Minerals Council bemoans lack of competiveness focus in economic recovery plan

16th October 2020 By: Marleny Arnoldi - Creamer Media Online Writer

The Minerals Council South Africa says the Economic Reconstruction and Recovery Plan – unveiled by President Cyril Ramaphosa on October 15 to a joint hybrid sitting of Parliament – does not go far enough in addressing areas where South Africa can improve its global competitiveness.

While the council says a number of the agreed points from discussions at the National Economic Development and Labour Council (Nedlac) were featured in the recovery plan, it needs more decisive action around raising investor and business confidence, which are key to up the country’s competitiveness.

Minerals Council president Mxolisi Mgojo says South Africa is at a precipice and, while it previously managed to back-pedal back from a precipice, it had only been through decisive action that recognised that pain comes before gain, that the nation was able to get back on a prosperous path.

“Hard economic decisions need to be taken, and soon.”

Mgojo explains that the South African economy was in a crisis before the outbreak of the Covid-19 pandemic, performing well below its potential for the past decade.

Covid-19 has further exacerbated the situation, with the lockdown resulting in 2.2-million South Africans losing their livelihoods during the second quarter of the year, and the country’s fiscal deficit ballooning to 15% of gross domestic product (GDP), which is likely to shrink by 9% for the year.  

“The government's plan, while a positive contribution to stabilising the economy, appears to centre on what government can do in a massive infrastructure programme, promoting greater local procurement for industrialisation and on public and social job creation processes.

“But, the plan does not adequately address in detail the issues that drive competitiveness and investment, including foreign investment. The tough choices on structural reforms that would allow much greater private sector participation and investment are mostly absent or are only mentioned in passing,” the council states.

The council believes these structural reforms should include much greater private sector participation and competition in infrastructure – such as electricity, ports, pipelines and rail, a much more sustainable fiscal policy and balanced budgets, and institutional reforms for a smaller, more efficient and more capable State.

While there is agreement in the President’s plan that a more detailed process must be undertaken at Nedlac to discuss key structural and institutional reforms, the Minerals Council believes this process must be accelerated on an urgent basis.

It, however, welcomes the inclusion of interventions related to mining that are aimed at:

• Ensuring electricity energy security, and in particular, the fast-tracking of applications for self-generation of energy supply; the separation and unbundling of Eskom to address structural challenges; and improving the operational and financial stability of the power utility;

• The proposed halving of turnaround times for mining and prospecting licences in order to improve investor confidence;

• Addressing crime and corruption, and the mismanagement and waste of State resources and stopping the hijacking of businesses and mines for nefarious purposes; and

• The mention of modernising and reforming network industries such as electricity, roads, rail and ports, and the State-owned enterprises responsible for delivering these services.

Moreover, Minerals Council CEO Roger Baxter says the council fully agrees with the President that South Africa needs to take extraordinary measures towards a speedy and sustainable economic recovery.

“This will require active public-private engagement. If the Covid-19 pandemic has showed us anything, it is that various segments of our society can come together in service of a greater goal.

“But it is critical that we have a frank conversation on the real structural and institutional issues impeding competitiveness and growth at the national level and to develop detailed plans on how to unlock these constraints.”

Baxter further notes that at the specific mining sector level, the Minerals Council is currently engaged in intensive and frank conversations with the Department of Mineral Resources and Energy to identify solutions to constraints to unlock the potential of the exploration and mining sectors.

“We firmly believe that – with the right interventions – we could grow exploration to 3% [from 1%] of global expenditure within five years and mining could contribute upwards of 10% to South Africa’s GDP and, in so doing, grow GDP overall and help lead the economic recovery. Mineral Resources and Energy Minister Gwede Mantashe also shares this sentiment.”

With that would come investment, jobs, export earnings and taxes to the fiscus. But, at the heart of our potential recovery as a nation is the need for improving our national competitiveness and we need to focus much more on this issue,” Baxter concludes.