The cause of slow economic growth is the subject of intense debates in South Africa. Policymakers, investors and trade union leaders have different views, shaped by the constituencies they represent or self-interest.
There is general agreement, however, about the consequences of low growth: it causes unemployment. But there are disagreements about the causes of low investment that leads to low growth.
Typically, private sector players blame the government for lack of policy certainty, to which they attribute negative investor sentiments. The cry of business for policy certainty has begun to sound like the proverbial stuck record.
Trade unions complain about what they call “investment strike”, the deliberate withholding, for inexplicable reasons, of much-needed investment. They blame companies for hoarding cash instead of investing to create jobs.
The problems of low investment and low growth are also the subject of contradictory solutions. Private sector players believe the government must remove the onerous hand of the state that shows up in regulatory impediments and red tape to free them up to create jobs, while the government and the unions believe in the strong hand of the state.
In a recent lecture at Stellenbosch University, Reserve Bank Governor Lesetja Kganyago blamed the unemployment crisis on what he termed the “South African disease”.
He described the symptoms as follows: “We are scared of reform; we make every excuse to avoid it; we emphasise any short-term pain and discount any long-term benefits; and then we sit around wondering why our economy is stagnating, why our young people can’t find jobs, and why we are getting steadily poorer relative to the rest of the world.”
I take the governor’s advice that we should be very bold and honest if we are to resolve the unemployment crisis. In the mining sector, investors agree that more investment is required to explore for minerals, develop new mines and expand the life of existing mining operations. Improvements in all three areas will be necessary if the country is to reap the benefits of its comparative advantage in terms of natural resource endowment.
But there is one stakeholder group that does not feature in these debates about economic growth, job creation and poverty reduction. These are some environmental non-governmental organisations that have since morphed into anti-mining groups staffed by anti-mining activists.
While the government and mining companies have to take some share of the blame in the slowing down of investment, the question must be asked: What about some NGOs and their role in blocking mining and water-use licence applications?
There are parts of the country where the only major economic activity is mining, but anti-mining NGOs don’t offer any alternative solution to the jobs and poverty crisis faced by residents of those areas. Instead, they seek to block the few opportunities available that offer better income for households and the fiscus.
The truth is, you shut down mining and you shut down the livelihoods of many people in villages. You delay a mining project, you delay jobs and procurement opportunities for local aspirant entrepreneurs.
According to a Statistics South Africa’s mining report published in September 2021, by 2019 the mining sector employed 514,859 people, excluding those contracted through labour brokers. In the same year, the sector paid R103-billion in salaries. I’m certain Stats SA’s next comprehensive report will show the figures are higher for 2020/21, given the commodity boom.
If you block mining, it means you are also opposed to the social grants paid from taxes and royalties which the state extracts from mining operations. In July, the then finance minister Tito Mboweni said the government’s R350 Covid relief social grants would be funded by higher-than-expected tax and royalty revenues from mining. The grant, which ends in March 2022, will cost R38.8-billion. In February the Treasury attributed the R2.2-billion in personal income tax relief to the higher-than-expected tax revenues from mining.
In some parts of the country, nature conservation parks have to coexist with other economic activities such as tourism, agriculture, mining and manufacturing. Properly managed coexistence will ensure that the benefits from all economic activities can and must be realised simultaneously.
For various economic activities to coexist, the economic players involved have to appreciate that there is no zero-sum game in investment, growth and job creation. In other words, the existence of one legitimate economic activity must not necessarily cancel another. Certainly not in a country where every job matters.
Only those with steady dollar income from foreign endowments believe that it’s fine for people to be jobless and poor as they would reap their rewards for not having mining activities near their communities.
It is tragic that, instead of advocating environmental compliance, which in any case is a condition for mining licences, some NGOs have turned into strictly anti-mining fundamentalists. It’s not clear how such a stance is meant to advance human development given the fact that even the just transition from fossil fuels to cleaner energies need mineral resources that have to be mined.
Yet, some NGOs propagate a zero-sum game and secure the support of unsuspecting community members, who are then clothed with a status of heroism for blocking mining activities. It is irresponsible to make unsuspecting community members leaders of an anti-mining campaign that is seen by job-hungry residents and existing mineworkers as a threat to their economic wellbeing.
Much as investors and regulators have to shoulder the blame for low growth, the full extent of the influence of some NGOs in blocking economic activities has to be understood. If the aim of NGOs is to ensure the accountability of other economic players, such as mining companies, they too should be held to account for the full impact of their own activities.
We need regular reporting on the economic impact of licence blockages in mining and other economic sectors. The reporting must include economic opportunity losses, including jobs, as well as other multiplier effects not released due to delayed investments. To appreciate the significance of the mining sector’s multiplier effect, we have to consider the fact that in 2019 alone, the mining sector generated earnings of R323.8-billion in export sales, bringing in much-needed foreign exchange. The sector recorded R203.7-billion in domestic sales – an important contribution to local downstream industries such as manufacturing.
As a net exporter of minerals, South Africa has benefited handsomely from higher export prices since the second half of 2020. This is helping the country mitigate the harsh effects of Covid-19 on, among other things, jobs and tax revenues.
This positive contribution needs appreciation from all stakeholders. It should encourage stakeholders to cooperate in the interest of the competitiveness of the mining sector and the wellbeing of its people. An annual report that assesses the impact of blocked and delayed licences might, in some way, address some aspects of the “South African disease” because we won’t be sitting around wondering why jobs have been delayed or blocked. DM