African jewellers is inferior to that of their international counterparts. The incubator will look to improve the skills of the participants to the level of international standards by employing two approaches; first, the key players will provide immediate skills transfer to project participants and, in the longer-term, the training facility will ensure that graduates are trained at international standards.

The incubator currently offers:

  • State of the art infrastructure and facilities
  • Consistent PGM supply through a negotiated platinum loan
  • A training centre (First Student intake in January 2007)
  • Strong links with the South African jewellery manufacturing industry
  • Strong links with the South African jewellery retail industry to distribute platinum jewellery in South Africa, through its linked company, the World of Platinum Marketing

3. Competitive Advantages of the Platinum Project

  • Timing of South Africa's legislative environment supporting the beneficiation of platinum
  • Access to a Platinum Loan
  • Alignment with existing local and international channels of distribution
  • Differentiated product
  • Marketing support in the form of branding and a strong communication strategy at the consumer level
SWOT Analysis
Strengths Weaknesses
  • Buy-in of established platinum jewellery manufacturers
  • Supported by platinum mining companies
  • Established channels of distribution
  • Strong brand image of platinum metal
  • Platinum loan
  • Unskilled local work force
  • High cost of platinum metal
  • The incubator is in its initial stages
Opportunities Threats
  • Growing South African jewellery market
  • South African tourist market
  • Export income generation
  • Volatility of platinum metal price
  • White gold jewellery a substitute product
  • Cyclical business cycle

The Result Areas
Result Areas Details
Location North West Province
Technology Focus Platinum jewellery manufacturing
Poverty Reduction Job creation and development of SMMEs
Technology Transfer to HDSA The training centre will leverage off the infrastructure of the transfer to HDSA incubator and train and develop HDSAs.
Lowering of barriers to entry The platinum loan will:
  • reduce the working capital investment required in the production of platinum jewellery
  • mitigate the metal price risk
  • mitigate the foreign exchange rate risk
  • substantially lower the barriers to entry for the incubator tenants
High Growth Prospect South African platinum jewellery and tourist sectors are in high growth phases. In addition, the incubator will, through its linked company, target maturing international platinum jewellery markets
Lengthening of Value Chain
  • Historical chain: Mine ore, refine and export metal
  • The incubator chain: Mine ore, refine, manufacture jewellery, market jewellery locally and internationally

Ownership and income opportunities for asset poor South Africans The development of SMMEs will provide training centre graduates, who are primarily HDSA, with ownership and income opportunities.

As the principal shareholders of the SMMEs servicing the incubator's participants are the training centre graduates, the incubator will provide ownership opportunities to HDSA. In addition to ownership opportunities, these participants and SMMEs will create employment opportunities, which in turn will create income opportunities from HDSA.
Integration of SMME into a viable market Platinum jewellery manufacturing