Every Friday morning, SAfm speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday's "At The Coalface" transcript:
Bikitsha: 2007 is all set to be South Africa's year of Industrial Policy as six high-priority sectors are targeted within the new strategic framework. Tell us more.
Creamer: The industrial policy has been honed so well over the years and there has been a reluctance of government to articulate it. The talk is that by April we will have an articulated Industrial Policy. Already the cabinet in their last session of the year approved targeted sectors namely biofeuls and also business process outsourcing. Biofuels, of course, the world over is being looked at for government interventions, people wanting to produce their own ethanol biodiesel. Business process outsourcing is something that could create a lot of jobs for us. They are talking about collectively 155 000 jobs hoped for if those two can be developed. The other four areas that could be targeted, we don't know what those will be, but we know that intergraded is the greater processing of agricultural products in an organised way and also possible aerospace development. We have got particular niche interest in aerospace and also possibly something in the nuclear industry. Overall, there will always be this idea of additionality and reciprocity when big incentives are giving to big companies like we saw with Alcan and the reciprocity being benefit to South Africa in that the pricing will be universal and not a high price for South Africa and a low price for the world.
Bikitsha: South Africa's current R409-billion public infrastructure rollout will trigger linked upkeep opportunities of a massive R2-trillion. That is a lot of money Martin.
Creamer: Yes, we don't often consider the spin-off from investment. In fact, I think South Africa has got a sort of a 'patch-and-pray' type of attitude to maintenance. We have never had a proper structure in place. Now, the government is determined that when it spends this R409-billion over five-years that it protects those assets and that it protects them through a new strategy called Nims, which is the National Infrastructure Maintenance Strategy to make sure that there is a lot of budgeting is put into upkeep of those assets, otherwise they immediately start decaying and lose the whole purpose of them. So, the R409-billion going big into energy, new power station development, also big into transport view, rail and freight services and water security. Those immediately will be accompanied by opportunity to maintain those and the spin-off is huge. The one company Pangaea of Pretoria is estimated that the maintenance opportunity over 20-year life cycle for this expenditure of R409-billion is R2-trillion over that period. South Africans are also starting to talk trillions now, not just the Americans.
Bikitsha: Wow. Chinese-linked mining companies are poised to produce almost as much ferrochrome in South Africa this year as they do in China itself. More good news.
Creamer: We find that the Chinese have been in the ferrochrome market in South Africa and they have done so strategically because China wants to have self sufficiency regards to stainless steel production it wants to then control its ferrochrome which is the main ingredient into the manufacture of. We'll see that companies in South Africa that are Chinese linked in the ferrochrome business are going to be producing something like 700 000 tons of ferrochrome this year. Well it is as much as the Chinese has produced themselves in 2005. It is quite a big element. What has been disappointing in the ferrochrome business in South Africa is that we haven't been selling enough of our ferrochrome to China. When our rand strengthened to R5,80 and R6,00 we were in a bad position and other competitors got in, notably India. South Africa needs to recover, because we have got a massive capacity of ferrochrome production and we able to produce 3,5-million tons a year, which is more than half of what the world consumed last year. We are going to 4-million tons, so an even bigger figure, but we only sold 2,7-million tons last year. So, we are in a situation where we had to become a swing producer and had to decommission some of our furnaces in order to keep the price up, which isn't a good thing. So the hope is that South Africa will be selling more into China and a good sign is that China has lowered their tariff of ferrochrome, they have halved it in fact, because that was a bit of an impediment to get into that market. We see a few more enquiries coming through to China. But, the situation is will China buy more ferrochrome from South Africa, that is what we actually need to happen or will they start producing it themselves. Hopefully not, because it seems like they are not really competitive, we are more competitive in this or will they get it from other countries. The hope is that they will get it from South Africa and we have the capacity and chrome in the ground.
Bikitsha: We will have to watch how that unfolds. Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he'll be back with us at the same time next week.
