A leading economic figure in the South African government offered the frankest acknowledgement yet on Thursday that South Africa had been slow to fully grasp the opportunities arising from the commodity-price boom and revealed that a study was being launched to assess ways of materially increasing investment into a sector that could yield both export earnings and blue-collar employment.

Speaking to Mining Weekly Online on the sidelines of the release of the annual report for Accelerated and Share Growth Initiative for South Africa (Asgisa), the deputy head of the Presidency's policy unit, Alan Hirsch, said it was common cause that the country had failed to attract the levels of mining-related investment that it would have anticipated given the strong demand for commodities.

"If you compare South Africa's performance to Australia, as many people have done over thepast couple of years, we haven't performed at the same level," Hirsch acknowledged, adding that the study, which would fall under the aegis of Asgisa, would seek to interrogate why the sector had underperformed.

He indicated that the focus would be on understanding what the constraints were to greater investment flows, but that the study would also reflect on how policy could be used to grow both employment and investment in the sector.

A similar study was planned for the agricultural sector, which had contracted over the last few decades.

For some time, critics of South Africa's mining reform and the Mineral and Petroleum Resources Development Act (MPRDA) have warned that South Africa was running the risk of falling behind its peers as a site for investment, unless it urgently ironed out legislative anomalies and improved administrative efficiencies.

They pointed, for instance, to the fact that South Africa had dropped 30 places, since 2004, in its ranking on the Fraser Institute Mining Survey. Currently, the country was placed 55 out of 65 countries, from 25 out of 53 countries in 2004.

Simultaneously, the mining industry's contribution to gross domestic product had fallen, despite what some are calling super-cycle conditions, mostly on the back of a contracting gold sector.

Between 2004 and 2006, mineral production slumped 6%, which was accompanied by an employment decline of 20 000 jobs during the period.

Statistics also showed that the South African mining industry suffered a substantial decline in investment since new legislation was introduced in May 2004.

This said, early last year the Chamber of Mines indicated that the country might have "turned the corner", with a 4% growth in mining investment in the last quarter of 2006.

Hirsch said that it was important for South Africa to continue to invest in its mining sector, given the strong outlook for commodity demand.

"It's generally accepted that growth among developing countries, particularly the giants like India, China, Brazil and Russia, is not over be a long chalk and that they will be followed by the Indonesians and the [Vietnamese] and others.

"On that basis, it is not likely that there will be no long-term loss of interest in our commodities. Therefore, we should continue to invest in the production, transportation and exporting of our commodities and beneficiating as much as possible as well," Hirsch stated.

WHAT ABOUT THE IMPACT OF POWER SHORTAGES?

He was also sanguine about the ability of the resources sector to continue to invest as well as for the economy to grow, despite what he described as "a serious power emergency".

In fact, he argued that the power crisis was not a "fundamental impediment" to the attainment of Asgisa's stated growth aspirations. The programme, which had been running for two years, sought average growth rates of 4% from 2006 to 2010, to be followed by an average of 6% from 2010 to 2014.

Hirsch stressed that there was no immediate reason for the government to change its target of halving poverty and unemployment by 2014.

"There are a variety of estimates for growth in 2010, but virtually all from the private sector are over 5%. We are talking about growth averaging over 6% from 2010 to 2014, so there is no reason for us to back off from that at this stage . . . it would be the wrong thing to do, as there is no evidence [to suggest] that it is impossible."

He added that even if the most pessimistic growth targets were accepted, South Africa would still meet its target to 2010, "if we average out the entire period since 2006".

"Our expectation is that we will get our response correct and that we will remove the key obstacles to medium-term growth," he added, noting that, while there would be some costs, "the fact that it happens at the same time as an international downturn probably is good fortune for us, as it allows for some time to catch up".

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