How South Africa can multiply its minerals dividend - Politicsweb

19 March 2019 - But the biggest problem is that the base upon which upstream beneficiation should operate – the process of mining – encounters obstacles to development rather than support.

Terence Corrigan 
Although minerals beneficiation – which the South African government is committed to – is a notoriously poor development vector, there are industrial benefits to be reaped from a strong mining industry.

The Institute of Race Relations’ (IRR) policy paper, Multipliers from Mining, shows that it is upstream development which should be the focus of policy.

Upstream development refers to the inputs into the mining process. These are not simply the obvious skills inputs involving geology and mining engineering but all the backward linkages from steel, explosives and timber as well as roads, railway lines, power supply and water. It also includes equipment used for exploration, mining and primary processing as well as the skills involved throughout the process.

What is the upstream industry worth? In 2017, for every two rand and ten cents worth of minerals mined, a further one rand was spent on upstream inputs. That translates to R300 billion in what, it must be remembered, was not a particularly good year for mining. If mining in South Africa were to boom once again, this multiplier would make a substantial contribution to growing the national economy and soaking up unemployment.

South Africa is still well placed to export mining equipment and specialist services, especially into other Southern African Development Community countries and West Africa. It has been conservatively estimated that this market is worth some US$4 billion a year. It is South Africa’s back yard, yet it is dominated by imports from more distant sources, especially the European Union.

In fact, if growth is to be export-driven, mining is the sector in which South Africa has a stand-out competitive advantage. A study by UCT economists eight years ago found that only in mining did South Africans hold a disproportionately large (for the size of the country) number of patents and that, moreover, many of these ‘were located at the global technology frontier’.

Yet upstream development (‘mining inputs’) is merely one of several ‘sectors’ supported by the Department of Trade and Industry. Of more concern is that the department which should be leading in this respect – Mineral Resources – remains entirely wedded to downstream beneficiation.

But the biggest problem is that the base upon which upstream beneficiation should operate – the process of mining – encounters obstacles to development rather than support. The Byzantine provisions in the 2018 Mining Charter (and its 54 page-long ‘Guidelines’) for industrial offsets, local procurement and supplier development are merely the latest manifestation of government’s obtuseness in this respect.

It the meantime, the basis for upstream development continues to wither. 85 percent of South Africa’s mining engineering graduates do not work long-term in the country. The skills component of the upstream mining industry is highly mobile and prone to emigrate. South Africa’s mining education institutions seem to be largely functioning to the benefit of Australia, Canada and the US. And this, a 2018 study suggests, while the South African mining industry is becoming more labour intensive (MTS, 2018).

All of this confirms the lament articulated by Roger Baxter, CEO of the Minerals Council of South Africa, who said last year: ‘What is a real shame is that most of the growth in our upstream supplier and contractor industries has actually been outside of South Africa because (our) mining industry has been shrinking over the past decade’.

Upstream multipliers have been an integral part of the historical development of South Africa’s economy, accounting for almost all of the development of the country’s R260 billion chemicals industry and being the major driver of such ‘sidestream’ sectors as banking. The first branch of Standard Bank opened in Johannesburg only two years after the discovery of gold.

These sorts of benefits can be realised again, to the advantage of all South Africans. But this will only happen if government steps back from its excessively bureaucratic and race-obsessed approach and allows the mining industry to thrive. It still has the potential. This needs to be unleashed.

Terence Corrigan is a project manager at the Institute of Race Relations. Readers are invited to take a stand with the IRR by sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).

https://www.politicsweb.co.za/opinion/how-south-africa-can-multiply-its-minerals-dividen

© 2018 South African Institute of Race Relations
CMS Website by Juizi

Terms & Conditions | Privacy Policy | Accuracy Guarantee | Sponsors & Donors