Click here to listen to audio file
Bikitsha: 2007 is all set to be South Africa's year of Industrial Policy as six high-priority sectors are targeted within the new strategic framework. Tell us more.
Creamer: The industrial policy has been honed so well over the years and there has been a reluctance of government to articulate it. The talk is that by April we will have an articulated Industrial Policy. Already the cabinet in their last session of the year approved targeted sectors namely biofeuls and also business process outsourcing. Biofuels, of course, the world over is being looked at for government interventions, people wanting to produce their own ethanol biodiesel. Business process outsourcing is something that could create a lot of jobs for us. They are talking about collectively 155 000 jobs hoped for if those two can be developed. The other four areas that could be targeted, we don't know what those will be, but we know that intergraded is the greater processing of agricultural products in an organised way and also possible aerospace development. We have got particular niche interest in aerospace and also possibly something in the nuclear industry. Overall, there will always be this idea of additionality and reciprocity when big incentives are giving to big companies like we saw with Alcan and the reciprocity being benefit to South Africa in that the pricing will be universal and not a high price for South Africa and a low price for the world.
Bikitsha: South Africa's current R409-billion public infrastructure rollout will trigger linked upkeep opportunities of a massive R2-trillion. That is a lot of money Martin.
Creamer: Yes, we don't often consider the spin-off from investment. In fact, I think South Africa has got a sort of a 'patch-and-pray' type of attitude to maintenance. We have never had a proper structure in place. Now, the government is determined that when it spends this R409-billion over five-years that it protects those assets and that it protects them through a new strategy called Nims, which is the National Infrastructure Maintenance Strategy to make sure that there is a lot of budgeting is put into upkeep of those assets, otherwise they immediately start decaying and lose the whole purpose of them. So, the R409-billion going big into energy, new power station development, also big into transport view, rail and freight services and water security. Those immediately will be accompanied by opportunity to maintain those and the spin-off is huge. The one company Pangaea of Pretoria is estimated that the maintenance opportunity over 20-year life cycle for this expenditure of R409-billion is R2-trillion over that period. South Africans are also starting to talk trillions now, not just the Americans.
Bikitsha: Wow. Chinese-linked mining companies are poised to produce almost as much ferrochrome in South Africa this year as they do in China itself. More good news.
Creamer: We find that the Chinese have been in the ferrochrome market in South Africa and they have done so strategically because China wants to have self sufficiency regards to stainless steel production it wants to then control its ferrochrome which is the main ingredient into the manufacture of. We'll see that companies in South Africa that are Chinese linked in the ferrochrome business are going to be producing something like 700 000 tons of ferrochrome this year. Well it is as much as the Chinese has produced themselves in 2005. It is quite a big element. What has been disappointing in the ferrochrome business in South Africa is that we haven't been selling enough of our ferrochrome to China. When our rand strengthened to R5,80 and R6,00 we were in a bad position and other competitors got in, notably India. South Africa needs to recover, because we have got a massive capacity of ferrochrome production and we able to produce 3,5-million tons a year, which is more than half of what the world consumed last year. We are going to 4-million tons, so an even bigger figure, but we only sold 2,7-million tons last year. So, we are in a situation where we had to become a swing producer and had to decommission some of our furnaces in order to keep the price up, which isn't a good thing. So the hope is that South Africa will be selling more into China and a good sign is that China has lowered their tariff of ferrochrome, they have halved it in fact, because that was a bit of an impediment to get into that market. We see a few more enquiries coming through to China. But, the situation is will China buy more ferrochrome from South Africa, that is what we actually need to happen or will they start producing it themselves. Hopefully not, because it seems like they are not really competitive, we are more competitive in this or will they get it from other countries. The hope is that they will get it from South Africa and we have the capacity and chrome in the ground.
Bikitsha: We will have to watch how that unfolds. Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he'll be back with us at the same time next week.
Click here to listen to audio file