Decline in commodity prices can create opportunities

South Africa has not been immune from the effects of the fall in commodity prices, writes Kingsley Makhubela.

The leaders of the global mining sector will meet in Cape Town for the annual Mining in Africa Conference, or what is now more commonly referred to as the Mining Indaba, over the next few days.

The 2016 Mining Indaba will enable a host of discussions on how the steady fall in commodity prices will affect economies which are most dependent on the export of raw materials, the impact on the socio-economic development of local communities in which mining companies set up their operations, and the creation of sustainable jobs amid this downturn.

With an economy that has been built on our mineral resources and, therefore, the mining industry, South Africa has not been immune from the effects of the fall in commodity prices. As I write, an estimated 30 000 jobs in the sector are under threat, amid our already high unemployment rate.

It is often said that adversity presents the biggest opportunities. I believe this is equally true of a country.

The turbulence in the global economy presents South Africa with an opportunity to re-evaluate the direction of our country to ensure sustainable growth and development and consistent socio-economic development.

After 22 years of democracy, South Africa remains one of the most unequal societies in the world, largely a consequence of our historical context.

As a country we have recognised this situation cannot continue and have therefore begun to implement the National Development Plan (NDP), which aims to ensure economic growth and social equity by 2030. To ensure the successful implementation of the NDP, the government, working with identified partners in the private sector, is also implementing the nine-point plan for economic recovery.

Operation Phakisa is the ethos underpinning the implementation of these plans and programmes.

In respect of the mining sector, Mining Phakisa is currently being implemented to create an enabling environment for South Africa’s drive to add more value to its mineral resources through the beneficiation of our mineral resources (focusing on five value chains, that is, platinum group metals, iron and steel, titanium, polypropylene and capital equipment for the mining sector).

Fast track

While Mining Phakisa will fast-track beneficiation in the sector, it is important to dispel the myth that all mined products currently exported from South Africa are in raw form with little downstream beneficiation taking place locally. According to the Chamber of Mines, downstream of the mining sector another R300 billion in economic activity and 200 000 jobs are created in beneficiation industries.

* Nearly 100 percent of South Africa’s cement and building aggregates are made locally and 80 percent of the country’s steel is made locally from locally mined iron ore, chrome, manganese and coking coal, using furnaces that are 95 percent powered by electricity from coal-fired power stations (the 20 percent imported steel is speciality steel products not made locally).

* Over 30 percent of the country’s liquid fuels are produced within the country from locally mined coal and 95 percent of electricity is generated in power plants that use locally mined coal.

* Most domestic chemicals, fertilisers, waxes, polymers and plastics are fabricated using locally mined minerals and coal, and 13 percent of the world’s platinum catalytic converters are made in South Africa.

* South Africa also accounts for the fabrication of 9 percent of the world’s platinum catalytic converters and produces a wide array of beneficiated products for exports to global markets.

If one includes the upstream and downstream industries, the mining cluster supports thousands of jobs with significant contributions to the economy and fiscus.

Despite current developments in the sector, the global economic environment necessitates that South Africa looks at this traditional pillar of the economy differently. Only with innovation and agility will the country be able to transform this sector to ensure it can contribute meaningfully to the country’s fiscus and its brand as a leader in the mining industry.

Most importantly, we must understand the human cost of not transforming the industry in terms of what the loss of jobs will mean to the breadwinners, families and communities who are employed in the sector.

Brand South Africa looks forward to welcoming delegates to the 2016 Mining Indaba and, more importantly, to the outcomes that the discussions will take this in.

* Kingsley Makhubela is the chief executive of Brand South Africa. Follow Makhubela on @klmmakhubela.

** The views expressed here do not necessarily reflect those of Independent Media.

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