Investors in mining exploration should be incentivised – ANC’s ETC
MINNG WEEKLY / 13 JULY 2020 - 14.11 / MARTIN CREAMER
JOHANNESBURG (miningweekly.com) – Listings of mining companies on the Johannesburg Stock Exchange should be encouraged and South African retail investors willing to invest in mining exploration should be incentivised as is the case in other mining jurisdictions, the economic transformation committee (ETC) of the African National Congress (ANC) states in a 30-page discussion document just released.
At a time when the Covid-19 pandemic is continuing to impact negatively on economic activity in South Africa, the ANC’s ETC has developed an economic framework for reconstruction, growth and transformation, with the objective of building a new, inclusive economy.
Broadly, the paper seeks to answer the question: what needs to be done to build a fast-growing, more resilient, and more inclusive economy, arguing that in response to the current crisis, the ANC should strive to unite society around a series of bold and decisive actions in order to set the economy on a path of high growth combined with social inclusivity.
In the section on mining, it states that although the South African mining industry has in recent years experienced falling levels of investment and exploration, amid job losses and increased cost pressures, South Africa remains a global mining powerhouse, with the country’s geological endowment and reputation the envy of the world.
It points out that South African leadership and expertise can be found at virtually every link along the mining value chain, with other countries looking to South Africa and South African companies for the way it builds mines, builds relationships with local communities, and protects the environment.
South Africa, it notes, is also a top destination for mineral endowment and offers unparalleled access to technical skills.
In order to translate the comparative advantage South Africa has into a competitive advantage, it states that there is a need to:
introduce robust junior mineral exploration and clean technology;
ensure mineral processing; and
build strong supportive mining supply and services sectors.
It acknowledges the South African Minerals Energy Complex Interventions Plan as outlining a vision for government, industry and stakeholders to place the mining industry on a path of competitiveness and long-term success.
The mining sector, it says, can help South Africa to drive a localisation agenda. In this regard, there is a need to more aggressively re-orient the mining sector inwardly, in order to support the local beneficiation of minerals, build the minerals value chains and strengthen broad-based industrialisation. Linked to this is the identification of strategic minerals that will be designated for local beneficiation.
It says that regulatory disputes and uncertainties should be resolved with immediate effect to facilitate expanded investment in the sector, increase mining research and development (R&D), led by Mintek and the Mandela Mining Precinct, as well as increase mining exploration, with the Council for Geoscience playing a leading role, to ensure long-term expansion of the sector.
Listings of mining companies on the Johannesburg Stock Exchange should be encouraged and South African retail investors willing to invest in mining exploration should be incentivised, as is the case in other mining jurisdictions.
MINING SECTOR LINKAGES
It lists manufacturing activities that are linked to mineral beneficiation chains as including coal beneficiation; platinum group metals beneficiation, such as, fuel-cells and other industrial products; steel value-chains, which include iron-ore, manganese and chromium; and vanadium, for production of battery-linked technologies, among others.
Historically, it states that South Africa has also had a well-developed sub-sector in upstream supplies to the mining sector and highlights the Mandela Mining Precinct as a R&D organisation that should receive maximum support from the State and mining companies. This should include targeted initiatives in linkages such as green hydrogen in combination with platinum fuel cells and battery storage technology and the document highlights South Africa as the world’s largest platinum producer.
“In line with our country’s long-term commitment to mineral beneficiation, there is a need to scale up existing research and development, and production initiatives, in this area.
“Stationary fuel cell applications in off-grid electricity generation (in which Eskom can play an important role) as well as mobile applications in fleet renewal and expansion for both municipal and bus rapid transport systems can provide a market for this proudly South African product and dramatically reduce carbon gases from our public transport system,” states the reconstruction, growth and transformation discussion document, which is targeting the building of a new, inclusive economy.
GREEN ECONOMY AND GREEN INDUSTRIALISATION
The ANC document states that the green economy can be seen as part of innovative solutions to address the persistent challenges of inequality, poverty and unemployment as well as climate vulnerability. It is also a significant instrument in closing gaps in the security of energy, food, water and electricity supply.
It stipulates that the Covid-19 economic recovery must include a green component as this will bring these strategic advantages:
firstly, it will have a positive impact on job creation in new green industries and enterprises that use new technologies;
secondly, dedicated international ‘green funds’ could be accessed to fund these new industries;
thirdly, green bonds have been shown to be cheaper than traditional bonds; and
finally, investment in green and sustainable solutions offer opportunities to promote long-term economic competitiveness and climate resilience.
The focus of South Africa’s green economy interventions should be on expanding the programme to retrofit public and private buildings with measures to improve energy and water efficiency. The extension of this programme to schools, clinics and other public buildings has the potential, it says, to build a local industry that is labour intensive and anchored in a sustainable value chain that supports the participation of small, medium-sized and microenterprises (SMMEs) and skills development for unemployed youth.
