/ 31 January 2014

Quest for a balanced approach

South Africa’s minister of economic development
South Africa’s minister of economic development

South Africa has the twin challenge of getting more minerals out of the ground and adding greater value to our raw materials base. Infrastructure development can help with both, but we must recognise the inherent tensions.

Although a private mining investor will seek simply to expand production, largely for global markets, the public policy agenda is wider.

Yes, greater mining output helps with mining jobs and tax revenues, but if we are to build a balanced and sustainable economy, we need to use the potential of mining inputs to drive industrialisation.

Of course, not all our mining output can be processed locally, even if we expand our manufacturing base substantially. We will remain a supplier of raw materials to others, but it is a question of degree.

We currently export most of our iron ore, largely to Asian producers. Yet the stimulation of the downstream metals industry is critical to industrial development.

Our infrastructure strategy is alive to these dilemmas and we seek therefore a balanced approach in which we strengthen pit-to-factory infrastructure and use a range of policy levers to encourage greater local processing.

In manganese mining, through the Industrial Development Corporation, the government supported a private investor who built a manganese sinter plant in Hotazel in the Northern Cape.

We are hopeful that the next step, manganese smelting, can be undertaken, probably in the Eastern Cape, and of course the “gold prize” is to use the product in steel manufacture and downstream activities.

Though the mining labour environment is turbulent, we need a new accord with trade unions to provide the stability and predictability around which an investment strategy can be developed.

The social accord concluded in October 2012 helped to end the platinum strike and got the parties around a table to address longer term triggers. Our industrial relations system is based on a self-regulation model that places the principal responsibility for managing their affairs on the social partners, business and labour.

While business must clearly be engaging the trade unions, we are watching developments closely in the sector and will step in as necessary.

Ebrahim Patel is South Africa’s minister of economic development

This article forms part of a supplement paid for by KPMG. Contents and photographs were sourced through and signed off by KPMG