Minerals Council South Africa has welcomed the accelerated economic recovery strategy published on July 10 by Business for South Africa (B4SA), which is aimed at achieving higher levels of inclusive economic growth to recover from the Covid-19 crisis and the economic crisis that preceded it.
Under the auspices of B4SA, the Minerals Council has identified a number of critical areas for the mining sector that need to be addressed urgently if the recovery is to occur, output is to be increased and jobs are to be saved and created in the next four years.
The council is engaging with Mineral Resources and Energy Minister Gwede Mantashe regarding these issues.
Minerals Council CEO Roger Baxter notes that the South African economy was in a crisis even before the pandemic struck and led to a decline in international competitiveness, a collapse in business and investor confidence, falling investment, low levels of economic growth, rising unemployment and accelerating poverty and social upheaval.
“Covid-19 has pushed South Africa further toward the precipice, with at least one-million jobs already lost, an estimated 8% decline in gross domestic product (GDP) likely in 2020, a fiscal deficit that has burgeoned to nearly 15% of GDP and public debt that is likely to exceed 100% of GDP in a couple of years,” Baxter says, warning that “South Africa is at a critical fork in the road and it can choose to follow the low road or the high road”.
The low road is where South Africa continues to pursue many investor-unfriendly policies, the economy and State capacity declines, and South Africa continues on the current march towards a sovereign debt default crisis and the resulting significant economic and social pain, where everyone loses.
The high road, says Baxter, is where the country’s leaders adopt a significant pro-competitiveness structural and institutional reform agenda and demonstrate decisive leadership to implement the reforms.
“The country will then realise its true economic and transformational potential to the benefit of all.”
On the high road, Baxter says the country will improve its competitiveness rankings towards the top quartile, with investment to rise to above 25% of GDP, and the economy to grow by at least 3% a year, effectively doubling the economy in size by 2032.
Unemployment will fall, many of the income inequality and poverty metrics will drastically improved and the transformation of the economy will become sustainable, he says.
“Simply stated, some serious policy choices must be made now. Inaction is a vote for the status quo, which will result in the low road.”
B4SA's identified priorities include: the critical need to improve the country’s competitiveness and ease of doing business rankings; urgent steps to improve business and investor confidence; significant structural and institutional reforms; policy consistency; regulatory reform; addressing crime and corruption; infrastructure investment; State-owned entity restructuring, optimisation or exit; energy industrialisation strategy; economic transformation and supporting black economic empowerment.
Additionally, other priorities include addressing skills shortages and investing for modernisation.
Each of these are critical for the recovery, sustainability and growth of the overall economy and the mining industry, B4SA notes.
“Collectively, the Minerals Council believes that if these actions are taken as rapidly as possible, it will mean that, by 2024, the industry could be generating an additional R61-billion in mineral sales a year and will be contributing R300-million in additional tax revenues.
It will result in about 70 000 jobs being saved and an additional 26 000 mining jobs and 47 000 indirect jobs being created.
These steps require a cooperative and united approach by all industry stakeholders,” Baxter says.
Even before Covid-19 reached South African shores, the country's mining industry had faced several challenges and in real GDP terms the sector is smaller now than it was in 1994.
While the industry has seen improvements in the industry’s policy and investment attractiveness rankings under the leadership of Mantashe, Baxter notes that “there are significant further reforms needed to enable the sector to achieve its true economic and transformational potential”.
The Covid-19-related lockdown and its broader impact on economic activity appears likely to reduce mining output by between 15% and 25% in 2020.