BENEFICIATION has quickly become the new buzz word these days, in both the ANC and in parliament. It is being sold to the public as the answer to all our problems, a simple intervention by the state to force those capital bogeymen who control all the wealth in South Africa to play fair and create jobs by handing out price discounts to manufactures.
The problem is that the theory behind beneficiation is being manipulated to such an extent that it has now all but become a policy of nationalising a percentage of the country’s minerals, determined by an ANC minister under the guise of a “price discount”.
When the case is put to the Department of Trade and Industry (dti) that price discounting is unworkable and would cause job losses, it is simply ignored as a predictable defence of “monopoly capital”.
However, this could not be further from the truth.
To discount minerals as proposed by the DTI would in fact cause thousands of jobs to be lost in the mining sector, countering any such selling point of job creation through value addition.
Over the last six months in Parliament, I have got to understand Minister Rob Davies quite well, and while he is an intelligent man who no doubt wants to create jobs, he is one, advised by some very questionable advisers in terms of economic policy and two, sees the solution to industrialisation and job creation in an extremely simplistic, government-led manner, which is his and the economy’s greatest undoing.
During a colloquium held by the Portfolio Committee on Trade and Industry over a three-week period, time and again key players from across industry came to the table to tell the committee it was not them that hamper beneficiation, but in fact government and its contradicting policies.
What was even more surprising was to see how far the private sector has actually beneficiated, but has now hit a wall because of high administered prices such as water, electricity and taxation.
It is certainly not the private sector’s responsibility to give price discounts and neither for the minister to determine such a discount as this would amount to price manipulation. Rather it is the government’s responsibility to lower costs for businesses, and invest in the promotion of trade and exports. It is true to say that value chains are highly complex with many individual components of which government understands very little.
The government has failed to commission any study to identify opportunities in the value chains that currently exist in manufacturing, and so any solution that seeks to obtain discounts on minerals without government coming to the table with such answers is highly misguided and in fact counter-productive.
In the colloquium previously alluded to, professor of economics and ANC veteran Ben Turok strongly suggested that research and investigations are conducted into value chains, in order to find opportunities for local manufactures. Both sides must be thoroughly examined before a decision is made, failing which the decision is essentially misinformed.
I recall a meeting with Davies where he put it as simply as this – “if we achieved a 20 percent discount on platinum, we could capture the worlds catalytic conversion market”. This best illustrates the department’s view on beneficiation, which is – offer a discount on minerals and the world will come and invest in the market.
But what about infrastructure? What about labour stability? What about lack of electricity supply? And what about the 500 000 jobs in the mining sector that would be at risk? Someone is going to have to subsidise such discounts, and ultimately it will be workers. The worst example of government failure to come to the table to allow industry to lead beneficiation is found in the forestry industry.
Ten years ago, government was to make 100 000 hectares of land available to rural communities in the Eastern Cape as feedstock to the saw-mills.
This would have created jobs in communities that struggle to make ends meet, yet to this very day only 9 000ha, or 9 percent, of land has been made available to the people of the Eastern Cape. This has not only affected their chances of earning a living, but has also hampered the forestry industry from growing and beneficiating.
There is only one reason and one reason only as to why the dti has become the champion of beneficiation, and that is because it has failed to drive industrialisation and manufacturing growth and now needs a “get out of jail” card – which is beneficiation.
The dti is using beneficiation as a red herring to divert attention away from its failures – particularly the Industrial Policy Action Plan, and thus is trying to rewrite the national debate on job creation.
What is abundantly clear is that price discounts on minerals will cost jobs. The DA unequivocally supports small businesses owners and budding entrepreneurs, especially in the manufacturing sector, and will continue to advocate for the reduction of administered prices, tax incentives and export promotion.
This is the only sustainable way in which we can simultaneously grow the industry and tackle our high levels of unemployment.
Dean Macpherson MP is the DA’s spokesman on Trade and Industry.