By Fiona Wakelin
In his letter to the nation during the first week of July, President Ramaphosa shared some good news concerning the country’s economic recovery.
Trade Surplus News
Last week, the South African Revenue Service (SARS) announced that South Africa recorded another record trade surplus in May, to the value of R54.6-billion – due to a 1.5% increase in exports between April and May. This means that our trade balance surplus has been increasing year on year.
South Africa’s trade surplus is primarily driven by mineral and precious metal exports, as well as exports of vehicle and transport equipment, chemical products and agricultural products. High commodity prices and rising global demand is good for our economy, particularly the mining sector.
What is also good for our economic recovery, due to the pandemic, is the rise in global metals prices – which in turn will bring new opportunities in the mining value chain – particularly for beneficiation.
Mining Making An Impact
The President continued this good news with an analysis of the dual role mining has played in our economy and society.
“On the one hand, mining contributes over half of our goods exports, around 10% of GDP and 5% of employment. It is a pillar of our capital goods industry. It is not a coincidence that when global metals prices peak, our economy and job creation also surge.
“On the other hand, mining has historically been central to South Africa’s deep inequalities. Ownership is concentrated in a few huge companies, while workplaces, pay-scales and communities around the mines are still largely shaped by discriminatory relationships established under apartheid.
“The challenge is to benefit from the mining boom while laying the groundwork for more diversified, inclusive and environmentally sustainable growth.
“We need to ensure that the returns from mining are used to promote more employment-friendly activities, and that they empower mineworkers and mining communities. We have to direct investments in infrastructure and a more efficient regulatory framework to both take advantage of new opportunities in mining and to support overall growth once the upward cycle in commodity prices ends.”
Metal Exports Increase
Further good news is that in constant dollar terms, prices for most of our metals exports – led by platinum, gold and iron ore – are now as high as they were at the peak of the last commodity boom in 2011. Which means our growth has recovered far better than we thought possible at the beginning of the pandemic. And the mining “boom” has far reaching prospects in terms of job creation, small business development, localisation, beneficiation and growth in new industries.
Hand in hand with the growth in the mining sector is government’s investment in infrastructure – think Kumba Iron Ore, which would not exist without Transnet’s bulk ore lines from the Karoo to the coast; and the new mining developments in the Waterberg in Limpopo which depend on the state for efficient and low-cost transport and energy.
But this is not where the infrastructure demands end – the range of requirements include providing basic services for communities hit by the COVID-19 crisis, to upgrading industrial sites for manufacturing, to fixing the national electricity system.
Speaking of electricity, the recent decision to facilitate private generation of power up to 100 MW crowds in investment from the mines and refineries for renewable generation, helps to stabilise the electricity supply for producers across the economy and gives Eskom space to improve maintenance on its own plants.
Mining projects can also help pay for bulk water developments which support new economic activities in agriculture, manufacturing and services and also empower smaller businesses- leveraging our mineral riches to support broad-based industrialisation.
In 1965, independent Ghana’s first President Kwame Nkrumah exhorted parliamentarians to use the country’s natural resources as a catalyst for development. He said: “We have the blessing of the wealth of our vast resources, the power of our talents and the potentialities of our people. Let us grasp now the opportunities before us and meet the challenge to our survival.”
“As South Africa we too now face a challenge to our economic survival. Mining is vital to our economy, and will continue to be for the foreseeable future. Let us grasp the opportunities that exist in this sector so that mining can help guide our path to a more inclusive and equitable economy.” – President Ramaphosa.
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