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Dr Paul Jourdan, advisor to the DME
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Sticks and carrots beneficiation saga
David McKay
Posted: Tue, 08 Mar 2005
[miningmx.com] -- RELATIONS between South Africa’s mining industry and Government could take a different, perhaps stormier, course on the evidence of recent comments by Paul Jourdan, newly appointed adviser to Minerals & Energy Minister Phumzile Mlambo-Ngcuka.
At a Chamber of Mines of SA presentation last week, Jourdan spoke volubly on a number of areas affecting SA’s mining industry, including its empowerment rating system that he believes should be retrospectively adjusted to account for more stringent procurement rules.
He’s also a staunch advocate of beneficiation and fiercely interested in establishing SA’s economic self-reliance. These things are not bad in themselves but, as Chris Hart Absa’s senior treasury economist, says: “The approach is too ‘mercantilist’.” Imports are bad and exports are good is Jourdan’s message. “That can lead to less choice and more expense for
consumers.”
Jourdan is also highly sensitive to “settler” (his term) ways in which mining companies still defer to their colonial offshore partners. By way of example, he berated Anglo Platinum for channelling R320m into offshore research in 2003 that could have been done in SA.
AngloPlat CEO Ralph Havenstein was not in favour of such practices, says Jourdan. Well he might, as the two men sit on the board of Mintek, the State-backed research body of which Jourdan has been CEO for two years and which has been long championing beneficiation.
Therefore, SA’s mining industry ought to sit up if Jourdan really has the ear of the minister; after all, beneficiation is an area with which it appears to have most difficulty. The crux of all this is that Jourdan last week declared an interest in imposing an industry-wide export duty, as well as a rail development tariff, to guarantee more direct benefit of mining to SA’s economy. The duty and the tariff are separate
pieces of legislation-in-concept, the net effect of which is to propose more punitive measures on the mining industry if it fails to beneficiate.
“If you want to sell dirt, then the cost of taking it to the coast will be US$30/t,” Jourdan says in order to illustrate how the export tax would operate. “If you want to beneficiate, it will cost $20/t. It will signal to the market that if you want to sell your country short, you’ll have to pay for it.”
That’s food for thought, considering that SA’s mining industry is having trouble digesting a diamond export duty as part of the proposed Precious Metals & Diamond General Amendment Bill (Beneficiation Bill). There are also other proposals to impose a royalty tax of between 2% and 8% on the gross revenue of mining companies.
Roger Baxter, senior economist at the chamber, says that the industry would be “totally opposed” to such measures. In any event, he argues, mining firms are better at mining than
beneficiating.
Brenton Saunders, an analyst at Deutsche Securities, says that beneficiation must be encouraged over years rather than punitively enforced. “Most beneficiation beyond the most basic forms (such as refining) is highly specialist and there are too many examples of beneficiation that look good on paper failing during implementation.” Must SA follow suit?
Baxter agreed. “I favour carrots over sticks,” he says of Government’s apparent interest in imposing “do or die” rules.
Says Jourdan: “I prefer a combination of sticks and carrots.”
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