President Jacob Zuma should, in one important way, try to emulate former US president Bill Clinton, who famously had a plaque on his desk. It read, "It’s the economy, stupid," so he never forgot what was important. Mr Zuma’s should read, "It’s the mines, stupid."
The mining industry is the only reason the African National Congress (ANC) had a significant world economy to inherit when it took the country in 1994. Mining gave this country its factories, its hospitals, its schools, colleges and universities. It gave us everything worth valuing at the dawn of democracy. Of course, it gave us some things less than worthy. But a committed and powerful democratic government should long ago have swept those away.
Yet, under the ANC, mining is shrivelling. Its output is falling, its contribution to gross domestic product is falling, the number of people it employs is falling. Our competitors, meanwhile, are growing in all those areas. As Finance Minister Pravin Gordhan gloomily noted in Parliament this week, mining production between 2003 and last year rose 30 percent in Australia and 44 percent in Brazil. "This has provided a huge boost for investment, tax revenues, jobs and incomes in those countries," he said.
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Well, where’s our "huge boost" in investment, jobs and tax revenue going to come from?
If you believe the ministers who advise Mr Zuma on economic planning, industrial policy and state involvement in the economy, not from mining. Instead, they have concocted an intricate mixture of academic, left-wing ideological and pie-in-the-sky plans to industrialise SA as if it were one day going to be possible for us to become a meaningful player in world markets for manufactured goods.
They have done this through a bewildering array of plans and proposals. The New Growth Path, which promises Mr Zuma he’ll create 5-million jobs. The Industrial Policy Action Plan (IPAP — mark 2!), the Integrated Resource Plan. They are dense with thought and detail — neat, sincere and expert — on how to "revive" the plastics industry, the metals industries, car components, green industries, textiles, biofuels, agro-processing and the like. We must, the argument goes, "reindustrialise". Hardly anywhere in these plans does mining play a central or even an interesting walk-on role.
But they are pipe dreams, supposing we were ever once "industrialised" in the first place. The fact is we have never been a significant exporter of manufactured goods. Our currency is too volatile, simply too unmanageable.
In our rush to become a modern African answer to Germany or the US, we have forgotten the obvious — that, economically, we are what we are, democracy or not.
And what we are is a mining country and a farming country. Instead of recognising this obvious truth, those two activities (precisely, perhaps, because they are our core) instead remain sites of political struggle while we chase imaginary gold at the end of an unreachable manufacturing rainbow.
It will not happen. It may appear to be possible, but only at an unsustainable cost. This newspaper has carried many stories this year of promised new investment. One, readers may remember, was a manganese smelter at Coega, the nascent harbour near Port Elizabeth. It would cost R4bn and create 700 jobs — that is R6m per job!
You cannot change what you are and growth will come to this country only once we accept this truth. The fact is, mining is the driver of almost everything we have ever made. Cars are an exception, to an extent, but only because those industries are heavily subsidised.
But it’s the mines, stupid (to paraphrase Mr Clinton’s plaque), that we should be looking to for our salvation. We are deindustrialising because mining is slumping. It is that simple.
What is surely required is a huge intensification in mining, meaning that the sector should be liberalised. We need 10 more mines a year producing more ores. We need annual targets for new mines. It doesn’t matter who owns them — be it the established multinationals, the Chinese or even the ANC Youth League — provided they mine safely, obey the laws, pay their taxes and royalties and, above all use their licences. And if Transnet can’t build railway lines quickly enough to carry the ores, let us find suppliers who can. It should be so easy but the ideologues aren’t content with easy. Overcomplicated government adds lustre and meaning to their work so we end up with a government trying to do way more than it is capable of actually achieving.
Into all this the ideologues have injected a distracting mirage called beneficiation. That means rather than digging ore out of the ground and shipping it out, we ought to be making goods out of the minerals in the ores. It’s a nice thought, and where we can we should. We already do a lot of beneficiation anyway. The electricity we use is little more than beneficiated coal.
But as a key part of national strategy? Please. It isn’t that we don’t know how to make catalytic converters or diamond rings or chrome bumpers — it’s that the people we sell our ores to already do that. Are we going to take their customers away from them? Will they just sit back and give up their markets so we can have them? Will we sell on price? It already costs 10 times more to cut a carat of diamond in SA than it does in India, so what do we plan to bring to the party?
Of course, the men who whisper dreams into Mr Zuma’s ears will have a smart answer, but they’ll never deliver more than a trickle of the jobs flood they promise him. Intellectually, he is their prisoner and we all have to live with it.
Instead though, we should be tearing rocks out of the ground and shipping them out as fast as possible. Our royalties are low and we should raise them and perhaps save some of them into a sovereign wealth fund we can use to flatten out the economic cycles we get caught in. Mining investors should know that SA is a place where they can make the most money in the shortest amount of time, higher royalties and taxes or not.
We should flatten the competition. Instead, ideology and internal ANC politics hold the country and the poor hostage, while the dream merchants in the Cabinet flutter ineffectually about trying to take on General Electric and Sony Corporation. It is so depressing.
There is nothing we could possibly make competitively in SA that would smooth the mining cycle. When demand for steel falls in the world, that’s our iron ore gone.
And make no mistake, there are no industries we can "pick" to champion now that could possibly replace the domestic knock-on effects of a thumping, vibrant mining industry. And yet it sits there, staring us in the face, while we fight about who should own it.
By some reckonings, there is R12- trillion worth of minerals in our soil. That’s 12 thousand billion rand , and doesn’t include the Karoo shale gas, which we need too.
That’s enough for everybody, even the state if it insists on going into business. If we get mining pumping, manufacturing will look after itself, like it always has, and Mr Gordhan wouldn’t have to scratch about for shekels to save it.
What’s more, mining companies have to be where the minerals are. They’re malleable and largely do what they’re told. Manufacturers can, literally, manufacture where they please. It’s the mines, Mr President. They’re the gift horse this country was given for free. Let’s stop looking it in the mouth.
We are what we are and no amount of industrial policy tinkering will change the facts. We are a mining economy. Minerals are our gift horse so let’s stop constantly checking what is in its mouth.