Government blamed for decline in mining sector

“There is no way government has done enough to aid in the sustainable building of the mining sector and big business in general,” Peter Major, lead mining analyst at Cadiz Corporate Solutions told the Mail & Guardian on Wednesday.

On Monday Anglo American Platinum (Amplats) – the world’s biggest platinum producer – announced plans to cut as many as 14 000 permanent jobs through suspending processing plants and mothballing several shafts.

It is estimated the move will save the company up to R3.2-billion, which it claims is critical to its long-term survival.

The company faced a severe backlash to its plans, with mining unions and the ruling ANC calling for government to force the miner to rethink its decision.

Mineral Resources Minister Susan Shabangu also came out strongly against the move and claimed the company’s mineral rights licence would be scrutinised, citing possible breaches.


“We regard this decision as unilateral and to have disrespected the regulator of that industry in the way they have made their own decision,” the minister said.

Shoulder the blame
Major and other economic commentators said Amplats should not shoulder the blame for the move.

“If you’re losing money and you’re a listed company you won’t be operating very much longer,” Major said.

“Unless you want to lose all your shareholders as well as ground in the market, you need to take action – and this is what they are doing. How could [government] possibly be shocked?”

Major said the state has “done little to nothing” to facilitate sustainable operations in the corporate sector.

“At the very best I’d give [government] a two out of 10 for their efforts in the mining sector because, quite frankly, I don’t know how they could do worse,” Major added.

“At best I would give a five out of 10 for the attempts made to spur business growth in all other sectors of the economy.”

'Industries need to be supported'
Major’s views were echoed by economist Adenaan Hardien.

“Government has not made doing business in South Africa easy,” he said.

“If they are so keen on business investment, things need to change and industries need to be supported.”

The announcement by Amplats was made at a challenging economic time for South Africa.

The country’s real gross domestic product slowed to 1.2% on a seasonally adjusted and annualised basis in the third quarter of this year, from a revised 3.4% (3.2%) in the second quarter‚ according to Statistics South Africa (Stats SA) data released in November.

The official unemployment rate in South Africa also rose to 25.5% from 24.9% of the labour force in the third quarter of 2012, according to Stats SA.

Involvement in SA's development
More recently there has been a move by ANC officials to embolden the business sector to become more involved in the economic development of the country.

“The business sector cannot be bystanders watching the drama,” newly elected deputy president of the ruling party Cyril Ramaphosa said during a TV interview on Tuesday.

“The private sector should begin oiling their machinery to make sure they participate in various [government] projects.”

But Hardien said more needed to be done than providing lip service and encouragement.

“The noises that have been made recently by the governing party are encouraging but we’d still have to see some fundamental changes to economic policy before noticing a difference in trade conditions,” he said.

'SA's investment potential'
Senior trader at Vestact, Sasha Naryshkine said that the recent gains on the JSE was a clear indication of the investment potential South Africa holds.

“Equity markets are not a fair reflection of the country’s economic performance but it is a reflection of the opportunities to make money within a market,” he said.

The JSE All Share Index spiked over 11% in the six months beginning on August 31 2012.

“South Africa is the ideal base for international companies to launch their operations but many are not taking advantage of it due to an unattractive business environment,” he said.

 “In essence: There is money to be made here but business needs assurances that their investments won’t be threatened through the actions of government.”

Both the departments of finance and trade and industry did not respond to requests by the M&G for comment on the government's approach to spurring investment in the country.

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