Business Maverick

Minerals Council: Ramaphosa’s economic plan fails to address structural reforms or investment

By Ed Stoddard 20 October 2020
Caption
PGMs generated the largest portion of revenue, overtaking coal for the first time since 2010.

The Minerals Council South Africa, which represents most companies in the mining sector, is not convinced by the economic recovery and reconstruction plan President Cyril Ramaphosa. 

The Minerals Council welcomed some of the initiatives Ramaphosa laid out, including pledges to speed approval for self-generation projects and halving the turnaround times for mining and prospecting licences. 

But in unusually blunt language, it found the plan wanting in key areas. 

“… 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 said in a statement. 

“Business believes that these structural reforms should include much greater private sector participation and competition in infrastructure (electricity, ports, pipelines, rail); a much more sustainable fiscal policy and balanced budgets; and institutional reforms (a smaller, more efficient and more capable state),” it said. Some of these concerns may be addressed by Finance Minister Tito Mboweni next week when he delivers his medium-term budget policy statement. 

Attracting foreign investment is crucial, hence the Minerals Council’s pointed reference to it. In a nutshell, South Africa’s domestic savings rate is too low to generate the capital levels required for investment purposes. South Africa has a rich geological endowment, and red-hot prices have recently significantly lifted the earnings of several companies based here. But this is not enough to attract the outside capital needed for a long-term industry such as mining. This does not mean that there needs to be a race to the bottom with taxes and regulations cut to the bone in some Trumpian sort of rampage. But policies that allow the private sector to flourish are needed to ensure South Africa gets a slice of the global capital allocation cake. 

“South Africa is at a precipice. While we have managed to claw back from the precipice before, it has only been through decisive action that recognises that pain comes before gain – across the board – that we can set our nation back on a road to prosperity. That means that hard economic decisions need to be taken, and soon,” Minerals Council President Mxolisi Mgojo was quoted as saying. 

Time will tell if and when such decisions are taken. BM

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