It notes that many of the coal-fired power stations in Mpumalanga that are due to be retired as they reach the end of their useful lives are the only source of livelihoods for local communities, and that retrofitting these power stations with renewable energy generation alternatives could save jobs, support livelihoods and ensure that important grid infrastructure is revitalised.
Research on the appropriateness of these geographical sites for solar energy generation has already been concluded and the feasibility studies are positive.
Accordingly, it is proposed that a special investment zone for renewables should be located in Mpumalanga to alleviate the impact of job losses as a result of the closure of coal plants.
In addition to the Working for Water and War on Leaks programmes, improved catchment management in water-scarce South Africa can, it says, yield up to 6% more water on a continuous basis.
Recovery in the Covid-hit wildlife or biodiversity economy, which currently employs more than 400 000 people, should include infrastructure development such as the creation of fire breaks, fencing, tourism facility upgrades, road building and maintenance, all of which are labour-intensive activities.
It cites waste recycling and the transition to a circular economy as another area where South Africa can dramatically upscale its interventions to create jobs, formalise informal SMMEs, divert waste from landfills and the environment and improve the overall system of waste management. The development of compliant landfills in every municipality as well as appropriate recycling facilities will assist in ensuring that South Africa is able to more effectively deliver waste management services and achieve targets on waste diversion and reuse, the document states.
The document states that the ANC, within its structures and with alliance partners, intends to deepen engagement on building a new, more inclusive economy for South Africa post-Covid.
It notes that the ANC will seek wide support for its economic programme and interventions, including from business, government, labour and community structures.
“South Africa’s economic crisis requires urgent interventions. Now is the time for bold and decisive action if we are to advance economic transformation and build a new economy in which the lives and opportunities of millions of people in South Africa are to be radically improved,” it urges.
It points out that Covid is continuing to impact negatively on economic activity in South Africa and around the world – unemployment is rising, businesses are under pressure and public finances are being stretched. South Africa’s legacy of underdevelopment and the country’s ongoing realities of poverty and racial and gender inequality are once again being exposed for all to see.
It describes the first pillar of the new policy framework under discussion as being the mobilisation of society around an infrastructure-led recovery with new investments in energy; water and sanitation; roads and bridges; human settlements, health and education; digital infrastructure and public transport.
To achieve significant job creation multipliers, the emphasis will be on localisation, including maximising the use of South African materials and construction companies as well as labour-intensive methods.
While it is an urgent priority that State capacity to plan and monitor the execution of infrastructure projects should be strengthened, there will also need to be expanded use of public-private partnerships, including build, operate and transfer project delivery methods.
The establishment of an infrastructure development agency in The Presidency will play a useful role in complementing the pockets of excellence that currently exist within the State and State-owned companies with regard to project management capabilities.
Further, the use of the district development model should be strengthened and deepened to improve service delivery and infrastructure expansion in both rural and urban areas. The State, through its various spheres and organs, should at all times function as a unit. It is through proper coordination and collaboration that service delivery will be improved and people begin to have better access to social and economic opportunities and choices. It is also crucial that South Africa forge new spatial forms in its settlement and transport systems, to bring people closer to areas of social and economic opportunity.
As a second pillar, the new policy framework will promote investment in key productive sectors, such as agriculture, manufacturing, mining and tourism and other services. Decisive progress will be required in telecommunications reform, including expediting digital migration and spectrum allocation to reduce data costs for households and firms. Similarly, the growth and job creation potential of energy-related investments, including green industries must be fully harnessed including through local production linked to the country’s energy investment programme, as required in the Integrated Resource Plan. Industrialisation and the expansion of South Africa’s productive sectors will be accelerated though increased international trade, especially with other countries on the African continent.
While working to restore fiscal sustainability, it says that South Africa needs to deploy macroeconomic policy instruments that are compatible with the reconstruction of the economy. Reconstruction programmes must be sufficiently financed and financially sustainable. The National Treasury, South African Reserve Bank, development finance institutions (DFIs) and private financial institutions all have a role to play. The mobilisation of funds for increased investment in infrastructure and key productive sectors will inevitably require a combination of public and private resources.
The sustainable financing of South Africa’s economic recovery plans will require close coordination of fiscal and monetary policy to ensure ongoing access to capital markets and to reduce the cost of borrowing, as well as strengthening the role of DFIs. Changes should be made to Regulation 28 under the Pension Funds Act to enable cheaper access to finance for development. Furthermore, regulators should be vigilant to ensure increased competition in the banking sector, which frequently displays the kind of oligopolistic tendencies which limit access to finance particularly for SMMEs and for households in historically disadvantaged areas. In order to facilitate a society-wide mobilisation of financial and real resources to advance South Africa’s economic reconstruction and recovery, a process of social dialogue and social compacting, both at national and sectoral level, will be required to unite in action key constituencies including business, labour, community and government. To lead this process, South Africa’s Presidency should be strengthened to play a decisive role in economic policy coordination and, working in close liaison with government’s economic cluster, should closely monitor and manage effective policy execution, the ETC documents states.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER