The shocking GDP figures of a 3.2% decline in the first quarter of this year were cause for great concern. And while the ruling party bandied about some possible solutions, and the president shared with us his inspired aspirations in his state of the nation address, I think the time has now come for the rest of us to throw our hats into the ring and start to come up with more shorter-term and pragmatic solutions to our collective economic woes.
SA is made up of almost 57-million citizens who have proved over the past decade that their continual, concerted lamenting of government corruption and general societal ills can yield much. It is now time for us to turn this constructive bemoaning and armchair critiquing into a collaborative problem solving. I fear that if we continue to protest and await the suggested solutions of only a few we may find ourselves in the unenviable and dangerous position of Waiting for Godot — who, as some of us may know, fails to ever materialise!
Former president Thabo Mbeki affirms in his “I am an African” speech that, “SA belongs to all who live in it”, and all who live in it have an opportunity to state their views, promote them and strive for them so that we can “create for ourselves a glorious future”.
Why, then, do we leave the fate of our beloved country and its economy in the hands of a few when we can add our voices to the discourse and potentially change its trajectory? We need to start pitching in before our waiting further endangers our already fragile economy.
The question is, where do we start? What are some of the low hanging fruit? In other words, what do we already have at our disposal that can help us grow our economy?
Our government should prescribe minimum levels of local beneficiation because we have been super-long on talk and rather noncommittal on action up to now
I think the most obvious answer is our natural resources. We are very fortunate in that we can still lay claim to inhabiting one of the world’s most resource-rich countries, even if we seem not to be taking full advantage of this at present.
The fourth industrial revolution (4IR) is the buzzword at the moment and the focus seems to have shifted from an industrialisation agenda to one of ensuring that the country adapts to and adopts the disruptive technologies that are the hallmark of this revolution. While there is no denying that we need to do this, it should, however, not assuage us from a re-industrialisation drive that will be key to future economic growth and employment creation in the country. There is absolutely no reason why we can’t pursue the two concurrently.
In terms of our natural resources, we need to be pursuing beneficiation in a genuine effort to develop our country’s mineral wealth to its full potential. Our government should prescribe minimum levels of local beneficiation because we have been super-long on talk and rather noncommittal on action up to now, even with the full knowledge that the local beneficiation of our mineral wealth will increase our export revenues and create much needed jobs.
During her tenure as the minister of the then dDepartment of minerals and energy, Phumzile Mlambo-Ngcuka was perhaps the most vocal champion of beneficiation. It has still been touted by various proponents as a potential catalyst for meaningful growth and employment in SA, but never quite as strongly as when she was leading the charge. The time has now come for ministers Gwede Mantashe and Ebrahim Patel to pick up that baton and ensure the processing of our minerals takes centre stage in our economic development project.
Manganese and Norway, for example
To give you an example of the huge differential between the exporting of a raw mineral and one that has been processed, we can take a look at manganese. We are the world’s largest producer of manganese. We also hold the world’s largest identified reserves of the resource at an estimated 200-million tonnes (78% of total global manganese resources). Yet about 80% of the manganese ore we mine is exported for beneficiation elsewhere in the world — and we then import that processed product at a much higher price.
According to Mintek, up until 2001, 50% of the manganese ore we produced was smelted locally. By 2014, this figure had changed to only 16% with the remaining 84% being exported for beneficiation elsewhere. Now let’s assume we are still exporting more than 80% of manganese ore today, at today’s price of about the $4,90 per dry tonne mark for the 37% grade manganese ore, we forfeit the possibility of beneficiating a product that is priced at about $1,035 per tonne once it has gone through the smelting process to create 70% grade ferromanganese. This is more than 200 times the price of manganese ore! It seems like really simple maths to me, even if you take into consideration the costs of the entire smelting process.
In recent years the biggest stumbling blocks to a possible beneficiation drive have been cited as the availability and pricing of electricity. Increasing electricity prices have been blamed for the reluctance of companies to pursue beneficiation. However, I think that if we had to look at electricity prices in countries where these resources are being beneficiated at the moment, one would see that this excuse is rendered null and void.
The availability of electricity, on the other hand, remains an elusive part of the equation and may continue to be a huge deterrent to any meaningful beneficiation in SA if it is not addressed.
In Norway, for example, where some manganese is processed into ferromanganese, the price of electricity per kWh is $0.15; while the prices in France and Japan (also ferrochrome producers) stand at $0.19 and $0.22 per kWh, respectively. These are all more than double our local electricity price of $0.07 per kWh (also bearing in mind that our industrial users are charged far less than this).
Why, then, would mining or manufacturing companies not want to take advantage of the rest of this value chain right here in SA? Or maybe the question should be, are they taking advantage of it elsewhere, and what is the justification for that if it isn’t cheaper electricity prices, etc? These are some of the issues our government will have to interrogate because there certainly seems to be a case for local beneficiation otherwise if one looks at some of these facts.
The availability of electricity, on the other hand, remains an elusive part of the equation and may continue to be a huge deterrent to any meaningful beneficiation in SA if it is not addressed. Ensuring the availability of electricity to allow for rapid job creation, poverty alleviation and economic growth in SA is an imperative for the Ramaphosa administration, and also prevents electricity from becoming a scapegoat for any failure on the part of our government and private sector to invest in local beneficiation.
Despite assurances by President Cyril Ramaphosa to international investors in Davos, Switzerland last year that “we have excess power right now”, we were suddenly plunged into darkness on the eve of the elections in March this year. We seem to have veered back into the light again, but I daresay that even if we do have some surplus electricity, our generation capacity remains insufficient for any sort of meaningful growth.
If one looks at South Korea, which has a similar population to ours and has managed to transform its economy into one of the world’s most remarkable success stories without any of the resource endowment we have, we see that surplus electricity becomes a huge driver of any economic growth. That country has installed generation capacity of more than 110,000MW, currently. SA has to at least double its installed capacity of just more than 51,000MW to become a serious contender in the economic growth and industrialisation game. Additionally, we have to ensure that whatever energy mix we have, bolsters the stability of our grid at all times and curbs the current upward trend in our electricity prices.
In the meantime, we simply can’t continue to watch our economic wealth enrich other countries while our own economy languishes. If beneficiation can add even a drop in the ocean that is our unemployment and abject poverty, then we must fervently pursue it. Let’s find a way to rally around some of these patent solutions that are freely available on our indigenous land to ensure “a glorious future” for all.
• Headbush is a director at Headbush Group, a mining services company.
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