Mining: Digging for deeper dividends

Roger Baxter is upbeat about the future of the local mining industry and says it needs to focus on enhancing its profile. (Lisa Skinner, M&G)

Roger Baxter is upbeat about the future of the local mining industry and says it needs to focus on enhancing its profile. (Lisa Skinner, M&G)

When Roger Baxter left the Chamber of Mines less than a year ago, its chief executive, Bheki Sibiya, "vowed" to get him back.

Baxter has returned to his position as senior executive for strategy and economics after taking up a post at RioTinto in Canada in October.

His departure came at a time when the industry did not need more unsettling news. Apart from poor growth, infrastructure challenges and regulatory uncertainty, it faced the clamour of the ANC Youth League's call for nationalisation.

The nationalisation question was not, many have argued, resolved at the ANC's policy conference in June. Instead, the notion of "strategic nationalisation where deemed appropriate on the balance of evidence" has been adopted.

This position harks back to 1992 when the mining sector was having similar conversations with the ruling party on the eve of democracy.
Baxter was part of those discussions and his return to the talks that will no doubt precede the ANC's Mangaung elective conference is a boon for the chamber.

Industry's potential
As Baxter puts it, a major reason for his return is "to help the industry's inputs on various debates". Helping to guide the debate on the industry's potential is something he regards as a "personal challenge".

Given its history of exploitation, the perceived failure of the industry to make a greater contribution to economic transformation has ­arguably made it an easy target to political opportunism. But Baxter is not convinced of this. "The mining sector has undersold its significant contribution to the South African economy and the fact that the whole country has benefited from the mineral endowment," he said.

Research shows that mining accounts for about 500 000 direct jobs and 500 000 indirect jobs, helping to support about 10-million South Africans. "Much of South Africa's manufacturing, financial services and other services base was started off the back of the critical mass of demand ­created in mining," Baxter said.

Mining has also created a beneficiation industry that employs about 150000 people, adding R200-billion to the economy.

"Much of the country's savings and attraction of foreign capital is because the sector is such a large component of the value of the Johannesburg Securities Exchange," said Baxter.

Mining communities
Much is made of the sector's contribution to the corporate tax pool – R25-billion last year and an additional contribution through R5.5-billion in royalties. But Baxter pointed out that this contribution amounted to 17% of total corporate taxes, "way above the industry's 8% share [of gross domestic product]".

The industry, he said, had contributed to transformation and developing mining communities and those in major labour recruitment areas. The safety, health and environmental performance of the industry had also improved significantly over the past eight years.

"Recognising the contribution the industry does make provides a compelling story for focusing on enhancing its investment and growth profile," he said. "This requires a competitive, stable and predictable policy and operating environment."

The focus now had to be on the resolutions taken at the ANC policy conference, he said – and this included discussing growing the industry's contribution to economic development.

Cost-effective infrastructure
A major problem for the private sector has been the state's failure to provide working and cost-effective infrastructure. Baxter said that ­progress by the department of mineral resources in addressing many regulatory challenges had by and large been good.

"However, rail and electricity supply constraints remain a challenge and the rapid increase in rail and electricity tariffs has eroded the competitiveness of the mining sector."

One area in which the industry could help to address these challenges is in the energy arena.

"I think that we could have made faster progress on resolving certain infrastructure constraints if the private sector had been allowed to play a greater role – such as in electricity supply," said Baxter.

"The barriers holding back private participation in electricity are mostly regulatory in nature." The mining industry growth, development and employment task team is the platform where many of these issues are going to be thrashed out.

And Baxter will be there, making an informed and invaluable contribution to the debates.

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