SA economic policy wrong-headed

[] — A MAJOR difference between South Africa and China was that the South African government had focused mainly on social transformation while China had concentrated on growing its economy.

That’s according to Mike Rossouw, an executive director of Xstrata Alloys and chairman of the Energy Intensive Users Group of South Africa.

Addressing a seminar on “Strategies for an uncertain future’ at the Gordon Institute of Business in Johannesburg on Tuesday Rossouw commented: “It’s a no-brainer that we must have a strong economy because from a strong economy you can transform the country but you cannot do it the other way round.’

Describing the agenda of the mining charter as “not balanced’, Rossouw said a question to be asked was “are we not transforming at any price?’

Rossouw said the world was headed for another bout of massive growth in demand for commodities and it was essential that South Africa not lose out this time around the way it had during the previous cycle.

“The fundamentals of the commodity business are that demand is continuing to rise at a massive rate because of growth in China and India but mining capacity is stagnant because there has not been enough investment in new capacity to produce the metals needed.’

Rossouw pointed out that in the period 2001 to 2008 the global mining sector grew at an annual rate of 5% but South Africa’s mining sector had actually declined by 1%.

Said Rossouw: “Had South Africa’s mining industry grown at that same rate of 5% per annum as the rest of the world it would have created another 45,000 jobs in the sector.’

Rossouw attacked commentators who believed that South Africa should leave its minerals in the ground and instead diversify away from mining taking the “Singapore value added approach.’

“That makes no sense. South Africa still has significant geological potential and we are still a major mining player.’

Rossouw singled out manganese as one example where South Africa hosted 80% of the world’s manganese reserves but had only a 15% share in world production.

“By contrast China has less than 5% of the world’s manganese reserves but accounts for more than 30% of global manganese production. Clearly, there’s a very different economic strategy being followed here.’

Rossouw identified three key issues holding development of South Africa’s mining industry back. These were shortages of human capital and skills; insufficient infrastructure and insufficient capacity in the regulatory environment.

He paid tribute to the government for the revolution that had taken place in the country over the past 15 years where huge changes had been made through legislation.

“We now live in a wonderful country we should be proud of,’ he said adding that he felt the government initiative had “run out of petrol’ and was now “severely stressed’.

Power crisis

Turning to the country’s power supply crisis, Rossouw said the solution had to be found through closer collaboration between government, Eskom and the private sector.

“We have to take a more holistic, integrated approach. I fully believe in the concept of collaboration and I believe it’s taking place.’

Queried on the specific issue of the introduction of independent power producers (IPPs) into the electricity supply system, Rossouw said he believed government was listening to the private sector.

He commented all the factors which had constrained the development of IPP in South Africa should be removed in the coming months.