A year ago at the Mining Indaba, President Cyril Ramaphosa challenged the industry to implement what he termed 10 value-adding principles that would ensure our industry adds additional value to society. We have done a great deal of thinking about the president’s challenges, and have offered public media responses in various ways.
We think it is important to reflect on the real value of mining to SA and its people, and then imagine what that might be in future. Even today, notwithstanding the many challenges the industry faced in 2019, the mining industry contributed 8% of GDP directly and double that indirectly; it paid royalties of R8.6bn, paid company taxes of R24.3bn, and VAT of R33bn. And it employed 455,000 people.
Sadly, by Minerals Council estimates, 2019 production in the sector will have contracted by 2.8%. In terms of indexed production trends, mining production has not improved significantly since 2009.
Ramaphosa’s first challenge was for the industry to “foster inclusive growth in the areas where they operate”. This challenge is, in fact, an overriding one. It covers and incorporates almost all of his other challenges, most of which deal with specific areas of value addition and inclusive growth.
These were as follows: partnering with local government; decent housing for workers; investing in education and training; partnering with training colleges; beneficiation; workers’ health and safety; internships; and employee stock ownership plans as well as worker representation on boards.
Inclusive growth is a concept and goal that our entire economy, and our industry in particular, cannot but be committed to. Inequality has not been adequately addressed. Governments have done a remarkable job, particularly in respect of social transfers and the extension to previously unserviced and deprived communities of everything from education to healthcare, water and electricity supply, all of which are necessary for the creation of a more equal society. But we know this hasn’t been done as effectively as it could have been.
However, these are the areas where government has responsibilities for contributing directly to inclusive growth. We need to talk about the role of the mining industry in this regard. Here we have an inadequate story to tell over the last dozen or so years; not because mining companies haven’t made serious efforts, even though some of those efforts could have been more effectively implemented. Still, the transformation report commissioned by the Minerals Council and published last December highlights the significant progress made, in most areas, in implementing the provisions of the mining charter, itself an instrument of inclusive growth.
But the extent of growth, including inclusive growth has been constrained. The reasons for this are, in brief, the 2008 international financial crisis; the loss of industry confidence in the state capture era; and now, with many commodity prices looking quite healthy, we have the Eskom crisis.
What does it take to achieve inclusive growth? The literature tells us redistributive policies of government can play a part. So can (and do) the efforts of companies in local economic and infrastructure development, human resources development and training, advancement of women and advancing beneficiation. However, history also tells us that the most sustainable basis of inclusive growth is employment. This must be the priority.
We are seeing heavy job losses in the gold, deep level platinum and diamond mining sectors. Yet we shouldn’t think there is no employment growth in mining. The latest data shows that we also have encouraging growth in some sectors. Coal, manganese, iron ore and chrome are the leaders in this regard. What is needed now is a range of steps to address the constraints and facilitate optimal growth in these and other sectors, and to slow down the decline of those that are contracting.
Where the power crisis is concerned, the government needs to act urgently to bring on stream new private sector power options for embedded generation and private generation for self-use, but which is fed through the national grid.
After recent engagement with the president and mineral resources and energy minister, through Business Unity SA and directly as the Minerals Council, there is absolute commitment to creating a pathway to energy self-generation by the mining industry.
In our industry we know of seven of our members ready to build generation plants that would bring more than 600MW of power into the system. These projects could be implemented in anything from less than a year to a couple of years. This would ease the pressures on Eskom and enable it to mitigate load-shedding and power curtailment.
Secondly, SA’s fiscal situation has deteriorated. The public debt to GDP ratio has risen from 24% in 2008 to 60% in 2020. And a fiscal deficit at 6.5% of GDP promises to lift that ratio to debt trap levels.
All of this is why SA is in imminent danger of losing its last remaining investment grade from a ratings agency. This is not a problem because we need to be loved by ratings agencies — it is a problem because it will exacerbate all the other trends that are already overtaking us.
Finance minister Tito Mboweni’s budget in three weeks’ time will be critical in telling local and international investors whether we are seriously beginning to turn around this desperate situation. Further, the microeconomic and socioeconomic policy shifts addressed in the Treasury paper published in 2019 need active implementation to further modernise and streamline the economy.
The credibility of the criminal system needs to be rehabilitated too. And the most concerning regulatory issues need resolution if investor confidence has any chance of returning. At the forefront of these is the land expropriation issues and, for mining, the full recognition of the continuing consequences of past transactions.
The mining industry is willing to play its part in working with government and other stakeholders in salvaging SA’s economy. The urgency of carrying out these tasks cannot be overstated.
• Mgojo is Exxaro Resources CEO and president of the Minerals Council SA.
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