Future of SA mining is up for grabs at Mangaung

While the media focus has fallen on the “politics” and elective processes of the upcoming ANC national conference in Mangaung, some key economic policy issues will be thrashed out, which will have a significant impact on doing business in South Africa.

The state onslaught on the mining sector will reach fever pitch at the conference. Although Enoch Godongwana, who remains the party’s economic transformation committee chairman despite getting into hot water over dodgy union deals, says that nationalisation is not on the agenda, state intervention in mining will – with little doubt – be ramped up considerably.

Only yesterday, the government announced, after its cabinet meeting on Wednesday, that steps would be taken to dampen the prices of iron ore and steel. It is envisaged that export taxes be raised significantly to quell the global appetite for this country’s raw mineral products.

The idea, of course, is to force more of these goodies on to the South African market to enforce local beneficiation and uptake of steel. It is good in theory, at least.

But with all government interventions, the result is normally a distortion in the market which will, most likely, not pan out to be beneficial to the taxpayer. Take, for instance, the establishment of the African Exploration Mining and Finance Corporation (AEMFC), the state-owned mining company that focuses on supplying coal in sweetheart deals with Eskom.

The AEMFC received a plug of R120 million from the CEF, previously known as the Central Energy Fund. This is the only reason it has been able to carry on trading as a “stand-alone” state-owned company that is supposedly in the process of exiting from the CEF umbrella.

Then there is Alexkor, the state diamond mining company, which has rewritten the formula for mining management incompetence. It is simply a financial black hole. In these two examples, there has been absolutely no obvious benefit to the taxpayer. If anything, much of their highly overpaid management have simply become rich. They have achieved just the opposite of the intention to expand the state’s role to benefit the masses.

Despite this overwhelming evidence that the model of a greater state role in the economy doesn’t work, Godongwana, in an interview, said that the ANC should ignore the warnings of Moody’s Investors Service and Standard & Poor’s and impose taxes and more aggressive redistributive policies on the mining sector at Mangaung. According to the State Intervention in Mining report written some months ago, super-profit taxes are a jolly good idea.

Former Reserve Bank governor Tito Mboweni warned that nationalisation was just a ruse by some to plunder national resources. Yet one suspects that the prevalent thinking in the ruling party tends towards the radical positions.

Chamber of Mines chief executive Bheki Sibiya told the Cape Town Press Club recently that “the powers that be” – he meant political, religious, union and community organisations – must cease their witch-hunt against the “crown jewel”, the mining sector. He warned that the sector faced some 10 000 job losses in the first quarter of next year and was already struggling to survive. Nearly 60 percent of platinum mines did not make a profit. He also said the recent downgrade of the country’s credit rating was “a vote of no confidence” in the political leadership.

He said if an additional mining tax was introduced, the ANC would send the signal that it did not want a sustainable mining sector. “They want to kill the economy.”